Leading Exodus to the Promised Land
By Spencer E. Ante
Staff Reporter
4/21/99 10:16 AM ET
SAN FRANCISCO -- It took more than three decades to get there, but Ellen Hancock always wanted to stand at the helm of a ship. "People would ask me if I wanted to become a CEO, and I would ask, 'How many ways can I say yes?'" Hancock says, laughing in a conference room beside her office at Exodus Communications (EXDS:Nasdaq), where she is president, CEO and board member.
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Still, after 29 years at IBM (IBM:NYSE), 10 months as chief operating officer at National Semiconductor (NSM:NYSE) and a stormy one-year tenure as chief technology officer at Apple Computer (AAPL:Nasdaq), Hancock was picky about offers from Silicon Valley start-ups. Several interviews with small companies left her cold. Then, one morning in January 1998, Hancock received an email from Dan Lynch, a prominent private investor in Silicon Valley who had recently joined Exodus' board. Lynch dangled a tempting carrot before her: the job as president of Exodus.
Hancock was intrigued. Back then, Exodus already boasted 300 employees, annual revenue of $12.4 million in 1997 and an established customer base in a fast-growing market: Exodus manages the hosting, connectivity and monitoring of part of the new economy's gold, Web sites of Fortune 500 companies. It has since seen its workforce expand to 600 people, while 1998 revenue grew to $52.7 million.
Hancock joined Exodus nine days before the company's March 19, 1998, IPO, which is like boarding the Concorde moments before takeoff. The stock has since risen close to 1,000%, and her stock options, which she receives on top of a $150,000 salary, are worth more than $64 million.
Looking back, Hancock marvels at how much has happened in so short a time. "Two years ago, if you ever told me I was going to do this, I would have said, 'No way,'" says Hancock. "And yet now it feels fine. It doesn't feel like a start-up. It's a growth company."
Dealing With Demand
If Exodus founder and Chairman K.B. Chandrasekhar provided the vision of the Santa Clara, Calif., company, it's Hancock who is following through with the execution of that vision, analysts say. They praise Hancock's steady hand, management experience and knowledge of the networking business, most of which she acquired at IBM as senior vice president for Big Blue's Networking Hardware, Networking Software and Software Solutions divisions.
"One of the greatest strengths that the company has is focus," says Matt Ankrum, an analyst with Janus, which is one of the 10 biggest shareholders in Exodus. "Ellen has really rejuvenated the sales force to go after the markets they should own."
When Hancock joined Exodus, the company had already signed up several hundred customers. Most were start-ups such as Hotmail that would go belly-up if the Net didn't exist. Exodus added 188 new clients in 1998 alone, bringing the total to 830. And analysts estimate it's signing up another one or two every day, including heavies like Yahoo! (YHOO:Nasdaq), which signed up this January.
Now the company needs to add more traditional companies that are moving their business onto the Internet. To date, about 20% of Exodus' customers are of this bricks-and-mortar school, including such big names as DuPont (DD:NYSE), Hewlett-Packard (HWP:NYSE) and Oracle (ORCL:Nasdaq).
Hancock's talents and background seem well suited for this challenge. "Her pedigree will open doors of corporate boardrooms," says Ankrum. "She also has the credibility with Fortune 500 companies because of her past experience with companies like IBM and National Semiconductor."
For her part, Hancock says she isn't losing any sleep over the customer issue. "When I list my worries, demand is not on the list," she says. "If I worry, I worry about not being able to match the demand fast enough."
That's why Hancock is closely tracking how quickly Exodus rolls out the network of data centers that help it to meet surging demand for its services and to establish a beachhead in new markets. Right now, Exodus operates eight data centers and plans to build 10 new centers this year in London, Chicago and other cities, giving it more data centers than any of its competitors.
Exodus is also moving in on Asia. On April 15, the company announced an alliance program in Japan, lining up its first partner, the Internet Research Institute. However, Hancock says that Exodus is in discussions with potential Japanese partners and is "hoping to make a stronger statement in Japan toward the end of the year."
The company is planning to swallow up leading data centers in other regional markets, as its $20 million purchase of Web-hosting company American Information Systems helped it set up its Chicago data center six months faster than usual. That's why the company raised $250 million in a private debt offering last month. "We have been working with several companies on acquisitions," says Hancock, who added that Exodus has been advised by Goldman Sachs, BT Alex. Brown and Donaldson Lufkin & Jenrette. "I'd be personally disappointed if we did not acquire one or two companies by the end of the year."
Analysts cheer Exodus' expansion plans, but caution that they raise the specter of decreasing quality standards. "While the company has raised sufficient funds for building new facilities, management will be challenged to find the talent, suppliers, bandwidth and other resources to keep up with the market while preserving quality," wrote Farrokh Billimoria, an analyst with Hambrecht & Quist, in a recent report.
Climbing to the Top
Ellen M. Hancock
President and CEO of Exodus
Photo: Alan Blaustein/Exodus
Born in the Bronx and raised in Westchester, Hancock is the oldest of four children. Her father was president of an advertising company while her mother spent most of her time at home raising the family. Her parents "were really gender-blind in bringing us up," recalls Hancock. "They expected all of us to go to college. They expected all of us to be successful."
After graduating from the College of New Rochelle, an all-women's college near her New York home, Hancock returned to the Bronx, earning a master's degree in math from Fordham University. Following grad school, Hancock landed a job at IBM working on its internal computer network, and from there she rose up the corporate ladder. By the time she left IBM, she was the company's highest-ranking female executive.
"She's one of the hardest-working people I've ever seen," says Don Haile, the chief information officer of Fidelity who for 10 years worked under Hancock at IBM. "She's literally putting that whole concept of Web outsourcing on the map in a very substantial way."
Hancock's breadth of accomplishment is reflected on the walls of her office, where she points to some of the highlights of her career: A framed copy of the news report announcing her IBM appointment is on the wall not far from a picture of a private meeting with the Pope.
"If you notice, we're giving him an IBM Thinkpad in a great leather case," says Hancock. "And I got terribly nervous. The guys working for me had seen me give presentations to the board, to the chairman, but they never saw me as nervous as when I met the pope."
All in all, that was a rare moment for Hancock, who projects a sense of solidity, of gravitas. Indeed, Hancock is so solid that her reputation seems to have not been damaged by her less-than-successful and brief tenures at National Semiconductor and Apple, where both companies were struggling through painful transition periods.
No one can say that's the case at Exodus, which has a much clearer, if less-proven vision of its business.
"Adversity improves a skill set," says Hambrecht's Billimoria. "The tough situations she's been in at Apple should help her avoid mistakes in the future."
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