**UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549**

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**FORM 10-Q**

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(Mark One)

**[X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934**

**For the quarterly period ended September 30, 1999**

**OR**

**[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934**

**For the transition period from ________to _________**

**Commission file number 000-23795**

**EXODUS COMMUNICATIONS, INC.**
(Exact name of registrant as specified in its charter)



|**Delaware**                                                   | **77-0403076**                      
|-------------------------------------------------------------- | ------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification Number)

**2831 Mission College Blvd.Santa Clara, CA    95054**(Address of Principal Executive Offices including Zip Code)

**(408) 346-2200**(Registrant's Telephone Number, Including Area Code)







Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X]   NO [   ]

The number of shares outstanding of the issuer's common stock, par value $0.001,
as of November 8, 1999 was 85,226,155 shares.







**EXODUS COMMUNICATIONS, INC.
                                    FORM 10-Q
                                     INDEX**

**PART I.  Financial Information**

Item 1.  Financial Statements

> Condensed Consolidated Balance Sheets --
>             September 30, 1999 and December 31, 1998Condensed Consolidated Statements of Operations -- Three
>             and Nine Month Periods ended September 30, 1999 and 1998Condensed Consolidated Statements of Cash Flows --
>             Nine Month Periods ended September 30, 1999 and 1998Notes to Condensed Consolidated Financial
>          Statements

Item 2.   Management's Discussion and Analysis of Financial Condition and Results of
          Operations

> OverviewResults of OperationsLiquidity and Capital ResourcesFactors Affecting Future ResultsRisks Related to the Year 2000 Problem

Item 3.   Quantitative and Qualitative Disclosure about Market Risks

**PART II. Other Information**

Item 1:  Legal Proceedings

Item 2:  Changes in Securities and Use of Proceeds

Item 3:  Defaults Upon Senior Securities

Item 4:  Submission of Matters to a Vote of Security Holders

Item 5:  Other Information

Item 6:  Exhibits and Reports on Form 8-K

**Signatures**

**PART I -- FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS**

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**EXODUS COMMUNICATIONS, INC.****CONDENSED CONSOLIDATED BALANCE SHEETS
                (In thousands, except share and per share data)**

`September 30, December 31,
                                                          1999          1998
                                                       ------------  ------------
                            Assets
Current assets:
  Cash and cash equivalents...........................    $164,215      $150,891
  Accounts receivable, net............................      47,449         9,648
  Prepaid expenses and other current assets...........      18,235         6,203
                                                       ------------  ------------
    Total current assets..............................     229,899       166,742
Property and equipment, net...........................     241,180        68,306
Restricted cash equivalents and investments...........      35,444        45,614
Intangibles and other assets..........................     164,873        12,624
                                                       ------------  ------------
                                                          $671,396      $293,286
                                                       ============  ============

      Liabilities and Stockholders' Equity
Current liabilities:
  Current portion of equipment loans and line of
   credit facility....................................      $7,722       $14,367
  Current portion of capital lease obligations........      14,131         5,140
  Accounts payable....................................      32,897         9,208
  Accrued expenses....................................      19,757         6,771
  Accrued interest payable............................       8,074        11,563
                                                       ------------  ------------
    Total current liabilities.........................      82,581        47,049
Equipment loans and line of credit facility,
 less current portion.................................       9,600        15,695
Capital lease obligations, less current portion.......      30,772        11,401
Convertible subordinated notes........................     250,000        --
Senior notes..........................................     275,375       200,000
                                                       ------------  ------------
    Total liabilities.................................     648,328       274,145
                                                       ------------  ------------
Stockholders' equity:
  Common stock, $0.001 par value: 300,000,000
   and 50,000,000 shares authorized as of
   September 30, 1999 and December 31, 1998,
   respectively; 84,490,625 and 80,269,408
   shares issued and outstanding as of
   September 30, 1999 and December 31, 1998,
   respectively.......................................          84            80
  Additional paid-in capital..........................     192,424       117,160
  Deferred stock compensation.........................        (541)       (1,080)
  Accumulated deficit.................................    (168,899)      (97,019)
                                                       ------------  ------------
    Total stockholders' equity........................      23,068        19,141
                                                       ------------  ------------
                                                          $671,396      $293,286
                                                       ============  ============`

**See accompanying notes to condensed consolidated
                 financial statements.**

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**EXODUS COMMUNICATIONS, INC.****CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In Thousands, Except Per Share Data)**

`Three Months Ended  Nine Months Ended
                                           September 30,       September 30,
                                       ------------------- -------------------
                                         1999      1998      1999      1998
                                       --------- --------- --------- ---------
Revenues.........................       $67,600   $14,462  $140,186   $31,638
                                       --------- --------- --------- ---------

Costs and expenses:
    Cost of revenues.............        55,069    16,427   117,775    39,291
    Marketing and sales..........        17,289     6,887    39,523    20,467
    General and administrative...         9,938     3,861    24,396     9,518
    Product development..........         1,774       935     4,610     2,299
    Amortization of intangibles..         3,242       --      4,674       --
    Restructuring costs..........           923       --        923       --
                                       --------- --------- --------- ---------
Total costs and expenses.........        88,235    28,110   191,901    71,575
                                       --------- --------- --------- ---------

Operating loss...................       (20,635)  (13,648)  (51,715)  (39,937)
Net interest expense.............         8,180     4,012    20,165     5,120
                                       --------- --------- --------- ---------
    Net loss.....................       (28,815)  (17,660)  (71,880)  (45,057)
Cumulative dividends and
  accretion on redeemable
  convertible preferred stock....           --        --        --     (2,014)
                                       --------- --------- --------- ---------
Net loss attributable to
  common stockholders............      ($28,815) ($17,660) ($71,880) ($47,071)
                                       ========= ========= ========= =========

Basic and diluted net loss
  per share.......................       ($0.34)   ($0.23)   ($0.87)   ($0.83)
                                       ========= ========= ========= =========

Shares used in computing basic
  and diluted net loss per share..       83,873    78,369    82,427    56,792
                                       ========= ========= ========= =========`

**See accompanying notes to condensed consolidated
                 financial statements.**

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**EXODUS COMMUNICATIONS, INC.****CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In Thousands)**

`Nine Months Ended
                                                             September 30,
                                                         --------------------
                                                           1999       1998
                                                         ---------  ---------
Cash flows from operating activities:
  Net loss.............................................  ($71,880)  ($45,057)
  Adjustments to reconcile net loss to net cash used
  for operating activities:
    Depreciation and amortization......................    28,045      8,568
    Loss on disposal of property and equipment.........       --         248
    Noncash warrant expense............................       --         786
    Amortization of deferred stock compensation........       539      1,081
    Amortization of debt issuance costs................     1,063        274
    Interest accretion on restricted cash equivalents
      and investments..................................    (1,068)      (580)
    Changes in operating assets and liabilities:
        Accounts receivable............................   (27,865)    (7,117)
        Prepaid expenses and other assets..............   (16,812)    (3,970)
        Accounts payable...............................    21,735      4,981
        Accrued expenses...............................     5,366      3,790
        Accrued interest payable.......................    (3,489)     5,750
                                                         ---------  ---------
            Net cash used for operating activities.....   (64,366)   (31,246)
                                                         ---------  ---------
Cash flows from investing activities:
  Purchases of property and equipment..................  (157,703)   (26,523)
  Businesses acquired, net of cash received............   (70,398)       --
  Release of restricted cash equivalents
     and investments...................................    24,938        --
  Increase in restricted cash equivalents
     and investments...................................   (13,413)   (43,562)
  Other assets.........................................   (15,405)       --
                                                         ---------  ---------
           Net cash used for investing activities......  (231,981)   (70,085)
                                                         ---------  ---------
Cash flows from financing  activities:
  Proceeds from issuance of redeemable
   convertible preferred stock and warrants............       --       2,176
  Proceeds from issuance of common stock...............    14,006     71,353
  Notes receivable from stockholders, net..............       --          90
  Repayment of bank borrowings.........................       --      (3,000)
  Proceeds from sale-leaseback transactions............       --       4,035
  Payment on capital lease obligations.................    (6,176)    (1,689)
  Proceeds from debt...................................       --      18,611
  Repayment of debt....................................   (13,529)    (3,468)
  Proceeds from convertible subordinated
     notes, net........................................   242,124        --
  Proceeds from senior notes, net......................    73,246    194,000
                                                         ---------  ---------
            Net cash provided by financing activities..   309,671    282,108
                                                         ---------  ---------
Net increase in cash and cash equivalents..............    13,324    180,777
Cash and cash equivalents at beginning of period.......   150,891     10,270
                                                         ---------  ---------
Cash and cash equivalents at end of period.............  $164,215   $191,047
                                                         =========  =========
Supplemental disclosure of cash flow information:
  Cash paid-interest...................................   $33,910     $2,921
                                                         =========  =========
  Noncash investing and financing activities:
       Assets recorded under capital lease.............   $34,538     $6,691
                                                         =========  =========
  Issuance of common stock and assumption of options
       in connection with the acquisition of
       Cohesive Technology Solutions, Inc..............   $61,262      $ --
                                                         =========  =========
    Cumulative dividends and accretion on
       Series C and D redeemable convertible
       preferred stock and warrants....................     $ --      $2,014
                                                         =========  =========
    Conversion of redeemable convertible
       preferred stock to common stock.................     $ --     $43,437
                                                         =========  =========
See accompanying notes to condensed consolidated financial statements.`

**See accompanying notes to condensed consolidated
                 financial statements.**

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**EXODUS COMMUNICATIONS, INC.****NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                SEPTEMBER 30, 1999**

**NOTE 1 - BASIS OF PRESENTATION**

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information, the instructions to Form
10-Q and Article 10 of Regulation S-X.  Accordingly, they do not contain
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.  In the opinion
of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the
Company's financial position as of September 30, 1999 and the results of
its operations and cash flows for the three and nine month periods ended
September 30, 1999 and 1998.  These financial statements should be read
in conjunction with the Company's audited consolidated financial
statements as of December 31, 1998 and 1997 and for each of the years in
the three-year period ended December 31, 1998, including notes thereto,
included in the Company's 1998 Annual Report on Form 10-K.  Operating
results for the nine month period ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1999.

**NOTE 2 - NET LOSS PER SHARE**

Basic and diluted net loss per share has been computed by dividing the
net loss attributable to common stockholders by the weighted average
number of shares of common stock outstanding.  Diluted net loss per
share for the three and nine month periods ended September 30, 1999 and
1998 does not include the effect of (i) 25,641,000 and 13,380,000 shares
issuable under stock options outstanding with weighted average exercise
prices of $20.61 and $2.60 as of September 30, 1999 and September 30,
1998, respectively, and (ii) 253,000 and 1,068,000 shares issuable
pursuant to warrants to purchase common stock with weighted average
exercise prices of $3.67 and $1.80, as of September 30, 1999 and
September 30, 1998, respectively.

**NOTE 3 - REVENUE RECOGNITION**

The Company's revenues consist of (i) monthly fees from customer use of
Internet Data Center sites, network services, managed services and
professional services and use of equipment and software provided by the
Company, (ii) revenues from sales of third-party equipment to customers
and (iii) fees for installation and certain professional services.
Currently, substantially all of our revenue is derived from services.
Revenues (other than installation fees, equipment sales to customers and
certain professional services) are generally billed and recognized
ratably over the term of the contract, which is generally one year.
Installation fees are typically recognized at the time the installation
occurs, and equipment revenues are typically recognized when the
equipment is delivered to the customer or placed into service at an
Internet Data Center. We sell third-party equipment to our customers as
an accommodation to facilitate their purchase of services. One-time
professional service fees are typically recognized when services are
rendered.

**NOTE 4 - PROPERTY AND EQUIPMENT**

Property and equipment consisted of the following (in thousands):

`September 30, December 31,
                                                         1999          1998
                                                      ------------  ------------
  Data centers and related equipment.................    $150,239       $43,959
  Furniture, fixtures, computer equipment
    and other........................................      90,319        32,887
  Construction in progress...........................      40,576         8,497
                                                      ------------  ------------
                                                          281,134        85,343
  Less accumulated depreciation and
    amortization.....................................      39,954        17,037
                                                      ------------  ------------
                                                         $241,180       $68,306
                                                      ============  ============`

Computer equipment and certain data center equipment are recorded under
capital leases that aggregated $54,774,000 and $20,236,000 as of
September 30, 1999 and December 31, 1998, respectively. Accumulated
amortization on the assets recorded under capital leases aggregated
$12,260,000 and $4,426,000 as of September 30, 1999 and December 31,
1998, respectively.

**NOTE 5 - ACQUISITIONS**

On October 2, 1998, the Company purchased substantially all of the
assets, including customer agreements, and assumed certain liabilities
of Arca Systems, Inc. ("Arca"), a wholly-owned subsidiary of Cyberguard
Corporation. Arca is a provider of advanced network and system security
consulting services and designs and develops security technology
solutions for complex and sensitive information systems. Arca operates
as a wholly-owned subsidiary of the Company. Total consideration paid,
including direct acquisition costs, aggregated approximately $5,800,000.
The acquisition was accounted for as a purchase with the results of Arca
included from the acquisition date. The excess of the purchase price
over the fair value of tangible net assets acquired amounted to
approximately $5,000,000 and was attributed primarily to workforce in
place ($2,500,000) and goodwill ($2,400,000).  These amounts are
generally being amortized on a straight-line basis over 10 years.

On February 1, 1999, the Company purchased all of the capital stock of
American Information Systems, Inc ("AIS"). AIS provides hosting services
as well as professional services. Total consideration paid, including
direct acquisition costs, aggregated approximately $20,500,000. The
acquisition was accounted for as a purchase with the results of AIS
included from the acquisition date. The excess of the purchase price
over the fair value of tangible net assets acquired amounted to
approximately $18,700,000 and was attributed primarily to goodwill
($15,000,000), customer lists ($3,200,000) and workforce in
place($500,000).  These amounts are being amortized on a straight-line
basis over periods ranging from 5 to 7 years.

On July 27, 1999, the Company completed its acquisition of Cohesive
Technology Solutions, Inc. ("Cohesive").  Cohesive offers a variety of
services including network design and development, Internet-based and
application development and information technology strategy and project
management.  Pursuant to the terms of the Agreement and Plan of
Reorganization, each share of Cohesive common stock was converted into
the right to receive 0.02622 shares of Exodus common stock and $1.338 in
cash; each share of Cohesive Series A Preferred Stock was converted into
the right to receive $122.337 in cash; each share of Cohesive Series B
Preferred Stock was converted into the right to receive $115.965 in
cash; each share of Cohesive Series C Preferred Stock was converted into
the right to receive $5.00 in cash; and each share of Cohesive Series D
Preferred Stock, which automatically converted into Cohesive common
stock immediately prior to the merger, was converted into the right to
receive 0.02622 shares of Exodus common stock and approximately $6.655
in cash.  In addition, the Company assumed each issued and outstanding
option to purchase shares of Cohesive common stock which was converted
into an option to purchase Exodus common stock using an exchange ratio
of 0.03651.

Pursuant to the exchange ratios applied in the acquisition, the Company
issued 800,398 shares of Exodus common stock and approximately
$50,000,000 in cash and assumed options to purchase a total of 204,356
shares of Exodus common stock for a total purchase price of
approximately $112,000,000.  $10,000,000 of the cash consideration was
deposited in an escrow account to secure and collateralize the
indemnification obligations of Cohesive stockholders to Exodus and
certain affiliates of Exodus.  The acquisition was accounted for as a
purchase with the results of Cohesive included from the acquisition
date. The excess of the purchase price over the fair value of tangible
net assets acquired amounted to approximately $107,900,000 and was
attributed primarily to goodwill ($69,300,000), customer lists
($32,300,000) and workforce in place ($6,300,000).  These amounts are
being amortized on a straight-line basis over periods ranging from 5 to
8 years.

The following summary, prepared on an unaudited pro forma basis,
reflects the condensed consolidated results of operations for the three
and nine month periods ended September 30, 1999 and September 30, 1998
assuming Arca, AIS, and Cohesive had been acquired as of the beginning
of the periods presented (in thousands, except per share data):

`Three Months Ended          Nine Months Ended
                                                            September 30,               September 30,
                                                      --------------------------  --------------------------
                                                          1999          1998          1999          1998
                                                      ------------  ------------  ------------  ------------

Revenues............................................      $70,702       $25,779      $169,377       $69,208
Net loss attributable to common stockholders........     ($30,323)     ($23,847)     ($81,719)     ($62,557)
Basic and diluted net loss per share................       ($0.36)       ($0.30)       ($0.98)       ($1.09)
Shares used in pro forma per share computation......       84,099        79,169        83,034        57,592`

The pro forma results are not necessarily indicative of what would have
occurred if the acquisitions had been in effect for the periods
presented. In addition, they are not intended to be a projection of
future results and do not reflect any synergies that might be achieved
from combined operations.

**NOTE 6 - BANK BORROWINGS, EQUIPMENT LOANS AND LINE OF CREDIT FACILITIES**

On July 1, 1998, the Company issued $200,000,000 of 11 1/4% Senior Notes
due 2008 for aggregate net proceeds of approximately $194,000,000 (net
of discounts to the initial purchasers and offering expenses).  Interest
is payable semi-annually on January 1 and July 1 of each year commencing
January 1, 1999. The Company initially deposited approximately
$42,400,000 with an escrow agent that would be sufficient to pay when
due the first four semi-annual interest payments (through July 1, 2000).
As of September 30, 1999 restricted cash equivalents and investments
include approximately $22,300,000 for the remaining two interest
payments.  Subject to significant exceptions, the Senior Notes Indenture
restricts, among other things, the Company's ability to incur additional
indebtedness and use the proceeds therefrom, pay dividends, make certain
other restricted payments, incur certain liens to secure indebtedness or
engage in merger transactions.

On March 3, 1999, the Company issued $250,000,000 of 5% Convertible
Subordinated Notes (the "Convertible Notes") due 2006 for aggregate net
proceeds of approximately $242,100,000 (net of offering expenses).
Proceeds from the sale of the convertible notes may be used only for
limited purposes. Proceeds in the amount of $48,500,000 may be used for
general corporate purposes. The remaining $193,600,000, of which the
majority has been expended as of September 30, 1999, may be used only to
finance the purchase of assets or other businesses to be used in the
Company's business.

The convertible notes are convertible into the Company's common stock at
a conversion rate of 43.7852 shares per $1,000 principal amount of
Convertible Notes, subject to adjustment in certain events and at each
holder's option.  The Convertible Notes will not be subject to
redemption prior to March 20, 2001, and generally will be redeemable on
or after that date at the option of the Company, at the redemption
prices set forth in the indenture to the convertible notes ("Convertible
Notes Indenture"), subject to certain provisions.  In the event of a
Change in Control (as defined in the Convertible Notes Indenture), each
holder of the convertible notes has the right, subject to certain
conditions and restrictions, to require the Company to repurchase all or
any part of the holder's convertible notes at a repurchase price of 100%
of the principal amount, plus accrued interest of the convertible notes
being repurchased.  Interest on the convertible notes is payable on
March 15 and September 15 of each year, commencing on September 15,
1999.  The convertible notes are unsecured obligations of the Company
and are subordinated to all existing and future Senior Indebtedness (as
defined in the Convertible Notes Indenture) and effectively subordinated
to all indebtedness and other liabilities of the Company's subsidiaries.

On June 22, 1999, the Company issued $75,000,000 of 11 1/4% Senior Notes
due 2008 at 100.50% for aggregate net proceeds of approximately
$73,200,000 (net of discounts to the initial purchasers and offering
expenses).  The Company issued these senior notes under the indenture
dated July 1, 1998 under which it previously issued the $200,000,000
Senior Notes due 2008 (the "Original Notes").  These senior notes are
subject to substantially the same terms and conditions as the Original
Notes. Interest is payable semi-annually on January 1 and July 1 of each
year commencing July 1, 1999.  Concurrently with the closing of the
offering, the Company deposited approximately $8,400,000 with an escrow
agent that would be sufficient to pay when due the first three interest
payments (through July 1, 2000).  As of September 30, 1999 restricted
cash equivalents and investments include approximately $8,200,000 for
the remaining two interest payments.

On July 22, 1999, the Company amended its revolving line of credit
agreement with a financial institution, increasing the total commitment
amount from $7,000,000 to 10,000,000.  Pursuant to the terms of the new
amendment, the line of credit can be used for working capital
requirements, foreign exchange forward contracts, and letters of credit.
The amount available for working capital borrowings is limited to
$4,000,000.  In addition, total foreign exchange contracts at any one
time cannot exceed ten times the amount of the foreign exchange
sublimit, which is a maximum of $1,000,000.  The line of credit will
expire in July 2000 and is subject to certain covenants.  As of
September 30, 1999, the Company had drawn down the total commitment
amount of $10,000,000 to secure letters of credit required by various
leases entered into by the end of September 1999.

**NOTE 7 - COMPREHENSIVE INCOME**

There were no material differences between net loss and comprehensive
loss during the three and nine months ended September 30, 1999 and 1998.

**NOTE 8 - SEGMENT INFORMATION**

The Company operates a number of Internet Data Centers throughout the
United States and one in Europe. The Company establishes these Internet
Data Centers using a consistent investment and operating model. As a
result, the expected long term economic characteristics and financial
performance are similar. In particular, each data center provides the
same Internet related services to a similar type of customer who may
locate its servers in multiple Internet Data Centers. As a result, the
Company believes these Internet Data Centers represent one reportable
segment under the aggregation criteria of Statement of Financial
Accounting Standards ("SFAS") No. 131, "Disclosures About Segments of an
Enterprise and Related Information." Internet Data Center operations
primarily include services such as server infrastructure support,
Internet connectivity, and managed services.

With the acquisition of Cohesive on July 27, 1999, Management began
reviewing financial information and business performance and allocating
resources based on both Internet Data Center operations and by
professional services, given Cohesive's expertise in networking,
Internet-based applications and technology solutions.  As a result, the
Company identified professional services as an additional reportable
segment.  Professional services primarily include services such as
network design and development, Internet-based and application
development, and information technology strategy.

Financial information for the Company's reportable segments is presented
below:

`Three Months Ended          Nine Months Ended
                                                            September 30,               September 30,
                                                      --------------------------  --------------------------
                                                          1999          1998          1999          1998
                                                      ------------  ------------  ------------  ------------

Revenues:
  Internet Data Centers..............................     $51,973       $14,247      $119,082       $31,423
  Professional services..............................      15,627           215        21,104           215
                                                      ------------  ------------  ------------  ------------
      Total revenues.................................     $67,600       $14,462      $140,186       $31,638
                                                      ============  ============  ============  ============
Operating profit (loss):
  Internet data centers..............................     $13,100           $88       $28,783       ($2,859)
  Professional services..............................       2,179            17         1,880            17
  Corporate areas....................................    ($35,914)     ($13,753)     ($82,378)      (37,095)
                                                      ------------  ------------  ------------  ------------
      Total operating loss...........................    ($20,635)     ($13,648)     ($51,715)     ($39,937)
                                                      ============  ============  ============  ============

                                                      September 30, December 31,
                                                          1999          1998
                                                      ------------  ------------
Total assets:
  Internet Data Centers..............................    $196,404       $52,459
  Professional services..............................      $3,011          $212
  Corporate assets...................................     471,981       240,615
                                                      ------------  ------------
     Total assets....................................    $671,396      $293,286
                                                      ============  ============`

**Note 9 - SUBSEQUENT EVENT**

On October 26, 1999, the Company entered into a definitive agreement to
acquire Service Metrics, Inc. for approximately $280 million in Exodus
common stock and options to purchase Exodus common stock, subject to
adjustment depending on the price of Exodus common stock at the time of
closing.  Service Metrics is a leading provider of Internet monitoring
applications and services that measure the consistency, availability and
performance of web sites.  The Company expects to close the acquisition
before the end of 1999 and to account for it as a pooling of interests.

**ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS**

This Form 10-Q contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934 and Section 27A of
the Securities Act of 1933. Forward-looking statements are identified by
words such as "believes," "anticipates," "expects," "intends," "will,"
"may" and other similar expressions. In addition, any statements which
refer to expectations, projections or other characterizations of future
events or circumstances are forward-looking statements.  In addition,
the section labeled "Factors Affecting Future Results" consists
primarily of forward-looking statements. We undertake no obligation to
revise forward-looking statements. Readers are urged to review and
consider carefully the various disclosures made by us in this report and
in our other reports filed with the Securities and Exchange Commission,
including our 1998 Annual Report on Form 10-K, that advise interested
parties of risks and uncertainties that may affect our business. These
risks and uncertainties include: difficulties in achieving timely
expansion of our network and opening of additional Internet Data
Centers, difficulties in executing our current business plan, retaining
customers and attracting new customers, and difficulties in developing
and deploying new services.  Our actual results may differ materially
from any forward-looking statements due to such risks and uncertainties.

**Overview**

We are a leading provider of Internet system and network management
solutions and technology professional services for enterprises with
mission-critical Internet operations.  Our solutions include Internet
Data Centers, network services, managed services and professional
services that together provide the high performance, scalability and
expertise that enterprises need to optimize Internet operations. We
deliver our services from our geographically distributed, state-of-the-
art Internet Data Centers that are connected through a high-performance
Internet backbone network.

We are the successor to a Maryland corporation that was formed in August
1992 to provide computer-consulting services. We began offering server
hosting and Internet connectivity services in late 1995, opened our
first dedicated Internet Data Center in August 1996 and introduced
managed services in 1997 and professional services in 1998. We have
derived most of our revenues from customers for whom we provide these
services.  Most of our Internet Data Center customers initially purchase
a subset of our service offerings to address specific departmental or
enterprise Internet computing needs, and many of these customers
purchase additional services as the scale and complexity of their
Internet operations increase. We sell our services under contracts that
typically have minimum terms of one year. Customers pay monthly fees for
the services utilized, as well as one-time fees for installation,
certain professional services and for equipment they purchase from us.

We opened our first Internet Data Center in the Silicon Valley
metropolitan area in August 1996. Since that time, we have opened
thirteen additional domestic Internet Data Centers in the metropolitan
areas of New York (March 1997 and September 1999), Silicon Valley
(second site-August 1997; third site-June 1998; and fourth site June
1999), Seattle (September 1997 and June 1999), Los Angeles (October 1997
and September 1999), Washington, D.C. (December 1997 and May 1999),
Boston (July 1998), and Chicago (April 1999).  In addition, we opened
our first Internet Data Center outside of the United States in London in
June 1999. We plan to open four additional Internet Data Centers and
three server hosting sites by the end of 1999 or the first month of
2000. The building of Internet Data Centers has required us to obtain
substantial equity and debt financing. See "-Factors Affecting Future
Results-Our Substantial Leverage and Debt Service Obligations Adversely
Affect Our Cash Flow" and "-Liquidity and Capital Resources."

In October 1998, we purchased the assets of Arca Systems, Inc. ("Arca"),
a provider of advanced network and system security consulting services.
In February 1999, we acquired American Information Systems, Inc.
("AIS"), a regional provider of co-location, web hosting and
professional services. In July 1999, we acquired Cohesive Technology
Solutions, Inc. ("Cohesive"), a technology professional services
organization with expertise in networking, Internet-based applications
and technology solutions.  In October 1999, we signed a definitive
agreement to acquire Service Metrics, Inc., an Internet monitoring
applications and services company.

We intend to expand domestically and internationally.  Prior to building
an Internet Data Center in a new geographic region, we employ various
means to evaluate the market opportunity in a given location, including
market research on Internet usage statistics, the pre-selling of
services into the proposed market and analysis of specific financial
criteria. We typically require at least six months to select the
appropriate location for an Internet Data Center, construct the
necessary facilities, install equipment and telecommunications
infrastructure, and hire the operations and sales personnel needed to
conduct business at that site. Expenditures related to an Internet Data
Center commence well before the Internet Data Center opens, and it takes
an extended period to approach break-even capacity utilization at each
site. As a result, we expect that individual Internet Data Centers will
experience losses for an excess of one year from the time they are
opened. We experience further losses from sales personnel hired to test
market our services in markets where there is no, and may never be an,
Internet Data Center. As a result, we expect to make investments in
expanding our business rapidly into new geographic regions which, while
potentially increasing our revenues in the long term, will lead to
significant losses for the foreseeable future. See "-Factors Affecting
Future Results-Our Rapid Expansion Produces a Significant Strain on Our
Business."

Since we began to offer server hosting and Internet connectivity
services in 1995, we have experienced operating losses and negative cash
flows from operations in each fiscal quarter and year. As of September
30, 1999, we had an accumulated deficit of approximately $169 million.
The revenue and income potential of our business and market is unproven,
and our limited operating history makes an evaluation of our prospects
and us difficult. We intend to invest in new Internet Data Centers and
other sites, product development, and sales and marketing programs.  We
therefore believe that we will continue to experience net losses on a
quarterly and annual basis for the foreseeable future.  As a company in
the new and rapidly evolving market for Internet system and network
management solutions, we encounter risks, expenses and difficulties that
affect our business and prospects. There can be no assurance that we
will achieve profitability on a quarterly or an annual basis or that we
will sustain profitability. See "-Factors Affecting Future Results-Our
Short Operating History and Heavy Losses Make Our Business Difficult to
Evaluate."

**RESULTS OF OPERATIONS**

The following table sets forth certain statement of operations data as a
percentage of total revenues for the three and nine month periods ended
September 30, 1999 and 1998. This information has been derived from our
unaudited condensed consolidated financial statements which, in
management's opinion, have been prepared on substantially the same basis
as the audited financial statements included in our 1998 Annual Report
on Form 10-K and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the
financial information for the quarters presented.  This information
should be read in conjunction with the Condensed Consolidated Financial
Statements and accompanying Notes included in this Form 10-Q. The
operating results in any quarter are not necessarily indicative of the
results to be expected for any future period.

`Three Months Ended  Nine Months Ended
                                           September 30,       September 30,
                                       ------------------- -------------------
                                         1999      1998      1999      1998
                                       --------- --------- --------- ---------
Revenues.........................         100.0%    100.0%    100.0%    100.0%

Costs and expenses:
    Cost of revenues.............          81.4%    113.6%     84.0%    124.2%
    Marketing and sales..........          25.6%     47.6%     28.2%     64.7%
    General and administrative...          14.7%     26.7%     17.4%     30.1%
    Product development..........           2.6%      6.5%      3.3%      7.2%
    Amortization of intangibles..           4.8%      --        3.3%      --
    Restructuring costs..........           1.4%      --        0.7%      --
                                       --------- --------- --------- ---------
Total costs and expenses.........         130.5%    194.4%    136.9%    226.2%
                                       --------- --------- --------- ---------

Operating loss...................        (30.5%)   (94.4%)   (36.9%)  (126.2%)

Net interest expense.............        (12.1%)   (27.7%)   (14.4%)   (16.2%)
                                       --------- --------- --------- ---------
    Net loss.....................        (42.6%)  (122.1%)   (51.3%)  (142.4%)
                                       ========= ========= ========= =========`

**Revenues**

Our revenues consist of (i) monthly fees from customer use of Internet
Data Center sites, network services, managed services and professional
services and use of equipment and software provided by us, (ii) revenues
from sales of third-party equipment to customers and (iii) fees for
installation and certain professional services. Currently, substantially
all of our revenue is derived from services. Revenues (other than
installation fees, equipment sales to customers and certain professional
services) are generally billed and recognized ratably over the term of
the contract, which is generally one year. Installation fees are
typically recognized at the time the installation occurs, and equipment
revenues are typically recognized when the equipment is delivered to the
customer or placed into service at an Internet Data Center. We sell
third-party equipment to our customers as an accommodation to facilitate
their purchase of services. One-time professional service fees are
typically recognized when services are rendered.

Our revenues increased 367% and 343% to $67.6 million and $140.2 million
for the three and nine month periods ended September 30, 1999 from $14.5
million and $31.6 million in the same respective periods of the prior
year. This growth in revenues was the result of increases in the number
of new customers, substantially all of which were Internet Data Center
customers, increases in revenues from existing customers and revenue
contributions from Cohesive.

**Cost of Revenues**

Our cost of revenues is comprised of the costs for our backbone network
and local telecommunications loops, interconnections to other networks,
depreciation and amortization, salaries and benefits for our customer
service and operations personnel (customer service personnel, network
engineers and professional services personnel), rent, repairs and
utilities related to our Internet Data Centers and other sites and costs
of third party equipment sold to customers.

Cost of revenues increased 235% and 200% to $55.1 million and $117.8
million for the three and nine month periods ended September 30, 1999
from $16.4 million and $39.3 million in the same respective periods of
the prior year. These increases in cost of revenues in absolute dollars
were primarily the result of costs associated with hiring additional
employees and consultants, increased traffic on our network and to other
networks, increased depreciation due to capital expenditures related to
the buildout and expansion of Internet Data Centers, increased rent, and
increased utilities and other costs related to the opening and expanding
of Internet Data Centers. Our cost of revenues as a percentage of
revenues decreased to 81% and 84% for the three and nine months ended
September 30, 1999 from 114% and 124% for the same respective periods of
the prior year. This decline was due primarily to our increase in
revenue between comparison periods. We expect that cost of revenues will
continue to increase in absolute dollars.

**Marketing and Sales**

Our marketing and sales expenses are comprised of salaries, commissions
and benefits for our marketing and sales personnel, printing and
advertising costs, public relations costs, consultants' fees and travel
and entertainment expenses.

Our marketing and sales expenses increased 151% and 93% to $17.3 million
and $39.5 million for the three and nine month periods ended September
30, 1999 from $6.9 million and $20.5 million in the same respective
periods of the prior year. The increase in absolute dollars was
primarily the result of increased compensation and related expenses
associated with hiring additional marketing and sales personnel and
increased advertising expenses. Our marketing and sales expense as a
percentage of revenues decreased to 26% and 28% for the three and nine
months ended September 30, 1999 from 48% and 65% for the same respective
periods of the prior year. This decline was primarily due to our
significant increase in revenue between comparison periods. We expect
that marketing and sales expense will continue to increase in absolute
dollars.

**General and Administrative**

Our general and administrative expenses are primarily comprised of
salaries and benefits for our administrative and management information
systems personnel, consulting fees and recruiting fees.

Our general and administrative expenses increased 157% and 156% to $9.9
million and $24.4 million for the three and nine month periods ended
September 30, 1999 from $3.9 million and $9.5 million in the same
respective periods of the prior year. The increase in absolute dollars
was primarily the result of increased compensation expenses associated
with additional hiring of general and administrative personnel,
increased rent and related expenses due to entering into additional
operating leases during the period, higher depreciation and increased
recruiting expenses.  Our general and administrative expense as a
percentage of revenues decreased to 15% and 17% for the three and nine
month periods ended September 30, 1999 from 27% and 30% for the same
respective periods of the prior year. This decline was primarily due to
our significant increase in revenue between comparison periods.  We
expect that general and administrative expense will continue to increase
in absolute dollars.

**Product Development**

Our product development expenses consist primarily of salaries and
benefits for our product development personnel and fees paid to
consultants.

Our product development expenses increased 90% and 101% to $1.8 million
and $4.6 million for the three and nine month periods ended September
30, 1999 from $0.9 million and $2.3 million in the same respective
periods of the prior year. Our product development expenses grew
primarily due to the addition of product development personnel to
support our expanded service offerings.  Our product development expense
as a percentage of revenues decreased to 3% for both the three and nine
months ended September 30, 1999 from 7% for both of the same respective
periods of the prior year.  This decline was due to our significant
increase in revenue between comparison periods. We expect that product
development expenses will continue to increase in absolute dollars.

**Amortization of Intangibles**

As part of our strategy to grow through acquisitions of complementary
businesses, we acquired the assets of Arca in October 1998, AIS in
February 1999 and Cohesive in July 1999.  In connection with those
acquisitions, we have recorded intangible assets related to goodwill,
customer lists and workforce in place. Amortization related to those
intangibles was $3.2 million and $4.7 million for the three and nine
month periods ended September 30, 1999.  These intangibles are being
amortized on a straight-line basis generally over 5 to 10 years.  See
Note 5 of Notes to Condensed Consolidated Financial Statements for more
detailed information.

**Restructuring Costs**

In August 1999, we announced plans to consolidate seven professional
services practice offices of Cohesive, which we acquired on July 27,
1999.  We determined that consolidation of these offices would maximize
efficiencies of the combined companies.  This action is expected to be
completed by December 31, 1999. In connection with the consolidation of
these facilities, we recorded a restructuring charge of $923,000 for the
three and ninth month periods ended September 30, 1999.  This charge
includes approximately $689,000 for lease termination and other related
office closure costs and $234,000 in severance and other employee
benefits.

**Net Interest Expense**

Our net interest expense increased to $8.2 million and $20.2 million for
the three and nine month periods ended September 30, 1999 from $4.0
million and $5.1 million for the same respective periods of the prior
year. The increase in net interest expense was primarily the result of
interest expense associated with our 11 1/4% Senior Notes issued July 1,
1998 and June 22, 1999 and our 5% Convertible Subordinated Notes issued
March 3, 1999.

We expect that net interest expense will continue to increase as we
enter into additional equipment leases and loans, obtain additional
borrowings and long term debt and experience reduced interest income as
a result of the decline in our cash reserves to fund working capital and
other uses.

**EBITDA**

Our loss before interest, taxes, depreciation, amortization and other
non-cash charges ("EBITDA") was $5.0 million and $23.0 million for the
three and nine month periods ended September 30, 1999 compared to $9.4
million and $29.5 million for the same respective periods of the prior
year. The decrease in the magnitude of EBITDA losses between the
comparison periods was primarily due to the significant increases in
revenue over these periods offset in part by increased compensation
costs associated with the hiring of additional employees during those
time periods. Although EBITDA should not be used as an alternative to
operating loss or net cash provided by (used for) operating activities,
investing activities or financing activities, each as measured under
generally accepted accounting principles, our management believes that
EBITDA is an additional meaningful measure of performance and liquidity.

**Liquidity and Capital Resources**

From inception through September 30, 1999, we have financed our
operations primarily through private sales of preferred stock, our
initial public offering of common stock in March 1998, our senior notes
offerings in July 1998 and June 1999, our convertible subordinated notes
offering in March 1999 and through various types of equipment loans and
lease lines and working capital lines of credit. At September 30, 1999,
our principal sources of liquidity were approximately $164 million in
cash and cash equivalents. As of that date, we also had equipment loans
and lease lines of credit under which we could borrow up to an
additional aggregate of $1.2 million for purchases of equipment. As of
September 30, 1999, our total bank borrowings, equipment loans and lines
of credit facilities, capital lease obligations and senior and
convertible notes were $587.6 million. See Note 6 of Notes to Condensed
Consolidated Financial Statements.

Since we began to offer server-hosting services in 1995, we have had
significant negative cash flows from operating activities. Net cash used
for operating activities for the nine months ended September 30, 1999
was $64.4 million, primarily due to net losses and increases in accounts
receivable and prepaid expenses and other assets, offset in part by
increases in accounts payable and depreciation and amortization. This
compares to net cash used for operating activities for the nine months
ended September 30, 1998 of $31.2 million which was primarily due to net
losses and an increase in accounts receivable, offset in part by
increases in accounts payable and accrued interest payable and
depreciation and amortization.

Net cash used for investing activities for the nine months ended
September 30, 1999 was $232.0 million primarily due to capital
expenditures for the continued construction of Internet Data Centers and
the acquisitions of AIS and Cohesive.  This compares to net cash used
for investing activities for the nine months ended September 30, 1998 of
$70.1 million which was due to capital expenditures for the construction
of Internet Data Centers and an increase in restricted cash equivalents
and investments.

Net cash provided by financing activities for the nine month period
ended September 30, 1999 was $309.7 million, primarily due to the
proceeds from our issuance of $250 million of convertible subordinated
notes and our additional $75 million offering of senior notes in June
1999. This compares to net cash provided by financing activities for the
nine months ended September 30, 1998 of $282.1 million which was
primarily due to our initial public offering of common stock in March
1998 and our original $200 million senior notes offering in July 1998.

As of September 30, 1999, we had commitments under capital leases and
under noncancellable operating leases of $44.9 million and $260.3
million, respectively, through 2012. In addition, in August 1999 we
entered into capacity purchase agreements with Global Crossing.  The
transaction amounted to a total commitment of approximately $105 million
for fiber capacity and related maintenance covering approximately 25
years.  As of September 30, 1999 we had expended $7 million of the total
$105 million commitment.

We intend to make significant expenditures during the next 12 months
primarily for property and equipment, in particular equipment and
construction needed for existing and future Internet Data Centers, as
well as office equipment, computers and telephones. We expect to finance
such capital expenditures primarily through net proceeds from the senior
notes and convertible subordinated notes, existing and future equipment
loans and lease lines of credit, and issuances of additional debt and
other financing activities. We believe our working capital and capital
expenditure requirements over the next 12 months can be met with
existing cash and cash equivalents and short-term investments, cash from
sales of services and proceeds from debt financings and existing and
future equipment financing lines of credit. We may enter into additional
equipment loans and capital leases. We may also seek to raise additional
funds through public or private financing, strategic relationships or
other arrangements. There can be no assurance that we will be successful
generating sufficient cash flows from operations or raising capital in
sufficient amounts on terms acceptable to us.  See "-Factors Affecting
Future Results-Our Rapid Expansion Produces a Significant Strain on Our
Business."

**Factors Affecting Future Results**

**Our short operating history and heavy losses make our business difficult  to evaluate**

Our limited operating history makes evaluating our business operations
and our prospects difficult. We began offering server hosting and
Internet connectivity services in 1995, opened our first dedicated
Internet Data Center in August 1996 and introduced managed services in
1997 and professional services in 1998. Due to our short operating
history, our business model is still evolving. We have incurred
operating losses and negative cash flows each fiscal quarter and year
since 1995. Our accumulated deficit was approximately $168.9 million at
September 30, 1999. We anticipate continuing to make significant
investments in new Internet Data Centers and network infrastructure,
product development, sales and marketing programs and personnel. We
believe that we will continue to experience net losses on a quarterly
and annual basis for the foreseeable future. We may also use significant
amounts of cash and/or equity to acquire complementary businesses,
products, services or technologies. Although we have experienced
significant growth in revenues in recent periods, this growth rate is
not necessarily indicative of future operating results. It is possible
that we may never achieve profitability on a quarterly or an annual
basis.

**Our operating results have fluctuated widely and we expect this to  continue**

We have experienced significant fluctuations in our results of
operations on a quarterly and an annual basis. We expect to continue to
experience significant fluctuations due to a variety of factors, many of
which are outside of our control, including:

> demand for and market acceptance of our services;reliable continuity of service and network availability;the ability to increase bandwidth as necessary, both on our network
> and at our interconnection points with other networks;costs related to the acquisition of network capacity and arrangements
> for interconnections with third-party networks;customer retention and satisfaction;capacity utilization of our Internet Data Centers;the timing, magnitude and integration of acquisitions of
> complementary businesses and assets;the timing of customer installations;the provision of customer discounts and credits;the mix of services sold by us;the timing and success of marketing efforts and service introductions
> by us and our competitors;the timing and magnitude of capital expenditures, including
> construction costs relating to the expansion of operations;the timing of expansion of existing Internet Data Centers and
> completion of new Internet Data Centers;the introduction by third parties of new Internet and networking
> technologies;changes in our pricing policies and those of our competitors; andfluctuations in bandwidth used by customers.

In addition, a relatively large portion of our expenses are fixed in the
short-term, particularly with respect to telecommunications,
depreciation, substantial interest expenses, real estate and personnel.
Therefore, our results of operations are particularly sensitive to
fluctuations in revenues. Furthermore, if we were to become unable to
continue leveraging third-party products in our services offerings, our
product development costs could increase significantly. Finally, many of
our customers are emerging growth companies which may have negative cash
flows, and there is the possibility that we will not be able to collect
receivables on a timely basis.

**Our rapid expansion produces a significant strain on our business**

The expansion of our network through the opening of additional Internet
Data Centers in geographically diverse locations is one of our key
strategies. We currently have 14 Internet Data Centers located in seven
metropolitan areas of the United States: Boston, Chicago, Los Angeles,
New York, Seattle, Silicon Valley and Washington, D.C. We also opened
our first Internet Data Center outside of the United States in the
London metropolitan area in June 1999. We plan to open four additional
Internet Data Centers and three server hosting sites by the end of 1999
or the first month of 2000. To expand successfully, we must be able to
assess markets, locate and secure new Internet Data Center sites,
install telecommunications and Internet Data center facilities and
establish additional peering interconnections with Internet service
providers.  To manage this expansion effectively, we must continue to
improve our operational and financial systems and expand, train and
manage our employee base.   Our inability to establish additional
Internet Data Centers or effectively manage our expansion would have a
material adverse effect upon our business.

**We compete with much larger companies and there are few barriers to  entry**

Our market is intensely competitive. There are few substantial barriers
to entry, and we expect to face additional competition from existing
competitors and new market entrants in the future. Many companies have
announced recently that they intend to begin providing and/or greatly
expand their service offerings that are competitive with our services.
The principal competitive factors in this market include:

> Internet system engineering and other expertise;customer service;network capability, reliability, quality of service and scalability;the variety of services offered;access to network resources, including circuits, equipment and
> interconnection capacity to other networks;broad geographic presence;price;the ability to maintain and expand distribution channels;brand name;the timing of introductions of new services;network security; andfinancial resources.

There can be no assurance that we will have the resources or expertise
to compete successfully in the future. Our current and potential
competitors in the market include:

> providers of server hosting services;national, foreign and regional ISPs;global, regional and local telecommunications companies and Regional
> Bell Operating Companies;IT outsourcing firms; andother technology services and products companies.

Many of our competitors have substantially greater resources, more
customers, longer operating histories, greater name recognition and more
established relationships in the industry. As a result, these
competitors may be able to develop and expand their network
infrastructures and service offerings more quickly, devote greater
resources to the marketing and sale of their products and adopt more
aggressive pricing policies. In addition, these competitors have entered
and will likely continue to enter into business relationships to provide
additional services competitive with those we provide.

Some of our competitors may be able to provide customers with additional
benefits in connection with their Internet system and network management
solutions, including reduced communications costs, which could reduce
the overall costs of their services relative to ours. We may not be able
to offset the effects of any price reductions. In addition, we believe
our market is likely to encounter consolidation in the near future,
which could result in increased prices and other competition.

**Our market is new and our services may not be generally accepted**

The market for Internet system and network management solutions has only
recently begun to develop, is evolving rapidly and is characterized by
an increasing number of market entrants. This market may not prove to be
viable or, if it becomes viable, may not continue to grow. Our future
growth depends on the willingness of enterprises to outsource the system
and network management of their mission-critical Internet operations and
our ability to market our services in a cost-effective manner to a
sufficiently large number of customers. If this market fails to develop,
or develops more slowly than expected, or if our services do not achieve
market acceptance, our business would be adversely affected. In
addition, in order to be successful we must be able to differentiate
ourselves from our competition through our service offerings.

**Our substantial leverage and debt service obligations adversely affect  our cash flow**

We have substantial amounts of outstanding indebtedness, primarily from
our senior notes and convertible notes. There is the possibility that we
may be unable to generate cash sufficient to pay the principal of,
interest on and other amounts due in respect of, our indebtedness when
due. As of September 30, 1999, we had indebtedness of approximately
$587.6 million and available borrowings of up to an additional $1.2
million. We also expect to add additional equipment loans and lease
lines to finance capital expenditures for our Internet Data Centers and
to obtain additional long term debt, working capital lines of credit and
lease lines. We cannot be certain that any financing arrangements will
be available.

Our substantial leverage could have significant negative consequences,
including:

> increasing our vulnerability to general adverse economic and industry
> conditions;limiting our ability to obtain additional financing;requiring the dedication of a substantial portion of our expected
> cash flow from operations to service our indebtedness, thereby
> reducing the amount of our expected cash flow available for other
> purposes, including capital expenditures;limiting our flexibility in planning for, or reacting to, changes in
> our business and the industry in which we compete; andplacing us at a possible competitive disadvantage compared to less
> leveraged competitors and competitors that have better access to
> capital resources.

**We are subject to restrictive covenants that limit our flexibility**

Our senior notes and convertible notes contain various restrictions on
our ability to incur debt, pay dividends or make other restricted
payments, sell assets, enter into affiliate transactions and take other
actions.  Furthermore, our existing financing arrangements are, and
future financing arrangements are likely to be, secured by substantially
all of our assets. The existing financing arrangements require, and
future financing arrangements are likely to require, that we maintain
specific financial ratios and comply with covenants restricting our
ability to incur debt, pay dividends or make other restricted payments,
sell assets, enter into affiliate transactions or take other actions.

In addition, the proceeds from the sale of convertible notes in March
1999 may be used only for limited purposes. Proceeds in the amount of
$48.5 million may be used for general corporate purposes. The remaining
$193.6 million may be used only to finance the purchase of assets or
other businesses to be used in our business.

We expect to expend substantial resources for leases and/or the purchase
of real estate, significant improvements of facilities, purchase of
complementary businesses, assets and equipment, implementation of
multiple telecommunications connections and hiring of network,
administrative, customer support and sales and marketing personnel with
the establishment of each new Internet Data Center. Moreover, we expect
to make significant investments in sales and marketing and the
development of new services as part of our expansion strategy. The
failure to generate sufficient cash flows or to raise sufficient funds
may require us to delay or abandon some or all of our development and
expansion plans or otherwise forego market opportunities, making it
difficult for us to generate additional revenue and to respond to
competitive pressures.

In general, it takes us at least six months to select the appropriate
location for a new Internet Data Center, construct the necessary
facilities, install equipment and telecommunications infrastructure and
hire operations and sales personnel. Expenditures commence well before
the Internet Data Center opens, and it takes an extended period for us
to approach break-even capacity utilization. As a result, we expect that
individual Internet Data Centers will experience losses for in excess of
one year from the time they are opened. We experience further losses
from sales personnel hired to test market our services in markets where
there is no Internet Data Center. Growth in the number of our Internet
Data Centers is likely to increase the amount and duration of losses. In
addition, if we do not attract customers to new Internet Data Centers in
a timely manner, or at all, our business would be materially adversely
affected.

**We must manage growth effectively**

We are experiencing, and expect to continue experiencing, rapid growth
with respect to the building of our Internet Data Centers and network
infrastructure, expansion of our service offerings, geographic
expansion, expansion of our customer base and increases in the number of
employees. This growth has placed, and we expect it to continue to
place, a significant strain on our financial, management, operational
and other resources, including our ability to ensure customer
satisfaction. This expansion also requires significant time commitment
from our senior management and places a significant strain on their
ability to manage the existing business. In addition, we are required to
manage multiple relationships with a growing number of third parties as
we seek to complement our service offerings. Our ability to manage our
growth effectively will require us to continue to expand operating and
financial procedures and controls, to replace or upgrade our
operational, financial and management information systems and to
attract, train, motivate and retain key employees. We have recently
hired many key employees and officers, and as a result, our entire
management team has worked together for only a brief time. In addition,
we intend to hire additional senior management personnel to support our
growth and expansion of our business. If our executives are unable to
manage growth effectively, our business could be materially adversely
affected.

**There are risks associated with acquisitions**

In October 1998 we acquired the assets of Arca Systems, Inc., in
February 1999 we acquired American Information Systems, Inc. and in July
1999 we acquired Cohesive Technology Solutions, Inc. We continue to
expend resources integrating Cohesive and the personnel hired in
connection with acquisitions. As we acquire additional companies, such
as Service Metrics, Inc., with whom we signed a definitive agreement in
October 1999, we may incur expenses to, among other things, remediate
Year 2000 problems relating to these acquired companies.

We believe that our future growth depends, in part, upon the acquisition
of complementary businesses, products, services or technologies. After
purchasing a company, we could have difficulty in assimilating that
company's technology, personnel and operations. In addition, the key
personnel of the acquired company may decide not to work for us. These
difficulties could disrupt our ongoing business, distract our management
and employees and increase our expenses. In addition, future
acquisitions by us may require us to incur additional debt, result in
large one-time write-offs or create goodwill or other intangible assets
that could result in amortization expenses.

**System failures could lead to significant costs**

We must protect our network infrastructure and customers' equipment
against damage from human error, physical or electronic security
breaches, power loss and other facility failures, fire, earthquake,
flood, telecommunications failure, sabotage, vandalism and similar
events. Despite precautions we have taken, a natural disaster or other
unanticipated problems at one or more of our Internet Data Centers could
result in interruptions in our services or significant damage to
customer equipment. In addition, failure of any of our
telecommunications providers, such as MCI WorldCom, Qwest Communications
Corporation, Global Crossing or local exchange carriers, to provide
consistent data communications capacity could result in interruptions in
our services. Any damage to or failure of our systems or service
providers could result in reductions in, or terminations of, services
supplied to our customers, which could have a material adverse effect on
our business. In the past, we have experienced interruptions in specific
circuits within our network resulting from events outside our control,
which led to short-term degradation in the level of performance of our
network.

**Customer satisfaction is critical to our success**

Our customers demand a very high level of service. Our customer
contracts generally provide a limited service level commitment related
to the continuous availability of service on a 24 hours per day, seven
days per week basis. This commitment is generally limited to a credit
consisting of free service for a short period of time for disruptions in
Internet transmission services. To date, only a limited number of
customers have been entitled to this credit. If we incur significant
service level commitment obligations in connection with system downtime,
our liability insurance may not be adequate to cover these expenses. As
customers outsource more mission-critical operations to us, we are
subject to increased liability claims and customer dissatisfaction if
our systems fail or our customers otherwise become unsatisfied.

**Our ability to expand our network is unproven**

To satisfy customer requirements, we must continue to expand and adapt
our network infrastructure. We are dependent on MCI WorldCom, Qwest,
Global Crossing and other telecommunications providers for our network
capacity, including our dedicated clear channel network. The expansion
and adaptation of our telecommunications infrastructure will require
substantial financial, operational and management resources as we
negotiate telecommunications capacity with network infrastructure
suppliers. Due to the limited deployment of our services to date, our
ability to connect and manage a substantially larger number of customers
at high transmission speeds is unknown. We have yet to prove our
network's ability to be scaled up to higher customer levels while
maintaining superior performance. Furthermore, it may be difficult for
us to increase quickly our network capacity in light of current
necessary lead times within the industry to purchase circuits and other
critical items. If we fail to achieve or maintain high capacity data
transmission circuits, customer demand could diminish because of
possible degradation of service. In addition, as we upgrade our
telecommunications infrastructure to increase bandwidth available to our
customers, we expect to encounter equipment or software incompatibility
which may cause delays in implementation.

**We depend on network interconnections**

We rely on a number of public and private network interconnections to
allow our customers to connect to other networks. If the networks with
which we interconnect were to discontinue their interconnections, our
ability to exchange traffic would be significantly constrained.
Furthermore, our business will be adversely affected if these networks
do not add more bandwidth to accommodate increased traffic. Many of the
companies with which we maintain interconnections are our competitors.
There is nothing to prevent any networks, many of which are
significantly larger than we are, from charging high usage fees or
denying access. In the future, networks could refuse to continue to
interconnect directly with us, might impose significant costs on us or
limit our customers' access to their networks. In this event, we may not
be able on a cost-effective basis to access alternative networks to
exchange our customers' traffic. In addition, we may not be able to pass
through to our customers any additional costs of utilizing these
networks. In these cases, our business could be adversely affected.

**Risks associated with international operations**

A component of our strategy is to expand into international markets. We
opened our first Internet Data Center outside of the United States in
the London metropolitan area in June 1999. Furthermore, we plan to open
additional international server hosting sites and/or Internet Data
Centers by the end of 1999 or the first month of 2000. In order to
expand our international operations, we may enter into joint ventures or
outsourcing agreements with third parties, acquire rights to high-
bandwidth transmission capability, acquire complementary businesses or
operations, or establish and maintain new operations outside of the
United States. Thus, we may depend on third parties to be successful in
our international operations. In addition, the rate of development and
adoption of the Internet has been slower outside of the United States,
and the cost of bandwidth has been higher, which may adversely affect
our ability to expand operations and may increase our cost of operations
internationally. The risks inherent in conducting business
internationally include:

> unexpected changes in regulatory requirements, export restrictions,
> tariffs and other trade barriers;challenges in staffing and managing foreign operations;differences in technology standards;employment laws and practices in foreign countries;longer payment cycles and problems in collecting accounts receivable;political instability;fluctuations in currency exchange rates and imposition of currency
> exchange controls; andpotentially adverse tax consequences.

**Rapid technological change and evolving industry standards**

Our future success will depend on our ability to offer services that
incorporate leading technology and address the increasingly
sophisticated and varied needs of our current and prospective customers.
Our market is characterized by rapidly changing and unproven technology,
evolving industry standards, changes in customer needs, emerging
competition and frequent new service introductions. Future advances in
technology may not be beneficial to, or compatible with, our business.
In addition, we may not be able to incorporate advances on a cost-
effective and timely basis. Moreover, technological advances may have
the effect of encouraging our current or future customers to rely on in-
house personnel and equipment to furnish the services we currently
provide. In addition, keeping pace with technological advances may
require substantial expenditures and lead time.

We believe that our ability to compete successfully is also dependent
upon the continued compatibility and interoperability of our services
with products, services and architectures offered by various vendors.
Although we work with various vendors in testing newly developed
products, these products may not be compatible with our infrastructure
or adequate to address changing customer needs. For instance, existing
networking hardware may not be immediately compatible with leading edge
telecommunications infrastructure services. This incompatibility would
require us to make significant investments to achieve compatibility.
Although we intend to support emerging standards, industry standards may
not be established or we may not be able to timely conform to new
standards. Our failure to conform to a prevailing standard, or the
failure of a common standard to emerge, could have a material adverse
effect on our business.

**System security risks could disrupt our services**

The ability to provide secure transmissions of confidential information
over networks accessible to the public is a significant barrier to
electronic commerce and communications. A portion of our services rely
on encryption and authentication technology licensed from third parties.
Despite a variety of network security measures taken by us, we cannot
assure that unauthorized access, computer viruses, accidental or
intentional actions and other disruptions will not occur. Our Internet
Data Centers have experienced and may in the future experience delays or
interruptions in service as a result of the accidental or intentional
actions of Internet users, current and former employees or others.
Furthermore, inappropriate use of the network by third parties could
also jeopardize the security of confidential information, such as
customer and Exodus passwords as well as credit card and bank account
numbers, stored in our computer systems or those of our customers. As a
result, we could become liable to others and lose existing or potential
customers. The costs required to eliminate computer viruses and
alleviate other security problems could be prohibitively expensive. In
addition, the efforts to address these problems could result in
interruptions, delays or cessation of service to our customers.

**We depend on third-party equipment and software suppliers**

We depend on vendors to supply key components of our telecommunications
infrastructure and system and network management solutions. Some of the
telecommunications services and networking equipment is available only
from sole or limited sources. For instance, the routers, switches and
modems we use are currently supplied primarily by Cisco Systems, Inc. We
typically purchase or lease all of our components under purchase orders
placed from time to time. We do not carry significant inventories of
components and have no guaranteed supply arrangements with vendors. If
we are unable to obtain required products or services on a timely basis
and at an acceptable cost, our business would be adversely affected. In
addition, if our sole or limited source suppliers do not provide
products or components that comply with evolving Internet and
telecommunications standards or that interoperate with other products or
components we use, our business would be adversely affected. For
example, we have experienced performance problems, including previously
unknown software and firmware bugs, with routers and switches that have
caused temporary disruptions in and impairment of network performance.
In addition, we expect to depend for a time on third parties to deliver
and manage our services from certain international operations.

**Government regulation and legal uncertainties may adversely affect our  business**

Laws and regulations directly applicable to communications and commerce
over the Internet are becoming more prevalent. The United States
Congress has recently considered Internet laws regarding children's
privacy, copyrights, taxation and the transmission of sexually explicit
material. The European Union also recently enacted its own privacy
regulations. The law of the Internet, however, remains largely
unsettled, even in areas where there has been some legislative action.
It may take years to determine whether and how existing laws such as
those governing intellectual property, privacy, libel and taxation apply
to the Internet. In addition, the growth and development of the market
for online commerce may prompt calls for more stringent consumer
protection laws, both in the United States and abroad, that may impose
additional burdens on companies conducting business online. The adoption
or modification of laws or regulations relating to the Internet could
adversely affect our business. We provide services over the Internet in
all states in the United States and in many foreign countries, and we
facilitate the activities of our customers in these jurisdictions. As a
result we may be required to qualify to do business, or be subject to
taxation, or be subject to other laws and regulations, in these
jurisdictions even if we do not have a physical presence or employees or
property in these jurisdictions. The application of these multiple sets
of laws and regulations is uncertain, but we could find that Exodus is
subject to regulation, taxation, enforcement or other liability in
unexpected ways, which could materially adversely affect our business.

**There are risks involved with the information disseminated through our  network**

The law relating to the liability of online services companies and
Internet access providers for information carried on or disseminated
through their networks is currently unsettled. The Child Online
Protection Act of 1998 imposes criminal penalties and civil liability on
anyone engaged in the business of selling or transferring material that
is harmful to minors, by means of the World Wide Web, without
restricting access to this type of material by underage persons.
Numerous states have adopted or are currently considering similar types
of legislation. The imposition upon us and other Internet network
providers of potential liability for information carried on or
disseminated through systems could require us to implement measures to
reduce exposure to liability, which may require the expenditure of
substantial resources, or to discontinue various service or product
offerings. Further, the costs of defending against any claims and
potential adverse outcomes of these claims could have a material adverse
effect on our business. While we carry professional liability insurance,
it may not be adequate to compensate or may not cover us in the event we
become liable for information carried on or disseminated through our
networks.

Some businesses, organizations and individuals have in the past sent
unsolicited commercial e-mail messages advertising sites hosted at our
facilities to a massive number of people. This practice, known as
``spamming,'' has led to some complaints against us. In addition, some
ISPs and other online services companies could deny network access to us
if we allow undesired content or spamming to be transmitted through our
networks. Although we prohibit customers by contract from spamming, we
cannot be sure that customers will not engage in this practice, which
could have a material adverse effect on our business.

**We depend on our key personnel**

Our success depends in significant part upon the continued services of
our key technical, sales and senior management personnel. Although some
of our executive officers participate in our executive employment
policy, none of our officers is a party to an employment agreement. Any
officer or employee can terminate his or her relationship at any time.
If we lose the services of one or more of our key employees or are
unable to attract additional qualified personnel, our business would be
adversely affected. We do not carry key-person life insurance for any of
our employees.

**We depend on the Internet and Internet infrastructure development**

Our success depends in large part on continued growth in the use of the
Internet. Critical issues concerning the commercial use of the Internet,
including security, reliability, cost, ease of access, quality of
service and necessary increases in bandwidth availability, remain
unresolved and are likely to affect the development of the market for
our services. In addition, the rate of development and adoption of the
Internet has been slower outside of the United States and the cost of
bandwidth has been higher. The recent growth in the use of the Internet
has caused frequent periods of performance degradation, requiring the
upgrade of routers and switches, telecommunications links and other
components forming the infrastructure of the Internet by ISPs and other
organizations with links to the Internet. Any perceived degradation in
the performance of the Internet as a whole could undermine the benefits
of our services. Consequently, the emergence and growth of the market
for our services is dependent on improvements being made to the entire
Internet infrastructure to alleviate overloading and congestion.

**Risks associated with protection and enforcement of intellectual  property rights**

We rely on a combination of copyright, trademark, service mark and trade
secret laws and contractual restrictions to establish and protect
proprietary rights in our products and services. We have no patented
technology that would preclude or inhibit competitors from entering our
market. Although we have entered into confidentiality agreements with
our employees, contractors, suppliers, distributors and appropriate
customers to limit access to and disclosure of our proprietary
information, these may prove insufficient to prevent misappropriation of
our technology or to deter independent third-party development of
similar technologies. In addition, the laws of various foreign countries
may not protect our products, services or intellectual property rights
to the same extent as do the laws of the United States.

In addition to licensing technologies from third parties, we are
developing and acquiring additional proprietary intellectual property.
Third parties may try to claim that our products or services infringe
their intellectual property. We expect that participants in our markets
will be increasingly subject to infringement claims. Any claim, whether
meritorious or not, could be time consuming, result in costly
litigation, cause product installation delays or require us to enter
into royalty or licensing agreements. These royalty or licensing
agreements might not be available on terms acceptable to us or at all.

**Risks related to the Year 2000 Problem**

The Year 2000 problem stems from the use of a two digit date to
represent the year (for example, 85 = 1985) in computer software and
firmware. As a result, many currently installed computer systems are not
capable of distinguishing dates beginning with the Year 2000 from dates
prior to the Year 2000. As a result, computer systems or applications
used by many companies in a wide variety of industries may experience
operating difficulties unless the systems or applications are modified
to process adequately information related to the date change.
Significant uncertainty exists in the software and other industries
concerning the scope and magnitude of problems associated with the
century change. To the extent Year 2000 issues cause significant delay
in, or cancellation of decisions to purchase products or product
support, due to the reallocation of resources to address Year 2000
issues or otherwise, our business could be materially adversely
affected.

We recognize the need to ensure our operations will not be adversely
impacted by Year 2000 issues.  We have put into place a comprehensive
Year 2000 Risk Management initiative that is adequately funded, staffed
and managed. This initiative's scope covers both our IT systems and non-
IT systems and addresses all areas of the Year 2000 issues as defined by
the Information Technology Association of America (ITAA). Our internal
inventory audit was completed January 1999. Due to our acquisition of
Cohesive, we expanded the independent review of our Year 2000
assessment. The review was completed in the third quarter of 1999.  Due
to recently entering into a definitive agreement to acquire Service
Metrics, Inc., we will perform an independent review of their Year 2000
program.  The review will be completed by December 1999.

We have determined that our Internet Data Center equipment is currently
Year 2000 compliant.  We will continue to monitor vendors and suppliers
for the remainder of the year.  Likewise, based on the on-going
assessment relative to our current software service offerings, we
believe that the current versions of these products are Year 2000
compliant. We have reviewed, and continue to review, internal management
information and other systems in order to identify and modify those
products, services or systems to ensure that they remain Year 2000
compliant. We have completed a preliminary assessment of the Year 2000
compliance of Cohesive's internal management information and other
systems. Based on our assessment to date, we believe that our internal
management information and other systems and Cohesive's internal
management information and other systems are Year 2000 compliant. We do
not foresee any significant issues with internal IT and internal non-IT
systems remaining Year 2000 compliant throughout the remainder of the
year.

Our Year 2000 initiative also addresses vendor relationships (both IT
and non-IT) and their readiness/preparedness relating to Year 2000
issues. IT vendors include software providers, hardware providers,
service providers, off the shelf software publishers and IT consultants.
Non-IT providers include electric power suppliers, vendors of
uninterruptable power supplies and generators, telecommunications
service providers, business partners, facilities maintainers and other
non-IT service contractors. In the event that third parties cannot
provide us with products, services or systems that are Year 2000
compliant on a timely basis, our business could be materially adversely
affected. To date, we have not discovered nor do we anticipate any
material issues with vendors and service providers. Evaluation of vendor
Year 2000 preparedness is an on-going process. As our Year 2000
evaluation does not evaluate our vendors' vendors nor our vendors'
customer base viability issues, we will be developing contingency plans
to address specific vendor/service provider concerns. Our contingency
plans were completed by September 30, 1999. To minimize our risk,
effective November 15, 1999 through January 4, 2000, we have instituted
a freeze on the introduction of new technology, new software versions
and new configurations. During this period, we will utilize only
hardware currently approved for production.

Many of our customers maintain their Internet operations on servers
which may be impacted by Year 2000 complications. The failure of our
customers to ensure that their servers are Year 2000 compliant could
have a material adverse effect on our customers, which in turn could
have a material adverse effect on our business, if our customers are
forced to cease or interrupt Internet operations or experience
malfunctions related to their equipment.

We have established procedures for evaluating and managing the risks and
costs associated with the Year 2000 problem. Funding and execution for
this initiative is within our existing business units and operating
budgets and is not viewed as material. Based on our current assessment,
we believe the costs, excluding employee personnel time and effort and
unanticipated liabilities, to resolve Year 2000 issues should not exceed
$900,000 of which we have incurred approximately $650,000 through
September 30, 1999.  We further estimate that the time and effort
required of our personnel to resolve Year 2000 issues will not be
material.

While we believe our Year 2000 initiative to be prudent, properly funded
and staffed and well-managed, there can be no assurance that we will
identify and remedy all Year 2000 problems in a timely fashion, that any
remedial efforts in this regard will not involve significant time and
expense, or that these problems will not have a material adverse effect
on our business.

**ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**

We have limited exposure to financial market risks, including changes in
interest rates. The fair value of our investment portfolio or related
income would not be significantly impacted by a 100 basis point increase
or decrease in interest rates due mainly to the short-term nature of the
major portion of our investment portfolio.  Our investment portfolio
primarily consists of money market funds, United States Treasury Notes,
and certificates of deposit.  An increase or decrease in interest rates
would not significantly increase or decrease interest expense on debt
obligations due to the fixed nature of our debt obligations. We do not
currently have any significant foreign operations and thus are not
currently materially exposed to foreign currency fluctuations.

**PART II.   OTHER INFORMATION**

**ITEM 1.  LEGAL PROCEEDINGS**

We are not a party to any material legal proceedings.

**ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS**

In October 1999, our Board of Directors approved an amendment to the
Rights Agreement dated January 27, 1999 between us and BankBoston, N.A.,
as rights agent.  The amendment provides an exception to the definition
of "Acquiring Person" for FMR Corp. and its associates and affiliates.
Currently under the rights agreement, an "Acquiring Person" is a person
that owns 15% or more of our outstanding common stock.  Under the
amendment, FMR Corp. will not be considered an "Acquiring Person" unless
it owns 20% or more of our outstanding common stock.

**ITEM 3.  DEFAULTS UPON SENIOR SECURITIES**

Not applicable.

**ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

Not applicable.

**ITEM 5.  OTHER INFORMATION**

On October 26, 1999, we entered into a definitive agreement to acquire
Service Metrics, Inc. for approximately $280 million in Exodus common
stock and options to purchase Exodus common stock, subject to adjustment
depending on the price of Exodus common stock at the time of closing.
Service Metrics is a leading provider of Internet monitoring
applications and services that measure the consistency, availability and
performance of web sites.  We expect to close this acquisition before
the end of 1999 and to account for it as a pooling of interests.

Effective December 1, 1999, K.B. Chandrasekhar, our Chairman of the
Board of Directors, will no longer be an employee of the Company.  He
will continue to serve as a member of the Board of Directors as the
chairman.

In August 1999, we named William R. Yeack Executive Vice President,
Professional Services.

In October 1999, we named Beverly Brown Executive Vice President and
Chief Marketing officer.

**ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K**

**a.  Exhibits**

> Exhibit
>  No.                           Description of Exhibit
> ------  --------------------------------------------------------------------
> 10.68   Capacity Purchase Agreement between Exodus and Global Crossing USA Inc.
>         dated August 27, 1999.*
> 
>  27.1   Financial Data Schedule
> 
> 
> 
> *  Confidential treatment has been requested for certain portions of
> this document pursuant to an application for confidential treatment sent
> to the Securities and Exchange Commission.  Such portions have been
> redacted and marked with a triple asterisk.  The non-redacted version of
> this document has been sent to the Securities and Exchange Commission.

**b.  Reports on Form 8-K**

On August 11, 1999, we filed a report on Form 8-K announcing the
consummation of the acquisition of Cohesive Technology Solutions, Inc.
on July 27, 1999.

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**EXODUS COMMUNICATIONS, INC.

                                   SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



| |                            
| | ---------------------------
| | EXODUS COMMUNICATIONS, INC.

| |             
| | ------------
| | (Registrant)



| |     |                     
| | --- | --------------------
| | By: | /s/ Ellen M. Hancock

| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| |                                                                                              
| | Ellen M. Hancock                                                                             
| | President, Chief Executive Officer
                                              and Director
| | (Principal Executive Officer)                                                                



| |                        
| | -----------------------
| | Date: November 12, 1999



| |     |                       
| | --- | ----------------------
| | By: | /s/ Richard. S. Stoltz

| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| |                                                                                                  
| | Richard S. Stoltz                                                                                
| | Chief Financial Officer and
                                         Chief Operating Officer     
| | (Duly Authorized Officer and Chief
                                           Accounting Officer)



| |                        
| | -----------------------
| | Date: November 12, 1999

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