<PAGE>

================================================================================

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

                                    FORM 10-Q

(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, 2001

                                       OR

|_|    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

                                   000-23795
                            (Commission file number)

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

                Delaware                                 77-0403076
     (State or other jurisdiction of                  (I.R.S. Employer
      incorporation or organization)                 Identification No.)

     2831 Mission College Boulevard
            Santa Clara, CA                                95054
(Address of principal executive offices)                 (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 such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

       There were 582,734,417 shares of the issuer's common stock, par value
$0.001, outstanding as of October 31, 2001.

================================================================================

<PAGE>

                           EXODUS COMMUNICATIONS, INC.

                                      INDEX

                                                                            Page
                                                                            ----
PART I   FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited).................................    3

         Condensed Consolidated Balance Sheets--September 30, 2001
          and December 31, 2000...........................................    3

         Condensed Consolidated Statements of Operations--Three and
          Nine-Month Periods ended September 30, 2001 and 2000............    4

         Condensed Consolidated Statements of Cash Flows--Nine-Month
          Periods ended September 30, 2001 and 2000.......................    5

         Notes to Condensed Consolidated Financial Statements.............    6

Item 2.  Management's Discussion and Analysis of Financial Condition
          and Results of Operations.......................................   16

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.......   35

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings................................................   36

Item 2.  Changes in Securities and Use of Proceeds........................   36

Item 3.  Defaults Upon Senior Securities..................................   36

Item 4.  Submission of Matters to a Vote of Security Holders..............   37

Item 5.  Other Information................................................   37

Item 6.  Exhibits and Reports on Form 8-K.................................   37

SIGNATURES................................................................   44

<PAGE>

                          PART I--FINANCIAL INFORMATION

Item 1.   Financial Statements.

                           EXODUS COMMUNICATIONS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
                                   (unaudited)

On September 26, 2001, Exodus Communications and seven of its United States
subsidiaries (collectively, the "Debtors") filed voluntary petitions for relief
(the "Filing") under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code"). Please see Note 2 of the notes to the Condensed Consolidated
Financial Statements.

<TABLE>
<CAPTION>
                                                                                                September 30,  December 31,
                                                                                                    2001          2000
                                                                                                -------------  ------------
<S>                                                                                             <C>            <C>
                                           Assets

Current assets:
   Cash and cash equivalents ................................................................   $   107,727     $  805,036
   Accounts receivable, net of allowance for doubtful accounts of $114,350 and $23,843 as
      of September 30, 2001 and December 31, 2000, respectively .............................       240,096        175,645
   Prepaid expenses and other current assets ................................................       141,728         83,476
                                                                                                -----------     ----------
      Total current assets ..................................................................       489,551      1,064,157
   Property and equipment, net ..............................................................     2,075,001      1,760,701
   Restricted cash equivalents ..............................................................        29,712         87,383
   Goodwill and other intangible assets .....................................................            --        181,284
   Investments ..............................................................................        19,579        395,185
   Other assets .............................................................................       277,858        405,648
                                                                                                -----------     ----------
      Total assets ..........................................................................   $ 2,891,701     $3,894,358
                                                                                                ===========     ==========

                        Liabilities and Stockholders' Equity (Deficit)

Current liabilities:
   Current portion of equipment loans, line of credit facilities and other notes payable ....   $   118,876     $    7,240
   Current portion of capital lease obligations .............................................           733         48,250
   Accounts payable .........................................................................        28,461        395,180
   Accrued expenses .........................................................................        69,444         53,532
   Merger and restructuring related accruals ................................................         8,340             --
   Deferred revenue, deferred benefits and other ............................................        34,907         31,422
   Accrued interest payable .................................................................         2,652         99,578
                                                                                                -----------     ----------
      Total current liabilities .............................................................       263,413        635,202
Equipment loans, line of credit facilities and other notes payable, less current portion ....        59,714        216,618
Capital lease obligations, less current portion .............................................         8,866         64,953
Convertible subordinated notes ..............................................................            --        552,834
Senior notes ................................................................................            --      1,951,208
Other non-current liabilities ...............................................................        17,134          9,634
Liabilities subject to compromise ...........................................................     3,619,132             --
                                                                                                -----------      ---------
      Total liabilities .....................................................................     3,968,259      3,430,449
                                                                                                -----------      ---------
Stockholders' equity (deficit):
   Common stock .............................................................................           583            429
   Additional paid-in capital ...............................................................     3,435,367        938,148
   Deferred stock compensation ..............................................................          (545)        (1,006)
   Accumulated deficit ......................................................................    (4,490,758)      (484,554)
   Accumulated other comprehensive income (loss) ............................................       (21,205)        10,892
                                                                                                -----------     ----------
      Total stockholders' equity (deficit) ..................................................    (1,076,558)       463,909
                                                                                                -----------     ----------
      Total liabilities and stockholders' equity (deficit) ...................................  $ 2,891,701     $3,894,358
                                                                                                ===========     ==========
</TABLE>

     See accompanying notes to condensed consolidated financial statements


                                       3

<PAGE>

                           EXODUS COMMUNICATIONS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
                                   (unaudited)

On September 26, 2001, Exodus Communications and seven of its United States
subsidiaries (collectively, the "Debtors") filed voluntary petitions for relief
(the "Filing") under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code"). Please see Note 2 of the notes to the Condensed Consolidated
Financial Statements.

<TABLE>
<CAPTION>
                                                                        Three Months Ended               Nine Months Ended
                                                                           September 30,                   September 30,
                                                                        ------------------               -----------------
                                                                        2001            2000            2001           2000
                                                                        ----            ----            ----           ----
<S>                                                                <C>                <C>           <C>             <C>
Revenue:
   Service revenue .............................................   $   236,824        $195,732      $   819,522     $ 481,476
   Other revenue ...............................................        15,592          32,136          100,271        56,582
                                                                   -----------        --------      -----------     ---------
      Total revenue ............................................       252,416         227,868          919,793       538,058

Cost of revenue:
   Cost of service revenue .....................................       240,341         132,285          671,728       328,754
   Cost of other revenue .......................................        10,660          26,420           79,500        47,752
   Asset impairment charges ....................................         5,275              --           22,251            --
                                                                   -----------        --------      -----------     ---------
      Total cost of revenue ....................................       256,276         158,705          773,479       376,506
      Gross profit (loss) ......................................        (3,860)         69,163          146,314       161,552

Operating expenses:
   Marketing and sales .........................................        43,835          48,152          170,315       123,315
   General and administrative ..................................       111,773          40,907          270,043        97,498
   Product development .........................................         3,458           3,160           13,564        10,571
   Amortization of goodwill and other intangible assets ........            --           8,850          219,556        25,412
   Merger, restructuring and asset impairment charges ..........     2,452,456              --        2,784,416            --
   Chapter 11 related reorganization items .....................        69,423              --           69,423            --
                                                                   -----------        --------      -----------     ---------
      Total operating expenses .................................     2,680,945         101,069        3,527,317       256,796
      Operating loss ...........................................    (2,684,805)        (31,906)      (3,381,003)      (95,244)

Interest and other income (expense):
   Interest income .............................................         3,805          23,741           26,891        47,847
   Interest expense (contractual interest was $97,378 and
    $243,310 for the three and nine month periods ended
    September 30, 2001) ........................................       (94,120)        (63,720)        (240,052)     (132,371)
   Loss on equity method investments ...........................        (1,518)             --           (9,489)           --
   Loss on impairment of investments ...........................            --              --         (399,704)           --
   Other income (expense), net .................................         3,401             508           (2,847)       (3,035)
                                                                   -----------        --------      -----------     ---------
      Total interest and other expense, net ....................       (88,432)        (39,471)        (625,201)     (87,559)
Net loss before cumulative effect of change in accounting
 principle .....................................................    (2,773,237)        (71,377)      (4,006,204)     (182,803)
Cumulative effect of change in accounting principle ............            --              --               --        (8,352)
                                                                   -----------        --------      -----------     ---------
      Net loss .................................................   $(2,773,237)       $(71,377)     $(4,006,204)    $(191,155)
                                                                   ===========        ========      ===========     =========

Basic and diluted net loss per share:
   Before cumulative effect of change in accounting principle ..   $    (4.90)        $  (0.17)     $     (7.26)    $   (0.46)
   Cumulative effect of change in accounting principle .........           --               --               --         (0.02)
                                                                   -----------        --------      -----------     ---------
   Basic and diluted net loss per share ........................   $    (4.90)        $  (0.17)     $     (7.26)    $   (0.48)
                                                                   ===========        ========      ===========     =========
Shares used in computing basic and diluted net loss per share ..       566,605         418,375          552,118       398,512
                                                                   ===========        ========      ===========     =========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       4

<PAGE>

                           EXODUS COMMUNICATIONS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

On September 26, 2001, Exodus Communications and seven of its United States
subsidiaries (collectively, the "Debtors") filed voluntary petitions for relief
(the "Filing") under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code"). Please see Note 2 of the notes to the Condensed Consolidated
Financial Statements.

<TABLE>
<CAPTION>
                                                                                                          Nine Months Ended
                                                                                                             September 30,
                                                                                                          -----------------
                                                                                                         2001           2000
                                                                                                         ----           ----
<S>                                                                                                   <C>             <C>
Cash flows from operating activities:
Net loss .........................................................................................   $(4,006,204)  $  (191,155)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
     Depreciation and amortization ...............................................................       434,311       117,030
     Loss on impairment of investments ...........................................................       399,704            --
     Non-cash merger, restructuring and asset impairment charges .................................     2,616,797           (31)
     Non-cash interest expense on conversion of subordinated convertible notes ...................        19,917            --
     Non-cash gain on extinguishment of debt .....................................................       (10,186)           --
     Remeasurement gain on Euro denominated senior notes .........................................          (549)       (3,769)
     Amortization of deferred stock compensation .................................................           474         1,285
     Cumulative effect of change in accounting principle .........................................            --         8,352
     Amortization of debt issuance costs .........................................................        91,213         3,384
     Loss on equity method investments ...........................................................         9,489            --
     Interest accretion on restricted cash equivalents ...........................................            --          (281)
Changes in operating assets and liabilities:
     Accounts receivable .........................................................................       (26,417)      (69,470)
     Prepaid expenses and other current assets ...................................................       (33,820)      (22,670)
     Accounts payable ............................................................................       (46,261)      105,812
     Accrued expenses ............................................................................       121,837        49,040
     Accrued interest payable ....................................................................       (41,392)       41,228
                                                                                                     -----------   -----------
         Net cash provided by (used for) operating activities ....................................      (471,087)       38,755
Cash flows from investing activities:
Capital expenditures .............................................................................      (985,262)     (767,744)
Cash received (paid) in acquisition of businesses, net of transaction costs paid .................        57,815        (3,745)
Release of restricted cash equivalents ...........................................................        56,699        39,156
Increase in restricted cash equivalents ..........................................................       (16,704)      (75,938)
Purchase of investments ..........................................................................        (1,553)      (90,040)
Purchase of other assets .........................................................................        (7,990)     (134,441)
                                                                                                     -----------   -----------
         Net cash used for investing activities ..................................................      (896,995)   (1,032,752)
Cash flows from financing activities:
Proceeds from issuance of common stock, net ......................................................       247,626       120,398
Payments on capital lease obligations ............................................................       (60,887)      (18,931)
Proceeds from equipment loans, line of credit facilities and other notes payable .................       106,979           705
Payments on equipment loans, line of credit facilities and other notes payable ...................      (161,895)       (6,301)
Proceeds from issuance of convertible subordinated notes, net ....................................       558,272            --
Proceeds from issuance of senior notes, net ......................................................            --     1,155,930
                                                                                                     -----------   -----------
         Net cash provided by financing activities ...............................................       690,095     1,251,801
                                                                                                     -----------   -----------
Net increase (decrease) in cash and cash equivalents .............................................      (677,987)      257,804
Effects of exchange rates fluctuations on cash and cash equivalents ..............................       (19,322)       (2,716)
Cash and cash equivalents at beginning of period .................................................       805,036     1,015,960
                                                                                                     -----------   -----------
Cash and cash equivalents at end of period .......................................................   $   107,727   $ 1,271,048
                                                                                                     ===========   ===========

Supplemental disclosure of cash flow information:
     Cash paid for interest ......................................................................       103,176        34,168
     Cash paid for Chapter 11 related reorganization items .......................................         5,170            --

Non-cash investing and financing activities:
     Assets recorded under capital leases ........................................................       115,133        51,676
     Assets recorded under accrued liabilities ...................................................        31,316            --
     Unrealized gain (loss) on marketable securities .............................................       (16,247)       59,700
     Deferred compensation on grants of stock options ............................................            --           478
     Conversion of convertible subordinated notes into common stock ..............................       121,500       187,305
     Conversion of senior notes into common stock ................................................        30,500            --
     Issuance of common stock and assumption of stock options in connection with acquisition
      of businesses and strategic investments ....................................................            --       360,134
     Receipt of convertible preferred stock for deferred license revenue ..........................       25,000            --
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       5

<PAGE>

                           EXODUS COMMUNICATIONS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2001

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, 2001 and the results of its
operations and cash flows for the three and nine-month periods ended September
30, 2001 and 2000. These financial statements should be read in conjunction with
the Company's audited consolidated financial statements as of December 31, 2000
and 1999 and for each of the years in the three-year period ended December 31,
2000, including notes thereto, included in the Company's 2000 Annual Report on
Form 10-K. Operating results for the three and nine-month periods ended
September 30, 2001 are not indicative of the results that may be expected for
the year ending December 31, 2001. Certain prior period amounts have been
reclassified to conform to the current period presentation.

Note 2 - Voluntary Petition for Reorganization Relief Under Chapter 11

         On September 26, 2001 (the "Petition Date"), the Company and seven of
its United States subsidiaries listed below filed voluntary petitions for
reorganization relief under chapter 11 ("Chapter 11") of title 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") under Case Nos. 01-10539 through 01-10551
(collectively, "Chapter 11 Cases") and orders for relief were entered by the
Bankruptcy Court. The Debtors are currently operating their businesses as
debtors-in-possession in accordance with the applicable provisions of the
Bankruptcy Code. The Chapter 11 Cases have been consolidated for the purposes of
joint administration under Case No. 01-10539. The Chapter 11 Cases do not
include all United States subsidiaries of Exodus Communications or any of its
foreign subsidiaries (collectively, the "Non-Debtor Subsidiaries"). The
subsidiaries of the Company that filed Chapter 11 voluntary petitions for relief
are:

     Arca System, Inc.                          GlobalCenter, Inc.
     American Information Systems, Inc.         GlobalCenter Holding Co.
     Cohesive Technology Solutions, Inc.        KeyLabs, Inc.
                                                Service Metrics, Inc.

         The Debtors filed for relief under Chapter 11 to address the growing
demands on the Company's cash flow resulting from continued losses from
operations, debt service requirements and capital commitments.

Consequences of the Chapter 11 Filing
-------------------------------------

         As a consequence of the Filing, all pending claims and litigation
against the Debtors are stayed automatically by Section 362 of the Bankruptcy
Code, and absent further order of the Bankruptcy Court, no party may take any
action to recover any pre-petition claims, enforce any lien against or obtain
possession of any property from the Debtors. In addition, pursuant to Section
365 of the Bankruptcy Code, the Debtor may reject or assume pre-petition
executory contracts and unexpired leases, and parties affected by rejections of
these contracts or leases, may file claims with the Bankruptcy Court in
accordance with the Chapter 11 reorganization process. The Company anticipates
that substantially all liabilities as of the Petition Date will be subject to
settlement in accordance with a one or more Chapter 11 plans of reorganization
which will be proposed and voted on in accordance with the provisions of the
Bankruptcy Code. Although the Debtors intend to file and seek confirmation of
such a plan or plans, there can be no assurance as to when the Debtors will file
such a plan or plans, or that such plan or plans will be confirmed by the
Bankruptcy Court and consummated. A creditors' committee has been formed and, in
accordance with the provisions of the Bankruptcy Code, will have the right to be
heard on all matters that come before the Bankruptcy Court.

         As provided by the Bankruptcy Code, the Debtors initially have the
exclusive right for 120 days following the Petition Date to propose a plan of
reorganization. If the Debtors fail to file a plan of reorganization during such
period or any extension thereof, or if such plan is not accepted by the
requisite numbers of creditors and equity holders entitled to vote on the plan,
other parties in interest may be permitted to propose their own plan or plans of
reorganization for the Debtors. The Company is unable to predict at this time
what the treatment of creditors and equity holders of the respective Debtors
will be under any proposed plan or plans of reorganization.


                                       6

<PAGE>

         The Bankruptcy Court may confirm a plan of reorganization only upon
making certain findings required by the Bankruptcy Code, and a plan may be
confirmed over the dissent of non-accepting creditors and equity security
holders if certain requirements of the Bankruptcy Code are met. The payment
rights and other entitlements of pre-petition creditors and the Company's
stockholders may be substantially altered by any plan of reorganization
confirmed in the Chapter 11 Cases. There is no assurance that there will be
sufficient assets to satisfy the Debtors' pre-petition liabilities in whole or
in part, and the pre-petition creditors of some Debtors may be treated
differently than those of other Debtors. Under a plan or plans of
reorganization, pre-petition creditors could receive less than 100% of the face
value of their claims and holders of the Company's equity securities could
receive no value for their interests. Because of such possibilities, the value
of the equity securities of the Company is highly speculative. It is not
possible to predict the outcome of the Chapter 11 Cases, the terms and
provisions of any plan or plans of reorganization, or the effect of the Chapter
11 reorganization process on the claims of the creditors of the Debtors or the
interests of the Company's equity security holders.

         The Company expects to obtain up to $200 million in
debtor-in-possession financing from third party lenders (the "DIP Financing")
which will be subject to, among other things, Bankruptcy Court approval. As of
September 30, 2001, the Company had $107.7 million of cash and cash equivalents.
The Company expects that cash from operations (and, when funded, the DIP
Financing) will provide sufficient funds to allow it to continue its and its
subsidiaries' activities and to meet its post-petition debt and capital
requirements for the foreseeable future, while a plan of reorganization is
developed and considered. However, the ability of the Company to continue as a
going concern (including its ability to meet post-petition obligations of the
Debtors and to meet obligations of the Non-Debtor Subsidiaries) and the
appropriateness of using the going concern basis for its financial statements
are dependent upon, among other things, the Company's ability to obtain funding
under the DIP Financing, to comply with the terms of the DIP Financing and any
cash management order entered by the Bankruptcy Court, to maintain adequate cash
on hand, to generate cash from operations, and to obtain confirmation of a plan
or plans of reorganization under the Bankruptcy Code.

Background of Filing
--------------------

         The Company offers services through a worldwide network of Internet
Data Centers ("IDCs") located throughout North America, Europe, Asia and
Australia. The Company also manages a private Internet Protocol network
consisting of owned router equipment and leased fiber capacity interconnecting
its IDCs across four continents and connecting to 96 Internet Service Providers
via private direct circuits. Recently, the weakening U.S. economy precipitated a
broad decline in the technology sector that the Company had not anticipated. The
Company expanded its IDC capacity from 0.6 million square feet in June 1999
to 5.6 million square feet by September 2001 in anticipation of increased
demand. IDC utilization rates declined recently as a result of the slowdown in
the number of new customers, the elimination of the Company's financially
unstable customers and the Company's acquisition of GlobalCenter Holding Co.,
Inc., in January 2001.

         This substantial decline in asset utilization, combined with a large
debt burden incurred during the Company's IDC expansion led to the need to
restructure the Company's capital structure to address the possibility of future
liquidity constraints. As a result, the Company and seven of its subsidiaries
filed voluntary petitions for reorganization relief under the Bankruptcy Code to
protect and reorganize the Company's business and capital structure.

Financial Statement Presentation
--------------------------------

         The accompanying Condensed Consolidated Financial Statements have been
prepared in accordance with AICPA Statement of Position 90-7 ("SOP 90-7"),
"Financial Reporting by Entities in Reorganization under the Bankruptcy Code,"
and on a going concern basis, which contemplates continuity of operations,
realization of assets and liquidation of liabilities in the ordinary course of
business. However, as a result of the Filing, such realization of assets and
liquidation of liabilities are subject to uncertainty. While operating as
debtors-in-possession under the protection of Chapter 11 of the Bankruptcy Code,
and subject to Bankruptcy Court approval or otherwise as permitted in the normal
course of business, the Company may sell or otherwise dispose of assets and
liquidate or settle liabilities for amounts other than those reflected in the
Condensed Consolidated Financial Statements. Further, a plan of reorganization
could materially change the amounts and classifications reported in the
consolidated historical financial statements, which do not give effect to any
adjustments to the carrying value of assets or amounts of liabilities that might
be necessary as a consequence of a plan of reorganization.

         Under SOP 90-7, the Company is required to report its debt
instruments at the amount expected to be allowed by the Bankruptcy Court in the
Filing. Accordingly, the Company accelerated the amortization of its debt
issuance costs attributable to the Debtors and recorded an expense of
approximately $79.6 million in the three months ended September 30, 2001. This
expense was classified under "Chapter 11 related reorganization items" in the
accompanying Condensed Consolidated Statement of Operations.


                                       7

<PAGE>

         As reflected in the Condensed Consolidated Financial Statements,
"Liabilities subject to compromise" refer to the Debtors' liabilities incurred
prior to the commencement of the Chapter 11 Cases. The amounts of the various
liabilities that are subject to compromise are included in the financial
statements set forth below (the "Condensed Combined Debtor-in-Possession
Financial Statements"). These amounts represent the Company's estimate of known
or potential pre-petition claims to be resolved in connection with the Chapter
11 Cases. Such claims remain subject to future adjustment. Adjustments may
result from negotiations, actions of the Bankruptcy Court, further developments
with respect to disputed claims, rejection of executory contracts and unexpired
leases, the determination as to the value of any collateral securing claims,
proofs of claim, or other events. Payment terms for these amounts will be
established in connection with the Chapter 11 Cases.

         Pursuant to the Bankruptcy Code, schedules have been filed by the
Debtors with the Bankruptcy Court setting forth the assets and liabilities of
the Debtors. Differences between amounts recorded by the Debtors and claims
filed by creditors will be investigated and resolved as part of the Chapter 11
Cases. No bar dates have been set for the filing of proofs of claim against the
Debtors. Accordingly, the ultimate number and allowed amount of such claims are
not presently known.

         The Debtors have received approval from the Bankruptcy Court to pay or
otherwise honor certain of their pre-petition obligations, including employee
wages, salaries, benefits and other employee obligations and certain other
pre-petition claims. The pre-petition liabilities, that have been approved to be
paid by the Bankruptcy Court, are not included in "Liabilities Subject to
Compromise" on the accompanying condensed consolidated balance sheets as of
September 30, 2001.

         In accordance with SOP 90-7, condensed combined debtor-in-possession
financial statements of the Debtors are presented below. Such financial
statements have been prepared on the same basis as the condensed consolidated
financial statements and include investments in Non-Debtor subsidiaries at cost
and are presented as follows:

                           EXODUS COMMUNICATIONS, INC.
         Condensed Combined Debtor-in-Possession Statement of Operations
                  For the nine months ended September 30, 2001
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                               Three Months Ended          Nine Months Ended
                                                                               September 30, 2001         September 30, 2001
                                                                               ------------------         ------------------
<S>                                                                            <C>                        <C>
Revenue .....................................................................    $   226,559                $   824,857
Cost of revenue .............................................................        232,439                    682,924
                                                                                 -----------                -----------
       Gross profit (loss) .................................................        (5,880)                    141,933

Operating expenses:
   Marketing and sales ......................................................         36,455                    140,203
   General and administrative ...............................................         99,835                    235,643
   Product development ......................................................          3,458                     13,558
   Amortization of goodwill and other intangible assets .....................             --                    218,693
   Merger, restructuring and asset impairment charges .......................      2,225,835                  2,544,057
   Chapter 11 related reorganization items ..................................         69,423                     69,423
                                                                                 -----------                -----------
       Total operating expenses .............................................      2,435,006                  3,221,577
       Operating loss .......................................................     (2,440,886)                (3,079,644)

Interest and other income (expense):
   Interest income ..........................................................          3,428                     25,199
   Interest expense (contractual interest was $94,378 and $236,327 for the
   three and nine month periods ended September 30, 2001) ...................        (91,120)                  (233,069)
   Loss on equity method investments ........................................         (1,518)                    (9,489)
   Loss on impairment of investments ........................................             --                   (399,704)
   Other income, net ........................................................         28,143                     56,254
                                                                                 -----------                -----------
       Total interest and other expense, net ................................        (61,067)                  (560,809)
                                                                                 -----------                -----------
       Net loss .............................................................    $(2,501,953)               $(3,640,453)
                                                                                 ===========                ===========
</TABLE>


                                       8

<PAGE>

                           EXODUS COMMUNICATIONS, INC.
              Condensed Combined Debtor-in-Possession Balance Sheet
                               September 30, 2001
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                        2001
                                                                    -----------
<S>                                                                 <C>
                              Assets

Current assets:
     Cash and cash equivalents .................................    $    78,235
     Trade accounts receivable, net ............................        200,664
     Intercompany receivables from Non-Debtor Subsidiaries .....        579,759
     Prepaid expenses and other current assets .................         85,136
                                                                    -----------
        Total current assets ...................................        943,794
Property and equipment, net ....................................      1,661,750
Restricted cash equivalents ....................................         28,727
Investments ....................................................         19,481
Investments in Non-Debtor Subsidiaries .........................        268,574
Other assets ...................................................        263,890
                                                                    -----------
         Total assets ..........................................    $ 3,186,216
                                                                    ===========
              Liabilities and Stockholders' Deficit

Current liabilities:
     Accounts payable ..........................................    $    12,967
     Accrued expenses ..........................................          7,618
     Merger and restructuring related accruals .................          3,714
     Deferred revenue, deferred benefits and other .............         32,580
                                                                    -----------
        Total current liabilities ..............................         56,879
                                                                    -----------
Other non-current liabilities ..................................         16,092
Liabilities subject to compromise ..............................      3,619,132
                                                                    -----------
        Total liabilities ......................................      3,692,103
                                                                    -----------
Stockholders' deficit:
     Common stock ..............................................            583
     Additional paid-in capital ................................      3,549,960
     Deferred stock compensation ...............................           (544)
     Accumulated deficit .......................................     (4,052,744)
     Accumulated other comprehensive loss ......................         (3,142)
                                                                    -----------
        Total stockholders' deficit ............................       (505,887)
                                                                    -----------
            Total liabilities and stockholders' deficit ........    $ 3,186,216
                                                                    ===========
</TABLE>


                                       9

<PAGE>

                           EXODUS COMMUNICATIONS, INC.
         Condensed Combined Debtor-in-Possession Statement of Cash Flows
                  For the nine months ended September 30, 2001
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                             2001
                                                                                             ----
<S>                                                                                     <C>
Cash flows from operating activities:
Net loss ...........................................................................    $ (3,640,453)
Adjustments to reconcile net loss to net cash used for operating activities:
     Depreciation and amortization .................................................         397,010
     Loss on impairment of investments .............................................         399,704
     Non-cash, merger, restructuring and asset impairment charges ..................       2,374,183
     Non-cash interest expense on conversion of subordinated convertible debt ......          19,917
     Non-cash gain on extinguishment of debt .......................................         (10,186)
     Remeasurement gain on Euro denominated senior notes ...........................            (549)
     Amortization of deferred stock compensation ...................................             474
     Amortization of debt issuance costs ...........................................          88,151
     Loss on equity method investments .............................................           9,489
Changes in operating assets and liabilities:
     Accounts receivable ...........................................................          (8,815)
     Prepaid expenses and other current assets .....................................         (13,117)
     Accounts payable ..............................................................        (125,379)
     Accrued expenses ..............................................................         173,232
     Accrued interest payable ......................................................         (43,531)
                                                                                        ------------
         Net cash used for operating activities ....................................        (379,870)
Cash flows from investing activities:
Capital expenditures ...............................................................        (700,116)
Cash paid to fund Non Debtor subsidiaries ..........................................        (248,838)
Cash received in acquisition of business, net of transaction costs paid ............          32,199
Release of restricted cash equivalents .............................................          47,937
Increase in restricted cash equivalents ............................................         (15,840)
Purchase of investments ............................................................          (1,553)
Purchase of other assets ...........................................................         (42,637)
                                                                                        ------------
         Net cash used for investing activities ....................................        (928,848)
Cash flows from financing activities:
Proceeds from issuance of common stock, net ........................................         247,626
Payments on capital lease obligations ..............................................         (45,752)
Payments on equipment loans, line of credit facilities and other notes payable .....        (157,537)
Proceeds from issuance of convertible subordinated notes, net ......................         558,272
                                                                                        ------------
         Net cash provided by financing activities .................................         602,609
                                                                                        ------------
Net decrease in cash and cash equivalents ..........................................        (706,109)
Effects of exchange rates fluctuations on cash and cash equivalents ................          (3,392)
Cash and cash equivalents at beginning of period ...................................         787,736
                                                                                        ------------
Cash and cash equivalents at end of period .........................................    $     78,235
                                                                                        ============

         The liabilities subject to compromise in the condensed consolidated and condensed combined
balance sheets consist of the following items at September 30, 2001:

Equipment loans, line of credit facilities and other notes payable .................    $      3,050
Capital lease obligations ..........................................................         150,827
Accounts payable ...................................................................         159,526
Accrued expenses ...................................................................          45,214
Merger and restructuring related accruals, including estimated allowable
 claims for rejection of unexpired leases ..........................................         282,753
Accrued interest payable ...........................................................          55,980
Convertible subordinated notes .....................................................       1,005,461
Senior notes .......................................................................       1,916,320
                                                                                        ------------
         Total liabilities subject to compromise ...................................    $  3,619,132
                                                                                        ============
</TABLE>

                                       10

<PAGE>

         As part of the Filing, the Company intends to reject certain leases and
contracts as allowed by the Bankruptcy Code. Certain of the leases that the
Company intends to reject have previously been accounted for part of
restructuring plans in accordance with Emerging Issues Task Force ("EITF") Issue
No. 95-3, "Recognition of Liabilities in Connection with Purchase Business
Combinations" and EITF Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)." Consequently, the Company has
reduced the merger and restructuring related accruals for these leases by
approximately $129.6 million, to the estimated maximum amount of the allowable
claims under the Bankruptcy Code in the three-month period ended September 30,
2001.

         For leases not previously accrued under a restructuring plan that the
Company intends to reject, the Company recorded an accrual of $71.6 million for
the estimated maximum amount of allowable claims under the Bankruptcy Code in
the three-month period ended September 30, 2001. The accrual is included in
liabilities subject to compromise in the accompanying condensed consolidated
balance sheets.

         The amounts for Chapter 11 related reorganization items in the
condensed consolidated and condensed combined debtor-in-possession statements of
operations consist of the following for the three and nine-month periods ended
September 30, 2001:

<TABLE>
<CAPTION>
<S>                                                                                      <C>
Accelerated amortization of debt issuance costs .......................................    $  79,619
Estimated claims for rejection of unexpired leases ....................................      117,387
Reversal of EITF 95-3 and EITF 94-3 merger and restructuring related accruals (Note 3).     (129,639)
Professional fees .....................................................................        5,170
Other .................................................................................       (3,114)
                                                                                           ---------
         Total ........................................................................    $  69,423
                                                                                           =========
</TABLE>

Note 3 - Merger, Restructuring and Asset Impairment Charges

       In connection with its acquisition of GlobalCenter, the Company announced
plans to consolidate sales and administrative offices and discontinue IDC design
and investigation projects in geographies where the combined companies had
sufficient IDC capacity available. As a result of these plans, the Company
recorded approximately $47.4 million in merger and restructuring related
accruals during the quarter ended March 31, 2001. During the quarter ended June
30, 2001, the Company recorded additional merger and restructuring accruals
relating to the acquisition of GlobalCenter of approximately $60.9 million in
accordance with Emerging Issues Task Force ("EITF") Issue No. 95-3, "Recognition
of Liabilities in Connection with Purchase Business Combinations." The accruals
are primarily related to the termination of leases and related office closure
costs, contract cancellation costs. As part of the Filing, the Company intends
to reject certain of these leases and contracts as allowed by the Bankruptcy
Code. Consequently, the Company has reduced the related accrual by
approximately $65.0 million, to the estimated maximum amount of allowable
claims under the Bankruptcy Code in the three-month period ended September 30,
2001. The reduction has been classified as a Chapter 11 related reorganization
item in the accompanying condensed consolidated statement of operations. A
summary of these accruals is as follows (in thousands):

<TABLE>
<CAPTION>
                                                           Balance as    Reversal of Merger             Additional     Balance as of
                                                          of June 30,    and Restructuring   Amount      Accruals/     September 30,
                                                              2001        Related Accruals    Paid      Adjustments        2001
                                                          ------------   ------------------  --------   -----------    -------------
<S>                                                       <C>            <C>                 <C>        <C>            <C>
Accruals in accordance with EITF Issue No. 95-3:
    Lease and contract termination costs ..............      $100,674        $(64,977)       $(3,421)      $5,442         $ 37,718
    Employee severance ................................           159              --           (189)          30               --
                                                             --------        --------        -------       ------         --------
                                                             $100,833        $(64,977)       $(3,610)      $5,472           37,718
                                                             ========        =========       ========      ======
Liabilities subject to compromise .....................                                                                    (34,450)
                                                                                                                          --------
Merger and restructuring related accruals .............                                                                   $  3,268
                                                                                                                          ========
</TABLE>

       During the quarter ended June 30, 2001, the Company announced plans to
restructure its business operations due to the general decline in the U.S.
economy. These plans included reducing discretionary spending, capital
expenditures and workforce. Based on its assessment of current and future market
conditions, the Company formalized plans to restructure its business operations
and recorded approximately $230.1 million in restructuring accruals during the
quarter ended June 30, 2001. The accruals are primarily related to the
termination of leases and related office closure costs, contract cancellation
costs and, to a lesser extent, employee termination and severance charges. The
accruals were recorded in accordance with EITF Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring).


                                       11

<PAGE>

       As part of the Filing, the Company intends, in connection with the
Chapter 11 cases, to reject certain of these leases and contracts as allowed by
the Bankruptcy Code. Accordingly, the Company has reduced related accruals by
approximately $64.7 million, for the three-month period ended September 30,
2001, to reflect the estimated maximum allowable amount of certain post
rejection lease and contract claims under the Bankruptcy Code. The reversal of
such accruals is included as a Chapter 11 related reorganization item in the
accompanying condensed consolidated statements of operations for the three and
nine-month periods ended September 30, 2001.

       During the quarter ended September 30, 2001, the Company refined its
second quarter restructuring plans. The Company had additional reductions in
discretionary spending, capital expenditures and workforce, as well as the
termination of several IDC construction projects and the closure of certain
operational IDCs. These plans also include the rejection of certain unexpired
facilities leases as allowed by the Bankruptcy Code. The Company has accrued the
estimated maximum allowable amount under the Bankruptcy Code of the facilities
leases that will be rejected. This $71.6 million charge is included as a Chapter
11 related reorganization item in the accompanying condensed consolidated
statements of operations for the three and nine-month periods ended September
30, 2001. The accrual is included in "liabilities subject to compromise." All
other costs incurred to terminate the construction projects or close certain
IDCs will be included in "Merger, restructuring and asset impairment charges" in
the period incurred. A summary of these accruals is as follows (in thousands):

<TABLE>
<CAPTION>
                                                    Balance as    Reversal of Merger                 Additional   Balance as of
                                                    or June 30,   and Restructuring                 Accruals and  September 30,
                                                       2001        Related Accruals   Amount Paid    Adjustments      2001
                                                    -----------   ------------------  -----------   ------------  -------------
<S>                                                 <C>           <C>                 <C>           <C>           <C>
Accruals in accordance with EITF Issue No. 94-3:
    Lease and contract termination costs ..........   $217,405          $(64,662)       $ (6,623)      $32,868        $ 178,988
    Employee severance ............................      9,390                --          (9,385)        2,809            2,814
                                                      --------          --------        ---------      -------        ---------
                                                      $226,795          $(64,662)       $(16,008)      $35,677          181,802
                                                      ========          =========       =========      =======
Liabilities subject to compromise                                                                                      (176,730)
                                                                                                                      ---------
Merger and restructuring related accrual                                                                              $   5,072
                                                                                                                      =========
</TABLE>

       For the three and nine-month periods ended September 30, 2001, the
Company also recorded approximately $746.6 million and $860.4 million,
respectively, in asset impairment charges related to the write-off of property
and equipment and other assets, including approximately $5.3 million and $22.3
million of computer equipment and software that are included in cost of revenue
for the three and nine-month periods ended September 30, 2001.

Note 4 - Net Loss Per Share

       Basic and diluted net loss per share has been computed by dividing the
net loss by the weighted-average number of shares of common stock outstanding
during the period. Diluted net loss per share does not include the effect of the
following potential common shares, as the effect of their inclusion is
antidilutive during each period (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                                       September 30,
                                                                       ---------------------------------------------
                                                                              2001                        2000
                                                                       -------------------        ------------------
                                                                                  Weighted                  Weighted
                                                                                   Average                  Average
                                                                                  Exercise                  Exercise
                                                                       Shares       Price         Shares     Price
                                                                       -------    --------        ------    --------
<S>                                                                    <C>        <C>             <C>       <C>
Shares issuable under stock options ...............................    116,169     $ 13.92        96,296     $17.27
Shares issuable pursuant to warrants to purchase common stock .....        347     $  0.91           347     $ 0.91
Convertible subordinated notes on an "as if converted" basis ......     44,104     $ 22.80        25,159     $22.37
</TABLE>

It is probable that the Company's plan or plans of reorganization will require
the issuance of common stock, thereby diluting current equity interests.

Note 5 - Revenue Recognition

       The Company's service revenue consists of monthly fees from IDC services,
which include networking, storage, content distribution and caching, security,
performance measurement, monitoring and testing, managed Web hosting, Web
application management, and related installation services, fees for professional
consulting services, and fees from the rental of equipment under operating
leases. Revenue from rental of equipment was approximately $11.1 million and
$41.7 million for the three and nine-month periods ended September 30, 2001.
Other revenue consists of fees from the sale of equipment (including equipment
leased under sales-type leases) and licenses of intellectual property.

       The Company adopted Staff Accounting Bulletin No. 101 ("SAB 101"),
"Revenue Recognition in Financial Statements", during 2000. As a result of the
adoption of SAB 101, the Company determined that installation services related
to monthly services do not represent a separate earnings process. Therefore,
revenue from such installation services is deferred and recognized over the
contractual term of the arrangement. Incremental direct costs of such
installation services, if any, are deferred and amortized over the contractual
term of the arrangement. Prior to the adoption of SAB 101, the Company
recognized revenue for installation services upon completion of the services and
the associated incremental costs as incurred. The cumulative effect of the
change in accounting for installation services and incremental direct costs of
these services on all prior years resulted in an $8.4 million increase in net
loss for the nine-month period ended September 30, 2000, and is reflected as the
cumulative effect of change in accounting principle.


                                       12

<PAGE>

Note 6 - Property and Equipment

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

<TABLE>
<CAPTION>
                                                       September 30,    December 31,
                                                           2001             2000
                                                       -------------    ------------
<S>                                                    <C>              <C>
Data centers and related equipment .................    $2,144,721      $1,440,564
Furniture, fixtures, computer equipment and other ..       239,002          34,785
Construction in progress ...........................        50,520         468,155
                                                        ----------      ----------
                                                         2,434,243       1,943,504
Less accumulated depreciation and amortization .....      (359,242)       (182,803)
                                                        ----------      ----------
                                                        $2,075,001      $1,760,701
                                                        ==========      ==========
</TABLE>

       Computer and other equipment and certain data center infrastructure
recorded under capital leases aggregated $270.7 million and $155.6 million as of
September 30, 2001 and December 31, 2000, respectively. Accumulated amortization
on the assets recorded under capital leases aggregated $108.9 million and $37.9
million as of September 30, 2001 and December 31, 2000, respectively.

       The Company reviews its property and equipment for impairment whenever
events or changes in circumstances indicate that the carrying amount of these
assets may not be recoverable. During the third quarter of 2001, due to
significant industry and economic trends affecting both the Company's current
and future operations as well as a significant decline in the Company's stock
price, the Company completed an impairment review of certain IDC property and
equipment and construction in progress. This review included a comparison of the
carrying amount of such assets to the estimated future undiscounted net cash
flows expected to be generated by those assets. As a result of this review, the
Company determined that certain IDC property and equipment and construction in
progress were impaired and recorded an impairment charge of approximately $746.6
million during the three month period ended September 30, 2001. For IDC property
and equipment currently used in operations, the charge was measured as the
amount by which the carrying amount of these assets exceeded their fair value.
For construction in progress, the charge was measured as the amount by which the
carrying amount of these assets exceeded their fair value less costs of
disposal. The charge is included in merger, restructuring and asset impairment
charges in the accompanying condensed consolidated statements of operations for
the three and nine-month periods ended September 30, 2001.

Note 7 - Acquisitions

       On January 10, 2001, the Company acquired GlobalCenter Holding Co.
("GlobalCenter"), a provider of complex Internet hosting services, from Global
Crossing Ltd. GlobalCenter is now a wholly-owned subsidiary of the Company. The
acquisition was accounted for as a purchase, with GlobalCenter's results of
operations included from January 1, 2001. The Company issued 108,157,200 shares
of its common stock and assumed certain GlobalCenter and Global Crossing Ltd.
stock options in connection with this acquisition.

Note 8 - Investments

       The Company regularly reviews its investment portfolio, which consists of
both publicly traded and privately held companies, to determine whether any
declines in value are other than temporary. At September 30, 2001, the Company
had approximately $4.3 million investments in publicly-traded companies recorded
in prepaid expenses and other current assets, and $19.6 million of investments
in privately held companies recorded as investments on the accompanying
condensed consolidated balance sheets. The Company's review for declines in
value for privately held investments includes reviewing historical and
forecasted financial information as well as the market performance of similar
publicly traded companies. Declines in value of publicly traded companies,
measured by comparison of the market price of their securities to the cost of
the Company's investment, are considered to be other than temporary if those
declines in value persist for two successive quarters. As a result of the
Company's review during the three and nine-month periods ended September 30,
2001, the Company determined that some of its investments had declines in value
that were other than temporary. Accordingly, the Company recorded impairment
charges of zero and approximately $399.7 million, respectively, for the three
and nine-month periods ended September 30, 2001.


                                       13

<PAGE>

Note 9 - Goodwill and Other Intangible Assets

       Since 1998, the Company has completed several acquisitions, including
most significantly the GlobalCenter acquisition in January 2001. These
acquisitions resulted in the recording of goodwill and other intangible assets
of approximately $1.9 billion. The Company reviews its goodwill and other
intangible assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of these assets may not be recoverable. During
the third quarter of 2001, due to significant industry and economic trends
affecting the Company's current and future operations as well as a significant
decline in the Company's stock price since the date of the GlobalCenter
acquisition, the Company completed an impairment review of its goodwill and
other intangible assets. This review included a comparison of the carrying
amount of each asset to the estimated future undiscounted net cash flows
expected to be generated by that asset. As a result of this review, the Company
determined that its goodwill and other intangible assets were impaired and
recorded an impairment charge equal to the carrying amount of these assets, of
approximately $1.7 billion, during the three months ended September 30, 2001.
This charge was measured as the amount by which the carrying amount of these
assets exceeded their fair value and is included in the caption "Merger,
restructuring and asset impairment charges" in the accompanying condensed
consolidated statements of operations for the three and nine-month periods ended
September 30, 2001.

Note 10 - Debt

       In August 2001, holders of an aggregate principal amount of approximately
$65.5 million of the Company's 5.25% Convertible Subordinated Notes due February
15, 2008 converted the notes into approximately 10.6 million shares of the
Company's common stock. In August 2001, holders of an aggregate principal amount
of approximately $56.0 million of the Company's 4.75% Convertible Subordinated
Notes due July 15, 2008 converted the notes into approximately 10.2 million
shares of the Company's common stock. In connection with the conversions, the
Company issued approximately 16.0 million shares of common stock in excess of
the shares issuable under the original conversion terms, which had a fair market
value of approximately $19.9 million at the date of conversion. The fair value
of the shares issued in excess of the original conversion terms is included in
interest expense for the three-month period ended September 30, 2001, in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 84,
"Induced Conversion of Convertible Debt."

       In August 2001, an aggregate principal amount of approximately $6.0
million, $7.5 million and $17.0 million of the Company's 11.25% Senior Notes due
July 1, 2008, 11.625% Senior Notes due July 15, 2010 and 10.75% Senior Notes due
July 15, 2009, respectively, were exchanged for an aggregate of approximately
5.6 million shares of the Company's common stock with a market value of
approximately $7.3 million. The Company recorded a net gain on extinguishment of
debt of approximately $22.3 million, including the write-off of $0.9 million of
unamortized debt issuance costs, in accordance with Accounting Principles
Bulletin No. 26, "Early Extinguishment of Debt". This gain is included in other
income (expense) in the accompanying condensed consolidated statements of
operations for the three and nine-month periods ended September 30, 2001.

       On July 2, 2001, the Company prepaid the $150.0 million outstanding
principal balance under its senior secured credit facility and terminated the
facility. The Company recorded a net loss on extinguishment of debt of
approximately $15.3 million, including write-off of unamortized debt issuance
costs of $12.1 million and fees and other penalties of $3.2 million, which is
included in other income (expense) in the accompanying condensed consolidated
statements of operations for the three and nine-month periods ended September
30, 2001.

       On September 26, 2001, the Company filed voluntary petitions for relief
under chapter 11 of the Bankruptcy Code. As a consequence of the Filing,
substantially all of the Company's debt is currently in default, of which
approximately $115.3 million related to Non-Debtor subsidiaries is included in
the current portion of equipment loans, lines of credit, and other notes payable
on the accompanying condensed consolidated balance sheet at September 30, 2001.


                                       14

<PAGE>

Note 11 - Accumulated Other Comprehensive Loss

       The components of other comprehensive loss are as follows (in thousands):

<TABLE>
<CAPTION>
                                                            Three Months Ended            Nine Months Ended
                                                              September 30,                 September 30,
                                                       -------------------------      -------------------------
                                                           2001          2000             2001          2000
                                                       ------------    ---------      ------------   ----------
<S>                                                    <C>             <C>            <C>            <C>
Net loss ...........................................   $(2,773,237)    $(71,377)      $(4,006,204)   $(191,155)
Unrealized gain (loss) on marketable securities ....        (8,560)       6,232           (16,247)      59,700
Realized loss on marketable securities .............            --           --             4,696           --
Foreign currency translation .......................        12,550          369           (20,546)         332
                                                       -----------     --------       -----------    ---------
Comprehensive loss .................................   $(2,769,247)    $(64,776)      $(4,038,301)   $(131,123)
                                                       ===========     ========       ===========    =========
</TABLE>

       Accumulated other comprehensive loss consists of unrealized gains or
losses on available-for-sale securities, which are included in prepaid expenses
and other current assets on the condensed consolidated balance sheets, and
cumulative translation adjustments. There was no significant tax effect related
to the components of accumulated other comprehensive loss for the three and
nine-month periods ended September 30, 2001 and 2000.

Note 12 - Segment Information

       In prior quarters, the Company has reported multiple segments. However
due to the successful integration of recent acquisitions and the maturation of
its service offerings, the Company now operates in one reportable segment. The
Company provides complex Web hosting and managed and professional services to
customers through its network of IDCs. The Company establishes these IDCs using
a consistent investment and operating model. As a result, the expected long-term
economic characteristics and financial performance are similar. In particular,
each IDC provides the same Internet related services and managed and
professional services to a similar type of customer who may locate its servers
and receive similar managed and professional services in multiple IDCs. As a
result, the Company believes its IDCs meet the aggregation criteria of SFAS No.
131, "Disclosures About Segments of an Enterprise and Related Information."

Note 13 - Litigation

     On July 12, 2001, the Company and certain current and former executive
officers were named as defendants in a purported class action lawsuit filed in
the United States District Court for the Northern District of California.
Between July 16, 2001 and August 31, 2001, 14 substantially identical lawsuits
were filed in the same court, each naming these are group of defendants. In
general, these lawsuits allege that the Company and individual defendants
misrepresented the Company financial prospects for the second quarter of 2001.
The Company believes these allegations are without merit. These actions were
automatically stayed with the Chapter 11 filing.

Note 14 - Recent Accounting Pronouncements

       In June 2001, the Financial Accounting Standards Board ("FASB") issued
two new pronouncements: SFAS No. 141, "Business Combinations", and SFAS No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 141 requires the following: a)
use of the pooling-of-interest method is prohibited for business combinations
initiated after June 30, 2001; and b) the provisions of SFAS No. 141 also apply
to all business combinations accounted for by the purchase method that are
completed after June 30, 2001 (that is, the date of the acquisition is July 2001
or later). There are also transition provisions that apply to business
combinations completed before July 1, 2001, that were accounted for by the
purchase method. SFAS No. 142 is effective for fiscal years beginning after
December 15, 2001 to all goodwill and other intangible assets recognized in an
entity's statement of financial position at that date, regardless of when those
assets were initially recognized. The Company is currently evaluating the
provisions of SFAS No. 141 and SFAS No. 142 and does not expect the adoption of
such statement to have a material impact on its financial position or results of
operations.

       In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 is effective for
financial statements issued for fiscal years beginning after June 15, 2002,
which for the Company will be fiscal 2003. The Company is currently evaluating
the provisions of SFAS No. 143 and does not expect the adoption of such
statement to have a material impact on its financial position or results of
operations.

       In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets." SFAS 144 supercedes SFAS No. 121,
"Accounting for the Impairment of Long-lived Assets and Assets to be Disposed
of" and the accounting and reporting provisions of Accounting Principles Board
Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions." SFAS 144 also amends Accounting Research
Bulletin No. 51, "Consolidated Financial Statements," to eliminate the exception
to consolidation for a subsidiary for which control is likely to be temporary.
The provisions of SFAS 144 will be effective for fiscal years beginning after
December 15, 2001, which for the Company will be fiscal 2002. The most
significant changes made by SFAS 144 are that it: (1) removes goodwill from its
scope and, therefore, eliminates the requirements of SFAS


                                       15

<PAGE>

121 to allocate goodwill to long-lived assets to be tested for impairment, and
(2) describes a probability-weighted cash flow estimation approach to deal with
situations in which alternative course of action to recover the carrying amount
of a long-lived assets are under consideration or a range is estimated for the
amount of possible future cash flows. The Company is currently evaluating the
provisions of SFAS No. 143 and does not expect the adoption of such statement to
have a material impact on its financial position or results of operation.

Note 15 - Subsequent Events

       On October 25,2001, the Company announced plans to liquidate its
non-operational facilities in Amsterdam, Munich, and Dublin and filed a
voluntary petition to reorganize one of its subsidiaries in Amsterdam.

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

       This report contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve many risks and uncertainties, including those
identified in the section entitled "Factors Affecting Future Results," which
could cause actual results to differ from those discussed in the forward-looking
statements. Forward-looking statements in this report are identified by words
such as "believes," "anticipates," "expects," "intends," "may," "will" and other
similar expressions. In addition, any statements that refer to expectations,
projections or other characterizations of future events or circumstances, are
forward-looking statements. Our forward-looking statements include statements
regarding our continued viability and our future financial performance including
the impairment of our long-lived assets and our expectations about our future
revenues, cost of revenues and other expenses. We undertake no obligation to
release the results of any revisions to these forward-looking statements, which
could occur after the filing of this report. You are urged to review carefully
and consider our various disclosures, in this report and in our other reports
filed with the SEC, that attempt to advise you of the risks and other factors
that may affect our business.

Overview

       Exodus Communications is a leading provider of Internet infrastructure
outsourcing services for enterprises with mission-critical Internet operations.
We offer complex Web hosting and managed and professional services to optimize
the performance, reliability and scalability of our customers' Internet
operations.

       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 in late 1995, opened our first dedicated IDC in August
1996 and introduced managed services in 1997 and professional services in 1998.

Voluntary Petition for Reorganization Relief Under Chapter 11

       On September 26, 2001, we and seven of our U.S. subsidiaries listed
below, filed voluntary petitions in the United States Bankruptcy Court for the
District of Delaware for reorganization relief under Chapter 11 of the United
States Bankruptcy Code. We are currently operating our business as
debtors-in-possessions in accordance with provisions of the Bankruptcy Code. Our
Chapter 11 Cases have been consolidated for the purposes of joint administration
under Case No. 01-10539. The Chapter 11 Cases do not include all United States
subsidiaries or any of our foreign subsidiaries. Our subsidiaries that filed
Chapter 11 voluntary petitions for relief are:

       Arca System, Inc.                          GlobalCenter, Inc.
       American Information Systems, Inc.         GlobalCenter Holding, Co.
       Cohesive Technology Solutions, Inc.        KeyLabs, Inc.
                                                  Service Metrics, Inc.

       We filed for relief under Chapter 11 of the Bankruptcy Code to address
the growing demands on our cash flow resulting from continued losses from
operations, debt service requirements and capital commitments.

Consequences of the Chapter 11 Filing
-------------------------------------

       As a consequence of the filing, all pending claims and litigation against
us and our filed subsidiaries have been stayed


                                       16

<PAGE>

automatically by Section 362 of the Bankruptcy Code, and absent further order of
the Bankruptcy Court, no party may take any action to recover on pre-petition
claims, enforce any lien against us or obtain possession of any property from
us. In addition, pursuant to Section 365 of the Bankruptcy Code, we may reject
or assume pre-petition executory contracts and unexpired leases, and parties
affected by rejections of these contracts or leases may file claims with the
Bankruptcy Court, in accordance with the Chapter 11 reorganization process. We
anticipate that substantially all liabilities as of the Petition Date will be
subject to settlement in accordance with one or more Chapter 11 plans of
reorganization which will be proposed and voted on in accordance with the
provisions of the Bankruptcy Code. A creditors' committees has been formed and,
in accordance with the provisions of the Bankruptcy Code, will have the right to
be heard on all matters that come before the Bankruptcy Court. Although we
intend to file and seek confirmation of a plan or plans of reorganization there
can be no assurance as to when we will file such a plan or plans, or that when
we do such plan or plans will be confirmed by the Bankruptcy Court and
consummated.

       As provided by the Bankruptcy Code, we initially have the exclusive right
for 120 days following the Petition Date, to propose a plan of reorganization.
If we fail to file a plan of reorganization during such period or any extension
thereof, or if such plan is not accepted by the requisite numbers of creditors
and equity holders entitled to vote on the plan, other parties in interest may
be permitted to propose their own plan or plans of reorganization for us. We are
unable to predict at this time what the treatment of our creditors and equity
holders will be under any proposed plan or plans of reorganization. However,
given the various financial and strategic alternatives currently being
considered by us, we believe that it is unlikely that our equity will have any
value.

       The Bankruptcy Court may confirm a plan of reorganization only upon
making certain findings required by the Bankruptcy Code, and a plan may be
confirmed over the dissent of non-accepting creditors and equity security
holders if certain requirements of the Bankruptcy Code are met. The payment
rights and other entitlements of our pre-petition creditors or stockholders may
be substantially altered by any plan of reorganization confirmed in the Chapter
11 Cases. There is no assurance that there will be sufficient assets to satisfy
our pre-petition liabilities in whole or in part, and some of our pre-petition
creditors may be treated differently than others.

Background of Filing
--------------------

       We offer services through a worldwide network of IDCs located throughout
North America, Europe, Asia and Australia. We also manage a private Internet
Protocol network consisting of owned router equipment and leased fiber capacity
interconnecting our IDCs across four continents and connecting to 96 Internet
Service Providers via private direct circuits. We expanded our IDC capacity from
0.6 million square feet in June 1999 to 5.6 million square feet by September
2001. Recently, the weakening U.S. economy precipitated a broad decline in the
technology sector that we had not anticipated. IDC utilization rates have
declined recently as a result of such, a slowdown in the number of new customers
acquired, the acquisition of GlobalCenter Holding Co., Inc. in January 2001 and
the elimination of our financially unstable customers.

       This substantial decline in asset utilization, combined with a large debt
burden incurred during our IDC expansion led to a need to restructure our
capital to address the possibility of future liquidity constraints. As a result,
we and seven of our subsidiaries filed voluntary petitions for reorganization
relief under the Bankruptcy Code to protect and reorganize our business and
capital structure on September 26, 2001.

       We expect to obtain up to $200 million in debtor-in-possession financing
with third party lenders which will be subject to, among other things,
Bankruptcy Court approval. As of September 30, 2001, we had $107.7 million of
cash and cash equivalents. We expect that cash from operations and the
debtor-in-possession financing facility will provide sufficient funds to allow
us to continue to meet our obligations as they become due while a plan of
reorganization is developed and considered. However, our ability to continue as
a going concern (including our ability to meet our post-petition obligations and
to meet the obligations of the Non-Debtor Subsidiaries) and the appropriateness
of using the going concern basis for our financial statements depend upon, among
other things, our ability to obtain sufficient funding under the
debtor-in-possession financing facility, our ability to comply with the terms of
the facility and any cash management order entered by the Bankruptcy Court in
connection with the Chapter 11 Cases, our ability to maintain adequate cash on
hand, our ability to generate cash from operations and the confirmation of a
plan or plans of reorganization under the Bankruptcy Code.


                                       17

<PAGE>

Acquisitions

       We completed several acquisitions from October 1998 through January 2001.
We acquired the following through purchase acquisitions: the assets of Arca
Systems, Inc. in October 1998; American Information Systems, Inc. in February
1999; Cohesive Technology Solutions, Inc. in July 1999; Global Online Japan Co.,
Ltd. in December 1999; KeyLabs in February 2000; the assets of the Professional
Services Division of NSSI in February 2000; Grenville in August 2000; and
GlobalCenter in January 2001. In addition, we completed a pooling of interests
transaction with Service Metrics, Inc. in November 1999.

       On January 10, 2001, we acquired GlobalCenter, a provider of complex
Internet hosting services, from Global Crossing Ltd. GlobalCenter is now our
wholly-owned subsidiary. The acquisition was accounted for as a purchase with
GlobalCenter's results of operations included from January 1, 2001. We issued
108,157,200 shares of our common stock and assumed certain GlobalCenter and
Global Crossing Ltd. stock options. At the time of the transaction, we recorded
approximately $1.8 billion of goodwill and intangible assets and which were
being amortized on a straight-line basis over a weighted average useful life of
approximately four years. However, during the three month period ended September
30, 2001 we completed an assessment of the carrying value of our long-lived
assets during the quarter, which resulted in the write off of the entire
goodwill and other intangible assets balance. See Note 9 of the accompanying
condensed consolidated financial statements and "Impairment of Long-Lived
Assets" below.

Impairment of Long-Lived Assets

       As part of our review of our financial results for 2001, we performed an
assessment of the carrying value of all of our long-lived assets, including
approximately $1.7 billion of goodwill and other intangible assets which are
primarily related to the acquisition of GlobalCenter on January 10, 2001, and
approximately $2.8 billion of property and equipment which is primarily related
to our IDCs.

       Since 1998, we have completed several acquisitions, including most
significantly the acquisition of GlobalCenter in January 2001. These
acquisitions resulted in the recording of goodwill and other intangible assets
of approximately $1.9 billion. We review our goodwill and other intangible
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of these assets may not be recoverable. During the third
quarter of 2001, due to significant industry and economic trends affecting both
our current and future operations as well as a significant decline in our stock
price since the date of the GlobalCenter acquisition, we completed an impairment
review of our goodwill and other intangible assets. This review included a
comparison of the carrying amount of each asset to the estimated future
undiscounted net cash flows expected to be generated by that asset. As a result
of this review, we determined that our goodwill and other intangible assets were
impaired and recorded an impairment charge equal to the carrying amount of these
assets, of approximately $1.7 billion. This charge was measured as the amount by
which the carrying amount of these assets exceeded their fair value and is
included in the caption "Merger, restructuring and asset impairment charges" in
the accompanying condensed consolidated statement of operations for the three
and nine-month periods ended September 30, 2001.

       Similarly, we review our property and equipment for impairment whenever
events or changes in circumstances indicate that the carrying amount of these
assets may not be recoverable. During the third quarter of 2001, due to
significant industry and economic trends affect our current and future
operations as well as a significant decline in our stock price, we completed an
impairment review of certain data center property and equipment and construction
in progress. This review included a comparison of the carrying amount of such
assets to the estimated future undiscounted net cash flows expected to be
generated by those assets. As a result of this review, we determined that
certain IDC property and equipment and construction in progress were impaired
and recorded an impairment charge of approximately $746.6 million during the
three month period ended September 30, 2001. For IDC property and equipment
currently used in operations, the charge was measured as the amount by which the
carrying amount of these assets exceeded their fair value. For construction in
progress, the charge was measured as the amount by which the carrying amount of
these assets exceeded their fair value less costs of disposal. The charge is
included in merger, restructuring and asset impairment charges in the
accompanying condensed consolidated statement of operations for the three and
nine-month periods ended September 30, 2001. As we continue to reorganize our
business, we are continually reviewing our property and equipment for
impairment. If the economic and industry trends that are adversely affecting our
business do not improve, we may determine that there has been further impairment
of our property and equipment. Asset impairment charges will be recognized in
the quarter for which we determine such assets are impaired. Asset impairment
charges of this nature could be large and could have a material adverse effect
on our financial position and results of operations.

Investments

       We maintain an investment portfolio consisting primarily of equity
investments in publicly traded and privately held companies. We regularly review
our investment portfolio to determine if any declines in value are other than
temporary. Our reviews for declines in value for privately held investments
include reviewing historical and forecasted financial information as well as the
market performance of similar publicly traded companies. Declines in value of
publicly traded companies, measured by comparison of the market price of their
securities to the cost of our investment, are considered other than temporary if
those declines persist for two successive quarters. As a result of our reviews
during the three and nine-month periods ended September


                                       18

<PAGE>

30, 2001, we determined that our investments in Mirror Image and certain other
companies had declines in value that were other than temporary. Accordingly, we
recorded impairment charges of approximately zero and $399.7 million,
respectively, in our results of operations for the three and nine-month periods
ended September 30, 2001.

Leverage and Debt Obligations

       As of September 30, 2001, we had approximately $3.3 billion in debt
obligations, which are described below (in millions):

<TABLE>
<CAPTION>
                                                           Balance at
                                        Maturity Date  September 30, 2001
                                        -------------  ------------------
<S>                                     <C>            <C>
Senior Notes:
-------------
Dollar-denominated 11 1/4% Notes ......      2008            $  269.4
Euro-denominated 11 3/8% Notes ........      2008            $  182.4     (Euro 200.0)
Dollar-denominated 10 3/4% Notes ......      2009            $  358.0
Euro-denominated 10 3/4% Notes ........      2009            $  114.0     (Euro 125.0)
Dollar-denominated 11 5/8% Notes ......      2010            $  992.5
                                                             --------
                                                             $1,916.3
Convertible Subordinated Notes:
-------------------------------
5% Notes ..............................      2006            $   52.0
4 3/4% Notes ..........................      2008            $  444.0
5 1/4% Notes ..........................      2008            $  509.5
                                                             --------
                                                             $1,005.5

Other Debt Obligations:                     Varies           $  342.1
-----------------------                                      --------

        Total debt obligations ........                      $3,263.9
                                                             ========
</TABLE>

       Approximately $3.1 billion of the above debt is included in liabilities
subject to compromise on the accompanying condensed consolidated balance sheet
at September 30, 2001. See Note 2 of the accompanying condensed consolidated
financial statements.

Results of Operations

       The following table sets forth certain statement of operations data as a
percentage of total revenue for the three and nine-month periods ended September
30, 2001 and 2000. 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 2000 Annual Report on Form 10-K except for the
accounting and disclosure requirements of SOP 90-7 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 unaudited condensed
consolidated financial statements and accompanying notes included in this Form
10-Q. These operating results are not indicative of the results to be expected
for any future period.


                                       19

<PAGE>

                           EXODUS COMMUNICATIONS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                 Three Months Ended         Nine Months Ended
                                                                                    September 30,             September 30,
                                                                                 ------------------         -----------------
                                                                                   2001       2000           2001       2000
                                                                                 --------     -----         ------      -----
<S>                                                                              <C>          <C>           <C>         <C>
Revenue
   Service revenue ........................................................         94%       86%            89%        89%
   Other revenue ..........................................................           6%       14%            11%        11%
                                                                                 --------     -----         ------      -----
       Total revenue ......................................................         100%      100%           100%       100%
                                                                                 --------     -----         ------      -----

Cost of revenue
   Cost of service revenue ................................................          96%       58%            73%        61%
   Cost of other revenue ..................................................           4%       12%             9%         9%
   Restructuring and asset impairment charges .............................           2%       --              2%        --
                                                                                 --------     -----         ------      -----
       Total cost of revenue ..............................................         102%       70%            84%        70%
                                                                                 --------     -----         ------      -----
       Gross profit (loss) ................................................          (2)%      30%            16%        30%
                                                                                 --------     -----         ------      -----

Operating expenses:
   Marketing and sales ....................................................          17%       21%            20%        23%
   General and administrative .............................................          44%       18%            30%        18%
   Product development ....................................................           1%        1%             1%         2%
   Amortization of goodwill and other intangible assets ...................           --        4%            24%         5%
   Merger, restructuring and asset impairment charges .....................         972%       --            303%         --
   Chapter 11 related reorganization items ................................          28%       --              7%         --
                                                                                 --------     -----         ------      -----
       Total operating expenses ...........................................       1,062%       44%           383%        48%
                                                                                 --------     -----         ------      -----
       Operating loss .....................................................      (1,064)%     (14)%         (367)%      (18)%
                                                                                 --------     -----         ------      -----
Interest and other income (expense):
   Interest income ........................................................           2%       10%             3%         9%
   Interest expense .......................................................         (37)%     (28)%          (26)%      (25)%
   Loss on equity method investments ......................................          (1)%      --             (1)%       --
   Loss on impairment of investments ......................................          --        --            (44)%       --
   Other income (expense), net ............................................           1%       --             --         (1)%
                                                                                 --------     -----         ------      -----
       Total interest and other expense, net ..............................         (35)%     (17)%          (68)%      (16)%

Net loss before cumulative effect of change in accounting principle .......      (1,099)%     (31)%         (435)%      (34)%
Cumulative effect of change in accounting principle .......................          --        --             --         (2)%
                                                                                 --------     -----         ------      -----
         Net loss .........................................................      (1,099)%     (31)%         (435)%      (36)%
                                                                                 ========     =====         ======      =====
</TABLE>

    Revenue

       Service revenue consists of: (i) monthly fees from IDC services, which
include networking, storage, content distribution and caching, security,
performance measurement, monitoring and testing, managed Web hosting, Web
application management, and related installation services; (ii) fees for
professional consulting services; and (iii) fees from the rental of equipment
under operating leases. Other revenue consists of fees from the sale of
equipment (including equipment leased under sales-type leases) and licenses of
intellectual property.

       During 2000, we adopted SAB 101, "Revenue Recognition in Financial
Statements." As a result of the adoption of SAB 101, we determined that
installation services related to monthly services do not represent a separate
earnings process. Therefore, revenue from installation services is deferred and
recognized over the contractual term of the arrangement. Incremental direct
costs of such installation services are deferred and amortized over the
contractual term of the arrangement. Prior to the adoption of SAB 101, we
recognized revenue for installation services upon completion of the services and
the associated incremental costs as incurred. The cumulative effect of the
change in accounting for installation services and incremental direct costs of
these services on all prior years resulted in an $8.4 million increase in net
loss for the nine-month period ended September 30, 2000, and is reflected as the
cumulative effect of change in accounting principle.


                                       20

<PAGE>

     Service Revenue

       Service revenue increased 21% and 70% to $236.8 million and $819.5
million for the three and nine-month periods ended September 30, 2001 compared
with $195.7 million and $481.5 million for the same periods of the prior year.
Service revenue decreased 16% from $282.5 million in the second quarter of 2001
to $236.8 million in the third quarter of 2001. The revenue growth from the
corresponding periods in 2000 was due to increases in hosting and network
services, as a result of increases in new customers, and new IDCs, increased
traffic, and new managed services revenue, including storage management,
security services, content distribution, managed hosting and Web application
management. The decrease in service revenue in the third quarter, compared to
the second quarter of 2001 was due to negative industry trends and a general
economic downturn, which caused some customers to go out of business and some
new customers to defer their outsourcing decisions, which led to a higher rate
of order reductions and cancellations from our customers. At September 30, 2001,
we had approximately 3,700 outsourcing customers as compared to approximately
4,500 at June 30, 2001. The decrease in the number of customers is due to
customer cancellations as a result of the current economic environment as well
as our efforts to terminate services to customers who were not paying on a
timely basis.

     Other Revenue

       Other revenue was $15.6 million and $100.3 million for the three and
nine-month period ended September 30, 2001, compared with $32.1 million and
$56.6 million in the same periods of the prior year; representing a decrease of
51% and an increase of 77%, respectively. Other revenue decreased from $36.2
million in the second quarter in 2001 to $15.6 million in the third quarter of
2001, a decrease of 57% quarter-over-quarter. The decreases from the third
quarter of 2000 and the second quarter of 2001 relate primarily to our
customers' reduced requirements for equipment. The increase for the nine-month
period ended September 30, 2001 compared with the same period for 2000 is due to
the sale of a worldwide license to operate the DataVault services business, and
all assets associated with that business in the first quarter of 2001, which was
accounted for as a sales type lease. In the first three quarters of 2001, we
recognized approximately $15.4 million of revenue from the sale of equipment
necessary to operate the DataVault services business and recognized
approximately $18.2 million of revenue from the sale of the worldwide license to
operate the DataVault services business. The revenue from the sale of the assets
was recognized when sold and the revenue from the license is being recognized
over the estimated 21 month life of the license. The total consideration
attributed to the license of the DataVault service business was approximately
$54.5 million, consisting of approximately $29.5 million in cash and future
payments and approximately $25.0 million in convertible preferred stock.

     Cost of Revenue

       Our cost of revenue is comprised of the costs for salaries and benefits
for our customer service personnel, network engineers and professional services
personnel, depreciation and amortization, rent, consultants' fees, costs of
network and local telecommunications circuits, interconnections to other
networks, repairs and utilities related to our IDCs and other sites, and costs
of third-party equipment sold or rented to customers, including costs to vendors
under reseller agreements.

     Cost of Service Revenue

       Cost of service revenue increased 82% and 104% to $240.3 million and
$671.7 million for the three and nine-month periods ended September 30, 2001
from $132.3 million and $328.8 million in the same periods in the prior year.
Cost of service revenue increased from $216.9 million in the second quarter of
2001 to $240.3 million in the third quarter of 2001, an increase of 11%
quarter-over-quarter. Cost of service revenue as a percentage of service revenue
was 101% and 82% for the three and nine-month periods ended September 30, 2001
compared with 68% for the same periods in the prior year. The increase in cost
of service revenue in absolute dollars from the corresponding periods in 2000
was the result of an increased number of operating IDCs, associated higher rent
and occupancy expenses, increased depreciation from building and expanding IDCs,
transit and local loop connectivity costs, which were spent to connect the new
IDCs to our network, and increased expense for additional backbone capacity and
bandwidth usage on our network and from our network to other networks. The
increases in cost of service revenue as a percentage of service revenue was
primarily due to the decline in total service revenue, which was caused by
negative industry trends and the general economic downturn, and increased costs
due to the increase in the number of operating IDCs. The increase in cost of
service revenue from the second quarter of 2001 was due to a full quarter of
costs associated with the four IDCs opened during the second quarter of 2001.

     Cost of Other Revenue

Cost of other revenue was $10.7 million and $79.5 million for the three and
nine-month periods ended September 30, 2001, compared with $26.4 million and
$47.8 million for the corresponding periods of 2000; a decrease of 60% and an
increase of 66%, respectively. Cost of other revenue decreased from $27.1
million in the second quarter of 2001 to $10.7 million in the third quarter of
2001, a decrease of 61% quarter-over-quarter. Cost of other revenue as a
percentage of other revenue was 68% and 79% for the three and nine-month periods
ended September 30, 2001 compared with 82% and 84% for the same periods in the
prior year. The decreases in absolute dollars for the third quarter of 2001
compared with the third quarter of 2000 and the second


                                       21

<PAGE>

quarter of 2001 were due to our customers' reduced requirements for equipment.
The increase in absolute dollars for the nine-month period of 2001 compared with
the corresponding period of the prior year was due to the sale of assets
associated with the DataVault service business and increased equipment sales to
a larger customer base in 2001 compared with 2000. Cost of other revenue as a
percentage of other revenue typically fluctuates based on the negotiated price
of each individual sale.

     Marketing and Sales

       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, marketing programs and promotions,
training and travel and entertainment expenses.

       Marketing and sales expenses were $43.8 million and $170.3 million for
the three and nine-month periods ended September 30, 2001 compared with $48.2
million and $123.3 million for the same periods in the prior year, a decrease of
9% and an increase of 38% respectively. Sales and marketing expenses decreased
from $59.2 million in the second quarter of 2001 to $43.8 million in the third
quarter of 2001, a decrease of 26% quarter-over-quarter. Marketing and sales
expenses as a percentage of revenue decreased to 17% and 19% for the three and
nine-month periods ended September 30, 2001 from 21% and 23% for the same
periods of the prior year, respectively. The decreases in absolute dollars were
primarily due to reduced headcount expenses, such as payroll and benefits, and
decreased commission expense as a result of reduced revenue. The decreases as a
percentage of revenue were due to cost cutting measures, which lowered costs at
a faster rate than revenue.

     General and Administrative

       General and administrative expenses are comprised primarily of salaries
and benefits for our administrative and management information systems
personnel, consulting fees, recruiting fees, legal and accounting fees, travel
expenses and expenses associated with uncollectible amounts due from customers.

       General and administrative expenses increased 173% and 177% to $111.8
million and $270.0 million for the three and nine-month periods ended September
30, 2001 from $40.9 million and $97.5 million for the same periods in the prior
year. General and administrative expenses increased from $80.2 million from the
second quarter of 2001 to $111.8 million in the third quarter of 2001, an
increase of 39% quarter-over-quarter. General and administrative expenses as a
percentage of revenue increased to 44% and 30% for the three and nine-month
periods ended September 30, 2001 from 18% for the same periods of the prior
year, respectively. The increase in general and administrative expenses in
absolute dollars and as a percentage of revenue were a result of increased bad
debt expense associated with uncollectible amounts due from customers,
investments in our IT infrastructure and increased facilities cost. This
increase was partially offset by a decrease in headcount-related expenses. The
quarter-over-quarter increase in general and administrative expenses was due
primarily to increased bad debt expense partially offset by costs savings
resulting from reduced headcount.

     Product Development

       Product development expenses consist primarily of salaries, benefits and
facility costs for our product development department and fees paid to
consultants.

       Our product development expenses increased 9% and 28% to $3.5 million and
$13.6 million for the three and nine-month periods ended September 30, 2001 from
$3.2 million and $10.6 million for the same periods in the prior year. Product
development expenses decreased from $4.3 million for the second quarter of 2001
to $3.5 million in the third quarter of 2001, a decrease of 19%
quarter-over-quarter. Our product development expenses as a percentage of
revenue were 1% for the three and nine-month periods ended September 30, 2001,
compared with 1% for the same periods of the prior year. The increases in
product development expenses in absolute dollars from the corresponding periods
of the prior year was a result of higher depreciation and other facility costs.
The decrease in absolute dollars quarter-over-quarter was due to decreased
headcount related expenses and fewer consulting services.

     Amortization of Goodwill and Other Intangible Assets

       As part of our strategy to grow through acquisitions of complementary
businesses, we acquired the assets of Arca Systems, Inc. in October 1998;
American Information Systems, Inc. in February 1999; Cohesive Technology
Solutions, Inc. in July 1999; Global Online Japan Co., Ltd. in December 1999;
KeyLabs, in February 2000; the assets of the Professional Services Division of
NSSI. In February 2000; Grenville in August 2000; and GlobalCenter in January
2001. In connection with those acquisitions, we recorded approximately $1.9
billion in intangible assets related to goodwill, customer lists and workforce
in place. Amortization related to those intangibles was zero and approximately
$219.6 million for the three and nine-month periods ended September 30,


                                       22

<PAGE>

2001 compared with $8.9 million and $25.4 million for the same periods in the
prior year, respectively. The decrease in the amortization of our intangible
assets was due to an impairment charge of approximately $1.7 billion recorded
during the third quarter of 2001. During the current quarter, due to significant
industry and economic trends affecting both our current and future operations as
well as a significant decline in our stock price since the date of the
GlobalCenter acquisition, we completed an impairment review of our goodwill and
other intangible assets. This review included a comparison of the carrying
amount of each asset to the estimated future undiscounted net cash flows
expected to be generated by that asset. As a result of this review, we
determined that our goodwill and other intangible assets were impaired and
recorded an impairment charge equal to the carrying amount of these assets, of
approximately $1.7 billion. See Note 9 of the notes to the condensed
consolidated financial statements.

     Merger, Restructuring and Asset Impairment Charges

       Merger, restructuring and asset impairment Charges were $2.5 billion and
$2.8 billion for the three and nine month periods ended September 30, 2001
compared with zero for the corresponding periods in the prior year. Included in
merger, restructuring and asset impairment charges for the third quarter of 2001
are impairment charges on our property plant and equipment and goodwill and
other intangible assets. See Notes 3, 6 and 9 of the notes to condensed
consolidated financial statements.

     Chapter 11 Related Reorganization Items

       The accompanying condensed consolidated financial statements have been
prepared in accordance with SOP 90-7. SOP 90-7 requires charges, including
professional fees, realized gains and losses and provisions for losses resulting
from the reorganization and restructuring of the business due to our bankruptcy
filing are reported separately. Included in reorganization items are the
estimated claims on rejected leases of $114.3 million, the accelerated the
amortization of our debt related costs attributable to the to the subsidiaries
included in the Filing of approximately $79.6 million and professional fees of
$5.2 million. Partially offsetting these amounts is the reduction of the merger
and restructuring accrual of approximately $129.6 million due to the rejection
of certain leases as allowed under the Bankruptcy Code.

     Interest Income

       Interest income was $3.8 million and $26.9 million for the three and
nine-month periods ended September 30, 2001, compared with $23.7 million and
$47.8 million in the same periods in the prior year, respectively, and $9.0
million in the second quarter of 2001. The fluctuations in interest income
relate to changes in our average cash balance and prevailing interest rates
during these periods.

     Interest Expense

       Interest expense increased 48% and 81% to $94.1 million and $240.1
million in the three and nine-month periods ended September 30, 2001, from $63.7
million and $132.4 million for the same periods in the prior year. Interest
expense increased from $75.6 million in the second quarter of 2001 to $94.1
million in the third quarter of 2001, an increase of 25% quarter-over-quarter.
The increases from the corresponding periods of the prior year reflect bank
borrowings for our Japanese subsidiary of approximately $56.7 million in
December 2000, our issuance of $575 million of 5 1/4% of convertible
subordinated notes in February 2001, borrowings to finance the purchase of
certain real estate and increased borrowings of approximately $116.0 million in
March and April 2001, and equipment loans and lease agreements entered into to
finance equipment purchases and IDC construction. The primary reason for the
quarter-over-quarter increase was due to induced conversions of our convertible
subordinated debt in August 2001. Holders of an aggregate principal amount of
approximately $65.5 million of our 5.25% convertible subordinated notes due
February 15, 2008 converted the notes into approximately 10.6 million shares of
our common stock and holders of an aggregate principal amount of approximately
$56.0 million of our 4.75% convertible subordinated notes due July 15, 2008
converted the notes into approximately 10.2 million shares of our common stock.
We issued approximately 16.0 million shares of common stock in excess of the
original conversion terms and recorded interest expense equal to their fair
market value at the date of conversion of approximately $19.9 million in
accordance with SFAS No. 84, Induced Conversion of Convertible Debt.

     Loss on Equity Method Investments

       For the three and nine-month periods ended September 30, 2001, we
incurred losses of approximately $1.5 million and $9.5 million, respectively,
from our investment in voting convertible preferred stock of a privately held
company over which we exercise a significant influence.


                                       23

<PAGE>

     Loss on Impairment of Investments

       For the three and nine-month periods ended September 30, 2001, we
incurred losses on our equity investments of approximately zero and $399.7
million, respectively. The losses primarily related to our investment in Mirror
Image, Inc. and other declines in the fair value of our investments in privately
held and publicly traded companies, which we deemed to be other than temporary.

     Other Income (Expense), Net

       Net other income (expense) was other income of $3.4 million and other
loss of $2.8 million for the three and nine-month periods ended September 30,
2001, respectively, compared with other income of $0.5 million and other expense
of $3.0 million for the same periods in the prior year. Included in net other
income (expense) for the three-month period ended September 30, 2001 was a net
gain on extinguishment of debt of approximately $7.0 million as well as our net
losses on foreign currency transactions. See Note 10 of the notes to the
condensed consolidated financial statements.

     EBITDA

       "EBITDA" represents income (loss) before net interest and other income
(expense), income taxes, depreciation, amortization (including amortization of
deferred stock compensation) and other noncash charges, including but not
limited to losses on disposal of property and equipment, gains or losses on
equity investments, losses on impairment of investments, and merger,
restructuring and asset impairment charges. We had an EBITDA loss of
approximately $79.2 million and $70.5 million for the three and nine-month
periods ended September 30, 2001 compared to an EBITDA profit of approximately
$18.3 million and $18.5 million for the same periods in the prior year,
respectively. The following is a reconciliation of EBITDA to operating loss for
the three and nine month-periods ended September 30, 2001 and 2000.

<TABLE>
<CAPTION>
                                                               Three Months Ended                   Nine Months Ended
                                                                  September 30,                       September 30,
                                                         --------------------------------    --------------------------------
                                                              2001              2000             2001              2000
                                                         ---------------    -------------    --------------    --------------
<S>                                                      <C>                <C>              <C>               <C>
Operating loss .......................................   $(2,684,805)          $(31,906)      $(3,381,003)         $(95,244)
Merger, restructuring and asset impairment charges ...     2,457,731                 --         2,806,667                --
Chapter 11 related reorganization items ..............        69,423                               69,423
Depreciation & amortization ..........................        78,501             50,108           434,311           117,040
Cumulative effect of change in accounting principle ..            --                 --                --            (8,352)
Other ................................................            --                 70                87             5,040
                                                         ---------------    -------------    --------------    --------------
EBITDA ...............................................   $   (79,150)          $ 18,272       $   (70,515)         $ 18,484
                                                         ===============    =============    ==============    ==============
</TABLE>

       The decrease in the level of EBITDA from the corresponding periods of
2000 was primarily due to lower than expected revenues, higher bad debt expense
and the effects of our acquisition of GlobalCenter on our cash flows. The IDCs
acquired from GlobalCenter, as well as GlobalCenter's operations overall,
historically had significant EBITDA losses.

     Liquidity and Capital Resources

       From inception through September 30, 2001, we financed our operations
primarily through private sales of preferred stock, our initial public offering
of common stock in March 1998, a public offering of common stock in February
2001, our senior notes offerings in July 1998, June 1999, December 1999 and July
2000, our convertible subordinated notes offerings in March 1999, December 1999
and February 2001, our senior secured credit facility in October 2000, and
through various types of equipment loans, lease lines and working capital lines
of credit.

       On October 31, 2000, we entered into a senior secured credit facility
with a syndicate of banks under which, subject to our compliance with our
existing indentures, compliance with financial covenants and the satisfaction of
customary borrowing conditions, we were permitted to borrow up to $600.0
million, depending on our qualifying accounts receivable balances and


                                       24

<PAGE>

meeting certain debt covenants. We borrowed an initial $150.0 million against
one of the term loan facilities on October 31, 2000. On July 2, 2001, we prepaid
the $150.0 million outstanding principal balance under this senior secured
credit facility and terminated the facility. We recorded a net loss on
extinguishment of debt of approximately $15.3 million, including $12.1 million
of unamortized debt issuance costs and fees and other penalties of $3.2 million,
which has been classified as other income (expense) in our results of operations
for the third quarter of 2001.

       In February 2001, we issued $575.0 million aggregate principal amount of
5 1/4% convertible subordinated notes due February 15, 2008. Our aggregate net
proceeds of this offering were approximately $558.3 million after deducting
offering expenses. Concurrent with our offering of 5 1/4% convertible
subordinated notes, we sold 13,000,000 shares of common stock at $18.50 per
share, and received net proceeds of approximately $229.4 million.

       As of September 30, 2001, borrowings under our equipment loans and lines
of credit, capital lease obligations, mortgages and senior and convertible notes
were approximately $3.3 billion.

       Net cash used for operating activities for the nine-month period ended
September 30, 2001 was approximately $471.1 million, primarily due to continued
losses, decreases in accounts payable, accrued interest payable, and increases
in accounts receivable and prepaid expenses and other assets. This was partially
offset by depreciation and amortization, noncash merger, restructuring and asset
impairment charges, and non-cash charges on the impairment of Mirror Image and
other equity investments. This compares to net cash provided by operating
activities for the nine-month period ended September 30, 2000 of approximately
$38.8 million, which was primarily due to depreciation and amortization and
increases in accounts payable and accrued expenses, offset by net losses and
increases in accounts receivable and prepaid expenses.

       Net cash used for investing activities for the nine months ended
September 30, 2001 was approximately $897.0 million due primarily to capital
expenditures for the construction of IDCs, offset in part by the cash acquired
in the GlobalCenter acquisition and a decrease in our restricted cash balance.
This compares to net cash used for investing activities for the nine months
ended September 30, 2000 of approximately $1.0 billion, which was due to capital
expenditures for the construction of IDCs, and our investment in Mirror Image
and other assets.

       Net cash provided by financing activities for the nine months ended
September 30, 2001 was approximately $690.1 million, due primarily to the
proceeds from the convertible subordinated debt and common stock issued in
February 2001 and proceeds from a bank loan in March and May 2001. This was
partially offset by the repayment of our debt, of approximately $161.9 million
during the nine months ended September 30, 2001. This compares to net cash
provided by financing activities for the nine months ended September 30, 2000 of
approximately $1.3 billion, which was primarily due to the proceeds from the
issuance of our senior notes.

     Significant Commitments

       In January 1999, we entered into an agreement with a telecommunications
company to obtain telecommunications services for a period of 60 months with a
minimum commitment of $1.0 million per month.

       In August 1999, we entered into a capacity purchase agreement with a
second telecommunications company. The agreements provide for a total potential
outlay of up to $105.0 million for fiber capacity and related maintenance
covering approximately 25 years. As of September 30, 2001, we had paid
approximately $40.6 million, related to these agreements, which is included in
other assets in the accompanying balance sheets.

       In connection with the acquisition of GlobalCenter, we entered into two
network services, marketing and cooperation agreements, one with Global Crossing
Ltd. and the other with Asia Global Crossing Ltd., a company affiliated with
Global Crossing Ltd. (collectively, "Global Crossing"). Under these
arrangements, we agreed for a period of ten years to purchase at least 50% of
our future network needs outside of Asia and at least 60% of our future network
needs in Asia from Global Crossing. Global Crossing agreed to use us as its
exclusive provider of Web hosting services for a period of two years, and to
provide us with preferred pricing on all network services and assets offered by
Global Crossing.


                                       25

<PAGE>

     Post Filing Liquidity

      On September 26, 2001 we filed voluntary petitions for relief under
Chapter 11 of the Bankruptcy Code and as such all pending claims and litigation
against us are stayed automatically. Accordingly, we may reject or assume
pre-petition executory contracts as allowed by the Bankruptcy Code. We are
currently reviewing all pre petition executed contracts, to determine which
commitments will be assumed or rejected.

      At September 30, 2001, we had $107.7 million of cash and cash equivalents.
In connection with our Chapter 11 filing, we expect to obtain up to $200 million
in debtor-in-possession financing from third party lenders which will be subject
to, among other things, Bankruptcy Court approval.

      We believe that cash from operations and our debtor-in-possession
financing facility, will provide sufficient funds to allow us to continue our
operating activities and to meet our obligations as they become due while a plan
of reorganization is developed and considered.

Factors Affecting Future Results

Our bankruptcy filing may have unanticipated adverse impacts on our business.

      On September 26, 2001, we and seven of our domestic subsidiaries filed
voluntary petitions for bankruptcy protection under Chapter 11 of the U.S.
Bankruptcy Code. As a result, we are presently operating our business as
debtors-in-possession.

      Currently, neither we nor our creditors have proposed a plan of
reorganization and there can be no assurance that the Bankruptcy Court will
confirm any plan of reorganization that we or our creditors may propose. As
provided by the Bankruptcy Code, we initially have the exclusive right to
propose a plan of reorganization for 120 days following the filing of our
Chapter 11 petition. If we fail to file a plan of reorganization during such
period or any extension thereof, or if such plan is not accepted by the
requisite numbers of creditors and equity holders entitled to vote on the plan,
other parties in interest in the Chapter 11 Cases may be permitted to propose
their own plan or plans of reorganization. The failure to have a plan of
reorganization approved by the Bankruptcy Court could result in a liquidation of
our assets. Furthermore, there can be no assurance that there will be any
improvement in our financial condition or results of operations upon
consummation of a plan of reorganization. During the Chapter 11 Cases, we have
incurred, and will continue to incur, significant costs associated with the
reorganization, including, but not limited to, professional fees and other cash
demands typical in bankruptcy proceedings. These costs, which are being expensed
as incurred, are expected to significantly affect our results of operations.

      Our Chapter 11 filing, and the potential adverse publicity associated
with it, may have adverse effects on our business, including, but not limited
to:

     o    making it more difficult to attract, retain and compensate qualified
          employees;

     o    strained management resources;

     o    reduced commitments from or impaired relationships with our current
          customers;

     o    a lack of commitment from or impaired relationships with prospective
          customers;

     o    attempts by our current vendors to cancel services or renegotiate
          existing arrangements;

     o    refusals from prospective vendors to do business with us or difficulty
          obtaining reasonable trade credit terms from prospective vendors; and

     o    sales or other dispositions of assets for amounts other than those
          reflected in our financial statements.

      Other specific bankruptcy risks include: difficulty obtaining, operating
under and potential adequacy of our debtor-in-possession financing arrangements;
our inability to negotiate a favorable restructuring of our debt, raise
additional capital, reduce expenses and modify our business model, and to
develop, prosecute, confirm and consummate a plan or reorganization; our
inability to maintain and expand customer relationships while in bankruptcy and
in the context of a continued slowdown in the economy; uncertain demand for our
services; the risk that some customers will have difficulty paying for services
as a result of their own financial difficulties; difficulties delivering
services with reduced staffing levels; and unanticipated expenses of and
liabilities associated with litigation and bankruptcy.


                                       26

<PAGE>

Our ability to continue as a "going concern" is uncertain.

       The accompanying condensed consolidated financial statements have been
prepared assuming that we will continue to operate as a going concern, which
contemplates continuity of operations, timely payment for services by customers,
control of operating costs and expenses and the realization of asset sales and
liquidation of liabilities and commitments. The bankruptcy filing and related
circumstances, including our default on all pre-petition debt, the losses from
operations, as well as current economic conditions, raise substantial doubts
about our ability to continue as a going concern. The appropriateness of
reporting on a going concern basis is dependent upon, among other things, the
availability of funding under our debtor-in-possession financing arrangements
and compliance with the terms such arrangements, confirmation of a plan of
reorganization, future profitable operations, customer and employee retention
and the ability to generate sufficient cash from operations and financing
sources to meet our obligations as they become due. We have assumed all of the
foregoing. Should some or all of our assumptions prove to be unfounded or prove
to be untrue in the future, our results of operations and financial condition
will be adversely affected and our ability to continue as a going concern will
be doubtful.

We may experience difficulties developing and maintaining customer relationships
due to our financial condition.

       Our customers' perceptions of our financial stability may be affected by
our bankruptcy filing and by current general macro-economic conditions. Our
customers may perceive that there is increased risk in doing business with us
due to our current Chapter 11 filing. These perceptions may cause customers to
question our financial viability and thereby increase the difficulties inherent
in securing and maintaining customer relationships necessary to our business.

We may continue to lose portions of our customer base.

       Some of our customers are emerging Internet-based businesses that may not
pay us for our services on a timely basis and may fail over the long term, and
some of our other customers that are non-Internet based businesses may scale
back or discontinue their Internet operations.

       Approximately 31% of our monthly recurring revenue at the end of the
third quarter of 2001 was derived from customers that we classify as emerging
Internet-based businesses, and we expect that a portion of our future revenue
will be derived from this customer base. The unproven business models of some of
these customers and an uncertain economic climate, including the tight capital
markets, make their continued viability uncertain. Some of these customers have
encountered financial difficulties and some of these types of customers have
gone out of business, which has resulted in an increase in bad debt expense
associated with uncollectible amounts due from such customers. In the future,
other customers may do so and reduce or terminate the services they receive from
us, fail to pay for our services or delay payment for our services. If these
payment difficulties are substantial, our business and financial results could
be harmed.

Reduced demand for our services may prevent us from achieving targeted revenue
and profitability.

       Our revenue and our ability to achieve and sustain profitability depend
on the overall demand for Web hosting and the services we offer. The general
economic slowdown in the world economy may have caused our customers to defer
purchases of our services and otherwise altered their purchasing patterns.
Capital spending in the information technology sector generally has decreased
over the past twelve to eighteen months, and many of our customers and potential
customers have experienced declines in their revenues and operations. The
terrorist acts of September 11, 2001, also have increased the current
uncertainty in the economic environment, and we cannot predict the impact of
these events or similar events in the future, or of any related or unrelated
military action, on our customers or our business. We believe that, in light of
these events, some businesses may curtail or eliminate capital spending on
information technology. In addition, we have experienced continued hesitancy on
the part of our existing and potential customers to commit to continued or new
services from us. If U.S. or global economic conditions worsen, this revenue
impact may worsen as well and have a material adverse impact on our business,
operating results, and financial condition.

Our future success depends on our key personnel, the performance of new
management and avoiding unwanted attrition.

       Our success depends in significant part upon the continued services of
our key technical, sales and senior management personnel. 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, retain
and compensate additional qualified personnel, our business will be adversely
affected. Should employees or management depart, their departures could create
further attrition and adversely affect our business. We do not carry key-person
life insurance for any of our employees.

       We grant stock options as a method of attracting, retaining and
compensating employees, to motivate performance and to align the interests of
management with those of our stockholders. Due to our recent Chapter 11 filing
and acknowledgement by management that regardless of the Chapter 11 proceedings
or various financial and strategic alternatives currently being considered by
us, most stock options held by our employees have very little or no value.
Without adequate alternate compensatory incentives, we may find it more
difficult to retain key employees.


                                       27

<PAGE>

Our Nasdaq delisting may make our common stock less attractive to investors.

       In October 2001, as a result of our bankruptcy filing, we voluntarily
delisted from the Nasdaq National Market, and we are now quoted for trading on
the Over-the-Counter Bulletin Board. This move to the OTC Bulletin Board will,
among other things, restrict the ability of broker-dealers to buy or sell our
common stock, and may affect the ability of holders to buy or sell our common
stock in the secondary market and the price at which such holders can buy or
sell our common stock. Trading in our common stock through market makers and
quotation on the OTC Bulletin Board entails other risks. Due in part to the
decreased trading price of our common stock and reduced analyst coverage, the
trading price of our common stock may change quickly, and market makers may not
be able to execute trades as quickly as they could when the common stock was
listed on the Nasdaq National Market. In addition, our delisting from the Nasdaq
National Market may make it more difficult for us to raise additional capital
because stakeholders may be reluctant to invest in a company that is thinly
traded or not traded at all.

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

       Our limited operating history and the pace of change in our business make
evaluating our business operations and our prospects difficult. We have incurred
operating losses each fiscal quarter and year since 1995 because of our
substantial investments in infrastructure, personnel and sales and marketing
programs. Our accumulated deficit was approximately $4.5 billion as of September
30, 2001. Although we have experienced significant growth in revenue
historically, our growth is not necessarily indicative of future operating
results. It is possible that we may never achieve profitability on a quarterly
or 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 annual basis. We expect to continue to experience significant
fluctuations in our results of operations due to a variety of factors, many of
which are outside of our control, including:

     o    demand for our services;

     o    the impact of the Chapter 11 filing and any confirmed plan or plans of
          reorganization;

     o    customer retention, acquisition and satisfaction, including customers
          terminating their services as a result of their perrceptions of our
          financial condition, their own financial difficulties or their
          decisions to downsize their Internet operations;

     o    capacity utilization of our IDCs;

     o    the timing of and magnitude of closing and consolidating existing
          IDCs;

     o    the mix of services we sell;

     o    the timing and success of marketing efforts and service introductions
          by us and our competitors;


                                       28

<PAGE>

     o    the introduction of new Internet and networking technologies by third
          parties;

     o    changes in our pricing policies and those of our competitors; and

     o    fluctuations in bandwidth used by customers.

       In addition, large portions of our expenses are fixed, particularly our
expenses for telecommunications capacity, depreciation, interest, real estate
and personnel. Therefore, our results of operations are particularly sensitive
to fluctuations in revenue. Furthermore, if we were no longer able to offer
third-party products with our service offerings, our product development costs
could increase significantly to meet anticipated customer demand for new
complementary services. Finally, many of our customers are emerging growth
companies or recently created Internet-centric divisions of existing well
established companies, which may have negative cash flows or whose Internet
ventures may not be well received, so we may not be able to collect receivables
on a timely basis or at all.

The success of our business depends on the overall demand for information
technology and services, and Internet Data Center services in particular.

       Our success depends on the growth of overall demand for information
technology and services, particularly in the market for Internet system and
network management solutions for enterprises with mission-critical Internet
operations. Our business is affected by general economic and business conditions
throughout the world. A softening of demand for Internet infrastructure services
and information technology and services caused by a weakening of the global
economy in general and the U.S. economy in particular, and the lack of success
of certain new business models or lines of business that depend on the Internet,
has resulted in a recent decline in revenue and slower growth for us. If such
trend continues, our growth will slow further, our revenue may decrease further,
our financial results will be harmed and this may have a material adverse effect
on our business.

Reductions in force may harm our business operations and may require us to incur
expenses that could diminish cash reserves or adversely affect our financial
results.

       Workforce reductions may affect us directly, by reducing customer service
levels, or indirectly by raising concerns among customers, other corporate
partners and employees regarding our continued viability. We recently announced
reductions in our worldwide workforce, and to date in 2001 we have recorded
charges of $15.9 million for employee termination and severance. Since we first
began reducing our workforce in April 2001, we have reduced our workforce by
over 38% as of September 30, 2001. Such workforce reductions are expected to
continue. Workforce reductions may also subject us to the requirements of mass
employee termination laws and regulations in jurisdictions where we have
employees, which may subject us to additional costs. In addition, terminated
employees may possess specific knowledge or expertise, the lack of which may
cause operational difficulties. The workforce reductions may affect employee
morale and lead to increased turnover. The reductions may also subject us to
risks of litigation, which could be expensive to defend, divert the attention of
management, and subject us to possible liability for damages. Any of these
expenses could materially harm our results of operation or deplete our cash
reserves.

Reductions in operating expenses and capital expenditures could harm our results
of operations.

       We have undertaken cost cutting measures in an effort to streamline
operations and reduce costs. These measures include cuts in discretionary
spending and reductions in capital expenditures and workforce. It is possible
that these reductions could impair our marketing, sales and customer support
efforts or alter our product development plans. In addition, such reductions
could impair our ability to respond to unexpected challenges or take advantage
of new opportunities.

We compete with much larger companies and there are few barriers to entry. If we
cannot compete effectively, we will lose business.

       Our market is intensely competitive. There are few barriers to entry, and
we expect to face additional competition from both existing competitors and new
market entrants in the future. Many companies have announced that they will
begin to provide or plan to greatly expand their service offerings that are
competitive with ours. The principal competitive factors in our market include:

     o    the ability to deliver services when requested by the customer;

     o    Internet system engineering and other expertise;

     o    customer service;

     o    network capability, reliability, quality of service and scalability;

     o    variety of services offered;

     o    access to network resources, including circuits, equipment and
          interconnection capacity to other networks;

     o    broad geographic presence;

     o    price;

     o    brand name;

     o    network security; and

     o    financial resources, including access to capital.

       Our competitors in the market include:


                                       29

<PAGE>

     o    providers of server hosting, managed Web hosting and Web application
          management services;

     o    national, foreign and regional Internet service providers;

     o    global, regional and local telecommunications companies and Regional
          Bell Operating Companies;

     o    information technology outsourcing firms; and

     o    other technology services and products companies.

       Some of our competitors have substantially greater resources, more
customers, longer operating histories, greater name recognition and more
established relationships in the industry. Moreover, they may have greater
access to capital or access on more favorable terms. 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, adopt more aggressive pricing policies and be subject to
fewer restrictions as a result of financial covenants. 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 by enterprises
looking to outsource their mission-critical Internet operations, which could
harm our operating results.

       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. We currently incur costs greater
than our revenue. If we cannot retain or grow our customer base, we will not be
able to increase our sales and revenue or create economies of scale to offset
our fixed and operating costs. 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 and delivery.

Accounting principles relating to revenue recognition, business combinations and
other topics relevant to our business, and our application of those principles,
may change, which may adversely affect our results of operations.

       In December 1999, the SEC issued SAB No. 101, Revenue Recognition in
Financial Statements, which we adopted in 2000. This guidance may continue to
evolve. In addition, applying revenue recognition principles to a business like
ours is complex. This complexity is in part a function of the continual
interpretation of accounting principles by accounting standard setters. In
addition, changes in our relationships with particular customers may require us
to change how we account for revenue from those customers. These changes could
have a material adverse effect on the timing of revenue recognition and could
adversely affect our financial condition and results of operations.

       As a result of recently issued financial accounting standards, in 2002 we
will be required to evaluate our existing intangible assets and goodwill that
were acquired in prior purchase business combinations, and make any necessary
reclassifications in order to conform with the new criteria for recognition
apart from goodwill. We will also be required to reassess the useful lives and
residual values of all intangible assets acquired in purchase business
combinations. These changes could have a material adverse effect on our
accounting for goodwill and other intangible assets and could adversely affect
our financial condition and our results of operations.

       Similarly, our relationships with companies in which we have equity
investments are sometimes complex and may change over time. Upon the
establishment of a relationship, we determine how to account for the investment
and other financial aspects of the relationship. If our relationship with these
companies changes, we may be required to change the manner by which we account
for these relationships. Changes in accounting treatment that may result from
evolving relationships with our partners could have a material adverse effect on
our financial condition and results of operations.


                                       30

<PAGE>

Some of our investments in portfolio companies may lose value or may become
impaired.

       We have investments in technology companies, many of which are privately
held companies in a development stage. Some of our investments in private
companies have become liquid through initial public offerings or acquisitions,
and the carrying values of these investments fluctuate with their stock market
values. Many of our private equity investments are inherently risky because the
companies' businesses may never develop, and we may incur losses related to
these investments. We may be required to reduce the value of those investments
as reflected on our balance sheet, which also may affect our results of
operations. If we incur a charge to reflect other than temporary declines in the
value of our private equity investments below our recorded value, our balance
sheet and results of operations will be reduced.

       The market valuations of technology companies have been highly volatile
in recent years, and in the most recent year those market valuations have
generally trended downward. Because of this downward trend, we were required to
incur charges for the impairment of values of our investment of zero and $399.7
million for the three and nine-month periods ended September 30, 2001. We are
also required to mark to market periodically the values of any publicly traded
investments we hold. These measurements could result in declines in values
reflected in our balance sheet.


System failures could lead to significant costs.

       We must protect our network infrastructure, our equipment and our
customers' equipment (including data) against damage from human error, security
breaches, power loss and other facility failures, fire, earthquake, flood,
telecommunications failure, sabotage, vandalism and similar events. Despite the
precautions we have taken, a natural disaster or other unanticipated problems at
one or more of our IDCs could result in interruptions in our services or
significant damage to customer equipment. In addition, the failure of any of our
telecommunications providers, such as Global Crossing, to provide consistent
data communications capacity or other network providers to provide
interconnection agreements could result in service interruptions. 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, temporary loss of power, and failure of networking
equipment, all of which led to short-term degradation in the level of
performance of our network or temporary unavailability of our services. If we
incur significant financial commitments to our customers in connection with our
failure to meet our service level commitment obligations as a result of system
downtime, our liability insurance may not be adequate to cover those expenses,
and our results of operations and financial condition may be adversely affected.

Prolonged electrical power outages or shortages could harm our business.

       Our IDCs and other facilities are susceptible to regional electrical
power shortages and planned or unplanned power outages caused by these
shortages. We attempt to limit exposure to system downtime by using backup
generators and power supplies. However, we have experienced situations where our
back up generators briefly failed to function properly and service to customers
was interrupted. We also attempt to limit our financial liability for system
downtime by giving customers credits for free service each month for all
disruptions of service during that month. Nonetheless, customers may seek
additional remedies. The overall power shortage in California has increased the
cost of energy, which we may not be able to pass on to our customers. Moreover,
our power providers have informed us that there may be future power outages and
rolling blackouts. Power outages, which last beyond our backup and alternative
power arrangements, or in the event these backup and alternate arrangements do
not function properly, could harm our customers and our business. Any material
future interruptions of service could result in material claims and have an
adverse effect on our financial position and results of operations.

Customer satisfaction with our services is critical to our success.

       Our customers demand a high level of service, and services are an
increasingly significant portion of our offerings. 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 dissatisfied. 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. If we incur significant service level
commitment obligations in connection with system downtime, our liability
insurance may not be adequate to cover these expenses. Any material
interruptions of service could result in claims and have a material adverse
effect on our financial position and results of operations.


                                       31

<PAGE>

We depend on network interconnections provided by third parties who may raise
their fees or deny access.

       We rely on private and public network interconnections that allow our
customers to connect to other networks. If the networks with which we
interconnect were to discontinue these interconnections, our ability to exchange
traffic would be constrained. Many of the companies with which we maintain
interconnections are our competitors. Some of these networks require that we pay
them fees for the right to maintain interconnections. There is nothing to
prevent any of these networks, some of which are significantly larger than we
are, from increasing fees or denying access. In early 2000, one network with
which we previously maintained interconnections unilaterally terminated its
interconnections with us. In the future, other networks could refuse to continue
to interconnect directly with us, might impose significant costs on us or might
limit our customers' access to their networks. In these events, 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 or may lose customers
if we do pass through any such costs. In these cases, our business could be
harmed.

Foreign currency exchange rate fluctuations or repatriation could result in
losses.

       Our international expansion, particularly in Asia as a result of the
GlobalCenter transaction, may cause our results of operations and the value of
our assets to be affected by the exchange rates between the U.S. dollar and the
currencies of the additional countries in which we have operations and assets.
In some of these countries into which we have expanded, prices of our products
and services will be denominated in a currency other than the U.S. dollar. As a
result, we may experience economic losses solely as a result of foreign currency
exchange rate fluctuations, including a foreign currency's devaluation against
the U.S. dollar. Our losses may be greater if we cannot effectively hedge the
risk of foreign currency rate fluctuations.

We might not be successful in our attempts to keep up with 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 also depends on 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. Any 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 conform to
new standards in a timely manner. 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 problem for electronic
commerce and communications. 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. Advances
in computer capabilities, new discoveries in the field of cryptography, or other
developments may result in a compromise or breach of the technology we use to
protect confidential customer and end user data stored on or transmitted through
our network. Recently, numerous computer viruses have circulated throughout the
world. Our network and our customer sites are potentially vulnerable to these
viruses, which could impair our ability to deliver services to our customers,
which could harm our results of operations. Our IDCs 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 of Exodus and 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 and transmitted through our computer systems or those of our
customers. Experienced computer programmers and hackers may be able to penetrate
our network security and misappropriate this confidential information. As a
result, we could become liable to others and lose existing or potential
customers. If any of our customers are held liable for fraudulent credit card
transactions, theft of data or other illegal activities that take place on our
network, these customers or others may sue us for losses. Our insurance coverage
may be insufficient to cover losses that may


                                       32

<PAGE>

arise from these events. 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, system and network management solutions, managed Web hosting and
Web application management. 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. Vendors that supply us equipment without a vendor
agreement may delay or cease supplying such equipment. 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 will be harmed. 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 will
be harmed. 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, unknown software and hardware problems with respect to our Web hosting
and Web application management solutions could impair our ability to deliver
these services uninterrupted to our customers.

Government regulation and legal uncertainties may harm our business.

       Laws and regulations directly applicable to communications and commerce
over the Internet are becoming more prevalent. The United States Congress has
considered enacting Internet laws regarding privacy, copyrights, taxation and
the transmission of sexually explicit or offensive material. The European Union
and other countries have enacted their 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 and our products and services. 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 or
through the Internet. The adoption or modification of laws or regulations
relating to the Internet could adversely affect our business. We provide
services over the Internet in many 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 or liability,
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. In the future, should we
undertake to directly provide regulated telecommunications services, we could
find that we are subject to additional regulation, taxation and liabilities,
which could have a material adverse affect on our business.

We could be held liable for the information disseminated through our network.

       The law relating to the liability of online services companies and
Internet access providers for information and commerce 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 and foreign countries where we
operate or may operate in the future 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 our systems could require us to implement measures to reduce exposure to
liability, which may require the expenditure of substantial resources or cause
us 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 through our network or 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 Internet
service providers 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, or their customers and users, will not engage in this
practice, which could have a material adverse effect on our business. Moreover,
the federal government and foreign countries where we operate or may operate in
the future are currently considering legislation in regards to spamming which
may require us to incur compliance costs or impact our business in unforeseeable
ways.


                                       33

<PAGE>

We face risks associated with protection and enforcement of intellectual
property rights.

       We rely on a combination of copyright, patent, trademark, service mark
and trade secret laws and contractual restrictions to establish and protect
proprietary rights in our products and services. We have very little 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.

                                       34

<PAGE>

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

Investments

       We maintain an investment portfolio consisting primarily of equity
investments in publicly traded and privately held companies. Marketable equity
securities are classified as available for sale and, consequently, are recorded
on the balance sheet at fair value with unrealized gains or losses reported as a
separate component of accumulated other comprehensive income (loss). Our
marketable equity securities are subject to market price volatility. Marketable
equity securities are included in prepaid expenses and other current assets in
the accompanying September 30, 2001 condensed consolidated balance sheet. We
also have invested in certain privately held companies, many of which may still
be considered in start-up or development stages. These investments are
inherently risky because the markets for the technologies or products they offer
or have under development are typically in the early stages and may never
develop. Our cost method investments in privately held companies are carried at
cost unless a decline in value of the investment is determined to be other than
temporary, at which point the investment is written down to its estimated fair
value. Investments in privately held companies aggregated $19.6 million and are
included in investments in the accompanying condensed consolidated balance
sheets. We monitor these investments for changes in value, including impairment,
by reference to valuation of publicly traded companies in similar sectors and
other factors such as the status of the investee's technology, product launch
and customer acceptance. In some circumstances, we may obtain an independent
valuation of the investment. If we determine that the investment has suffered an
other than temporary decline in value, this decline is reported as loss on
impairment of investments in the period in which the determination is made.
These investments are inherently risky as the markets for the technologies or
products they have under development are typically in the early stages and may
never materialize. We could lose our entire initial investment in these
companies.

       The following analysis presents the hypothetical changes in fair values
of public equity investments that are sensitive to changes in the stock market.
These equity securities are held for purposes other than trading. The modeling
techniques used measure the hypothetical change in fair values arising from
selected hypothetical changes in each stock's price. The following table
estimates the fair value of the publicly traded corporate equities at a 12-month
horizon (in thousands):

<TABLE>
<CAPTION>
                             Valuation of securities given X% decrease    Fair value as        Valuation of securities given X%
                                     in each stock's price                    as of             increase in each stock's price
                             -----------------------------------------    September 30,       ----------------------------------
                                (50)%          (30)%        (15)%             2001              15%            30%          50%
                               ------         ------       ------            ------           ------         ------       ------
<S>                            <C>            <C>          <C>               <C>              <C>            <C>          <C>
Corporate Equities             $2,157         $3,020       $3,667            $4,314           $4,961         $5,608       $6,470
</TABLE>

       Our equity portfolio consists of securities with characteristics that
most closely match the S&P Index or companies traded on the NASDAQ National
Market. The NASDAQ Composite Index had at least 15% movement in each of the last
three years and has had at least a 30% and 50% movement in at least one of the
last three years.

Foreign Exchange Rate Risk

       We currently have cash and debt balances denominated in Euros recorded on
various subsidiaries' accounts totaling Euro 33.2 million ($30.2 million) and
Euro 325.0 million ($296.5 million), respectively. None of these subsidiaries
use the Euro as its functional currency. Accordingly, these balances are
remeasured into the functional currency at each period end using the period end
exchange rates with gains or losses included in the results of operations. Due
to substantial volatility of currency exchange rates, among other factors, we
cannot predict the effect of exchange rate fluctuations on our future operating
results. Notwithstanding our efforts to manage foreign exchange risk, there can
be no assurance that we will adequately protect ourselves against the risks
associated with foreign currency fluctuations.

                                       35

<PAGE>

Interest rate risk

       Our exposure to market rate risk for changes in interest rate risk
relates primarily to our investment portfolio, which consists of primarily cash
and cash equivalents. We do not use derivative financial instruments in our
investment portfolio. We place our investments with high quality insurers and,
by policy, limit the amount of risk by investing primarily in 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 because the majority of our debt obligations contain
fixed rates.

       We have an interest rate swap associated with a variable rate loan in our
Japanese subsidiary, which is accounted for as a cash flow hedge. As of
September 30, 2001, the fair value of this swap was insignificant.

                           PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

       On July 12, 2001, we and five of our current and former executive
officers were named as defendants in a purported class action lawsuit filed in
the United States District Court for the Northern District of California. This
lawsuit is captioned Paul Ruthfield v. Exodus Communications, Inc., et al., No.
01-CV-2661. Between July 16, 2001 and August 31, 2001 fourteen substantially
identical lawsuits were filed in the same court, each naming the same group of
defendants.

       These complaints are all brought on behalf of purchasers of our common
stock between March 30, 2001 and June 20, 2001 and allege essentially identical
violations of the Securities Exchange Act of 1934, as amended. The complaints
have been brought as purported stockholder class actions under Sections 10(b)
and 20(a) and Rule 10b-5 of the Securities Exchange Act. In general, the
complaints allege that Exodus and the individual defendants misrepresented
Exodus' financial prospects for the second quarter of 2001 to inflate the value
of our common stock. The complaints seek unspecified monetary damages for the
alleged inflated price of our common stock purchased by all class members,
attorneys' fees and costs of litigation. We anticipate that the complaints
pending in federal court will be consolidated into a single proceeding. We have
not yet responded to any of these lawsuits, and no discovery has been conducted.
This action has been automatically stayed with our Chapter 11 filing. We believe
that the allegations in each of these actions are without merit and we intend to
defend against these actions vigorously. We cannot give any assurance that this
litigation will not have a material adverse effect on us, our financial
condition or our results of operations.

       In addition, from time to time, we may be involved in litigation relating
to claims arising out of our operations in the normal course of business. As of
the date of this quarterly report, except as described herein, we are not
engaged in any legal proceedings that are expected, individually or in the
aggregate, to have material adverse effect on our business, financial condition,
operating results or cash flow.

       Chapter 11 Filings

       On September 26, 2001 we and seven of our subsidiaries filed voluntary
petitions for reorganization relief under Chapter 11 of the U.S. Bankruptcy Code
in the United States Bankruptcy Court for the District of Delaware, Case Nos.
01-10539 through 01-10551, inclusive. The filing is intended to allow us to
remain in possession of our assets and properties, and our existing directors
and officers will continue to oversee operation of our business as a
debtor-in-possession, subject to supervision and orders of the Bankruptcy Court
of matters outside the ordinary course of business. As a result of the Chapter
11 filing, claims against us are subject to an automatic stay. On October 25,
2001, we announced the restructuring of one other operational facility in
Amsterdam. On October 11, 2001 the U.S. Trustee appointed a seven-member
committee to represent the interests of our unsecured creditors. On November 5,
2001 we filed with the United States Bankruptcy Court a schedule of our assets,
liabilities, income, expenditures, and lists of our executory contracts,
unexpired leases, and equity security holders, all as required by Bankruptcy
Rule 1007(b).

Item 2.    Changes in Securities and Use of Proceeds

           Not applicable.

Item 3.    Defaults Upon Senior Securities

                                       36

<PAGE>

       As a result of the commencement of our voluntary petition for bankruptcy
protection, Exodus is currently in default on $2.9 billion in face amount of all
of our unsecured senior and convertible indebtedness as follows:

<TABLE>
<CAPTION>
                                                             Balance at
                                          Maturity Date  September 30, 2001
                                          -------------  ------------------
<S>                                       <C>            <C>
Senior Notes:
-------------
Dollar-denominated 11 1/4% Notes ......        2008           $  269.4
Euro-denominated 11 3/8% Notes ........        2008           $  182.4     (Euro 200.0)
Dollar-denominated 10 3/4% Notes ......        2009           $  358.0
Euro-denominated 10 3/4% Notes ........        2009           $  114.0     (Euro 125.0)
Dollar-denominated 11 5/8% Notes ......        2010           $  992.5
                                                              --------
                                                              $1,916.3
                                                              ========
Convertible Subordinated Notes:
-------------------------------
5% Notes ..............................        2006           $   52.0
4 3/4% Notes ..........................        2008           $  444.0
5 1/4% Notes ..........................        2008           $  509.5
                                                              --------
                                                              $1,005.5
                                                              ========
</TABLE>
       As a result of our voluntary petition for reorganization relief,
approximately $115.3 million principal amount of indebtedness of our
subsidiaries Exodus Communications Real Property I, LLC and Exodus
Communications Real Property I, LP, is in default and the lender, Lehman
Brothers Bank or its successor, is entitled to seek acceleration of repayment
and other remedies pursuant to the loan agreement.

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

Not applicable.


Item 5.  Other Information

Not applicable.


Item 6.  Exhibits and Reports on Form 8-K

(a)    Exhibits

Exhibit
Number     Title
-------    -----
2.01       Agreement and Plan of Reorganization by and among Registrant,
           Cohesive Technology Solutions, Inc. and Marley Acquisition Corp.
           dated April 22, 1999. (Incorporated by reference from Exhibit 2.03 to
           Registrant's Registration Statement on Form S-4 (File No. 333-79655)
           declared effective by the SEC on June 28, 1999 (the "June 1999 Form
           S-4")).

2.02       Amendment to Agreement and Plan of Reorganization by and among
           Registrant, Cohesive Technology Solutions, Inc. and Marley
           Acquisition Corp. dated May 28, 1999. (Incorporated by reference from
           Exhibit 2.04 to the June 1999 Form S-4).

2.03       Common Stock Purchase Agreement dated as of March 22, 2000 among
           Registrant, Mirror Image Internet, Inc. and Xcelera.com Inc.
           (Incorporated by reference from Exhibit 2.01 to Registrant's Current
           Report on Form 8-K Filed with the SEC on April 7, 2000 (the "April
           2000 Form 8-K")).

2.04       Common Stock Purchase Agreement dated as of March 22, 2000 between
           Registrant and Xcelera.com Inc. (Incorporated by reference from
           Exhibit 2.02 to the April 2000 Form 8-K).

2.05       Agreement and Plan of Merger among Registrant, Einstein Acquisition
           Corp., Global Crossing GlobalCenter Holdings, Inc., GlobalCenter
           Holding Co., GlobalCenter Inc., and Global Crossing North America,
           Inc., dated as of September 28, 2000 (Incorporated by reference from
           Exhibit 2.01 to Registrant's Current Report on Form 8-K filed with
           the SEC on October 13, 2000 ("the October 2000 Form 8-K")).

3.01       Registrant's Restated Certificate of Incorporation. (Incorporated by
           reference from Exhibit 4.01 to Registrant's Registration Statement on
           Form S-8 (File No. 333-38980) filed with the SEC on June 9, 2000 the
           "June 2000 Form S-8").


                                       37

<PAGE>

3.02       Registrant's Bylaws. (Incorporated by reference from Exhibit 3.06 to
           Registrant's Registration Statement on Form S-1 (File No. 333-4469),
           as amended, declared effective by the SEC on March 18, 1998 (the
           "Form S-1")).

3.03       Certificate of Designations specifying the terms of the Series A
           Junior Participating Preferred Stock of Registrant, as filed with the
           Delaware Secretary of State on January 28, 1999. (Incorporated by
           reference from Exhibit 3.02 to Registrant's Registration Statement on
           Form 8-A filed with the SEC on January 27, 1999 (the "January 1999
           Form 8-A")).

4.01       Form of Specimen Certificate for Registrant's Common Stock.
           (Incorporated by reference from Exhibit 4.01 to the Form S-1).

4.02       Form of Note for Registrant's 11 1/4% Senior Note due 2008.
           (Incorporated by reference from Exhibit 4.02 to Registrant's
           Registration Statement on Form S-4 (File No. 333-62413) declared
           effective by the SEC on November 9, 1998 (the "November 1998 Form
           S-4")).

4.03       Indenture dated July 1, 1998 between Registrant as Issuer and Chase
           Manhattan Bank and Trust Company, National Association, as Trustee
           related to Registrant's 11 1/4% Senior Notes due 2008. (Incorporated
           by reference from Exhibit 10.30 to the Registrant's Quarterly Report
           on Form 10-Q for the quarter ended June 30, 1998 (the "June 1998
           Form 10-Q")).

4.04       Rights Agreement dated January 27, 1999 between Registrant and
           BankBoston, N.A., as Rights Agent. (Incorporated by reference from
           Exhibit 4.04 to the January 1999 Form 8-A).

4.05       Form of Note for Registrant's 5% Convertible Subordinated Notes
           due2006. (Incorporated by reference from Exhibit 4.05 to Registrant's
           Quarterly Report on Form 10-Q for the quarter ended March 31, 1999
           (the "March 1999 Form 10-Q")).

4.06       Indenture dated March 1, 1999 between Registrant as Issuer and Chase
           Manhattan Bank and Trust Company, National Association related to
           Registrant's 5% Convertible Subordinated Notes due March 15, 2006.
           (Incorporated by reference from Exhibit 4.06 to the March 1999
           Form 10-Q).

4.07       Supplemental Indenture dated June 22, 1999 amending Indenture between
           Registrant and Chase Manhattan Bank and Trust Company, National
           Association, as Trustee dated July 1, 1998. (Incorporated by
           reference from Exhibit 10.66 to Registrant's Quarterly Report on Form
           10-Q for the quarter ended June 30, 1999 (the "June 1999 Form
           10-Q")).

4.08       Registration Rights Agreement dated March 1, 1999 among Registrant,
           Goldman Sachs & Co., BancBoston Robertson Stephens, Inc., BT Alex
           Brown Incorporated, Donaldson, Lufkin & Jenrette Securities
           Corporation and Hambrecht & Quist LLC, regarding Registrant's 5%
           Convertible Subordinated Notes due March 15, 2006. (Incorporated by
           reference from Exhibit 10.55 to the March 1999 Form 10-Q).

4.09       Form of Note for Registrant's 4 3/4% Convertible Subordinated Notes
           due July 15, 2008. (Incorporated by reference from Exhibit 4.04 to
           Registrant's Registration Statement on Form S-3 filed with the SEC on
           February 1, 2000 (the "4 3/4% Notes Form S-3")).

4.10       Indenture dated December 1, 1999 between Registrant, as Issuer, and
           Chase Manhattan Bank and Trust Company, National Association, as
           Trustee related to Registrant's 4 3/4% Convertible Subordinated Notes
           due July 15, 2008. (Incorporated by reference from Exhibit 4.05 to
           the 4 3/4% Notes Form S-3).

4.11       Registration Rights Agreement among Registrant and Goldman Sachs &
           Co., Donaldson, Lufkin & Jenrette Securities Corporation and Morgan
           Stanley & Co. Incorporated dated December 1, 1999 related to
           Registrant's 4 3/4% Convertible Subordinated Notes due July 15, 2008.
           (Incorporated by reference from Exhibit 4.07 to the 4 3/4% Notes Form
           S-3).

4.12       Form of Note for Registrant's 10 3/4% Senior Dollar Notes due 2009.
           (Incorporated by reference from Exhibit 4.11 to Registrant's
           Registration Statement on Form S-4 filed with the SEC on February 2,
           2000 (the "10 3/4% Notes Form S-4")).


                                       38

<PAGE>

4.13       Form of Note for Registrant's 10 3/4% Senior Euro Notes due 2009.
           (Incorporated by reference from Exhibit 4.12 to the 10 3/4% Notes
           Form S-4).

4.14       Indenture between Registrant, as Issuer, and Chase Manhattan Bank and
           Trust Company, National Association, as trustee, dated December 1,
           1999 related to Registrant's 10 3/4% Senior Notes due 2009.
           (Incorporated by reference from Exhibit 4.13 to the 10 3/4% Notes
           Form S-4).

4.15       Registration Rights Agreement dated April 21, 2000 between
           Registrant, Mirror Image Internet, Inc. and Xcelera.com, Inc.
           (Incorporated by reference from Exhibit 4.01 to Registrant's
           Registration Statement on Form S-3 filed with the SEC on May 5,
           2000).

4.16       Indenture between Registrant, as Issuer, and Chase Manhattan Bank and
           Trust Company, National Association, as trustee, dated July 6, 2000
           related to Registrant's 11 5/8% Senior Notes due 2010. (Incorporated
           by reference from Exhibit 4.17 to Registrant's Registration Statement
           on Form S-4 filed with the SEC on August 10, 2000 (the "August 2000
           Form S-4")).

4.17       Indenture between Registrant, as Issuer, and Chase Manhattan Bank
           and Trust Company, National Association, as trustee, dated July 6,
           2000 related to Registrant's 11 3/8% Senior Notes due 2008.
           (Incorporated by reference from Exhibit 4.18 to the August 2000 Form
           S-4).

4.18       Stockholder Agreement among Registrant, Global Crossing Ltd., and
           Global Crossing GlobalCenter Holdings, Inc., dated as of September
           28, 2000. (Incorporated by reference from Exhibit 4.01 to the
           Registrant's Current Report on Form 8-K filed with the SEC on October
           13, 2000 (the "October 2000 Form 8-K")).

4.19       Registration Rights Agreement by and among Registrant, Global
           Crossing GlobalCenter Holdings, Inc., Global Crossing Ltd., and its
           other direct and indirect subsidiaries mentioned therein, dated as of
           September 28, 2000. (Incorporated by reference from Exhibit 4.02 to
           the October 2000 Form 8-K).

4.20       Instrument of Resignation, Appointment and Acceptance dated as of
           September 6, 2000, among Registrant, Chase Manhattan Bank and Trust
           Company, National Association, and HSBC Bank USA, regarding
           Registrant's 11 1/4% Senior Notes due 2008. (Incorporated by
           reference from Exhibit 4.21 to the Registrant's Amended Registration
           Statement on Form S-4 filed with the SEC on October 17, 2000 (the
           "October 2000 Amended Form S-4")).

4.21       Instrument of Resignation, Appointment and Acceptance dated as of
           September 6, 2000, among Registrant, Chase Manhattan Bank and Trust
           Company, National Association, and HSBC Bank USA, regarding
           Registrant's 5% Convertible Subordinated Notes due March 15, 2006.
           (Incorporated by reference from Exhibit 4.22 to the October 2000
           Amended Form S-4).

4.22       Instrument of Resignation, Appointment and Acceptance dated as of
           September 6, 2000, among Registrant, Chase Manhattan Bank and Trust
           Company, National Association, and HSBC Bank USA, regarding
           Registrant's 10 3/4% Senior Notes due 2009. (Incorporated by
           reference from Exhibit 4.23 to the October 2000 Amended Form S-4).

4.23       Instrument of Resignation, Appointment and Acceptance dated as of
           September 6, 2000, among Registrant, Chase Manhattan Bank and Trust
           Company, National Association, and HSBC Bank USA, regarding
           Registrant's 4 3/4% Convertible Subordinated Notes due July 15, 2008.
           (Incorporated by reference from Exhibit 4.24 to the October 2000
           Amended Form S-4).

4.24       Instrument of Resignation, Appointment and Acceptance dated as of
           September 6, 2000, among Registrant, Chase Manhattan Bank and Trust
           Company, National Association, and HSBC Bank USA, regarding
           Registrant's 11 5/8% Senior Notes due 2010. (Incorporated by
           reference from Exhibit 4.25 to the October 2000 Amended Form S-4).

4.25       Instrument of Resignation, Appointment and Acceptance dated as of
           September 6, 2000, among Registrant, Chase Manhattan Bank and Trust
           Company, National Association, and HSBC Bank USA, regarding
           Registrant's 11 3/8% Senior Notes due 2008. (Incorporated by
           reference from Exhibit 4.26 to the October 2000 Amended Form S-4).

4.26       Second Supplemental Indenture dated as of October 30, 2000 between
           Registrant and HSBC Bank USA, regarding Registrant's 11 1/4% Senior
           Notes due 2008. (Incorporated by reference from Exhibit 4.11 to
           Registrant's Quarterly Report on Form 10-Q for the quarter ended
           September 30, 2000 (the "September 2000 Form 10-Q")).


                                       39

<PAGE>

4.27       First Supplemental Indenture dated as of October 30, 2000 between
           Registrant and HSBC Bank USA, regarding Registrant's 10 3/4% Senior
           Notes due 2009. (Incorporated by reference from Exhibit 4.12 to the
           September 2000 Form 10-Q).

4.28       First Supplemental Indenture dated as of October 30, 2000 between
           Registrant and HSBC Bank USA, regarding Registrant's 11 5/8% Senior
           Notes due 2010. (Incorporated by reference from Exhibit 4.13 to the
           September 2000 Form 10-Q).

4.29       First Supplemental Indenture dated as of October 30, 2000 between
           Registrant and HSBC Bank USA, regarding Registrant's 11 3/8% Senior
           Notes due 2008. (Incorporated by reference from Exhibit 4.14 to the
           September 2000 Form 10-Q).

4.30       Amendment to Rights Agreement dated October 20, 1999 between
           Registrant and BankBoston, N.A., as Rights Agent. (Incorporated by
           reference from Exhibit 4.05 of Registrant's Amended Registration
           Statement on Form 8-A filed with the SEC on November 29, 1999).

4.31       Amendment No. 2 to Rights Agreement dated as of January 9, 2001
           between Registrant and Fleet National Bank (formerly BankBoston,
           N.A.), as Rights Agent. (Incorporated by reference from Exhibit 4.06
           to Registrant's Amended Registration Statement on Form 8-A filed with
           the SEC on January 10, 2001).

4.32       Subordinated Indenture dated as of February 9, 2001 between
           Registrant and HSBC Bank USA regarding Registrant's 5 1/4%
           Convertible Subordinated Notes due February 15, 2008. (Incorporated
           by reference from Exhibit 4.01 to the Registrant's Current Report on
           Form 8-K filed with the SEC on February 23, 2000 (the "February 2001
           Form 8-K")).

4.33       Supplemental Subordinated Indenture dated as of February 9, 2001
           between Registrant and HSBC Bank USA regarding Registrant's 5 1/4%
           Convertible Subordinated Notes due February 15, 2008, between
           Registrant and HSBC Bank USA. (Incorporated by reference from Exhibit
           4.02 to the February 2001 Form 8-K).

4.34       Form of Registrant's 5 1/4% Convertible Subordinated Note due
           February 15, 2008 (Incorporated by reference from Exhibit 4.34 to the
           Registrant's Annual Report on Form 10-K filed with the SEC March 30,
           2001 (the "2000 Annual Report on Form 10K")).

4.35       Second Supplemental Subordinated Indenture dated as of March 28, 2001
           between Registrant and HSBC Bank USA regarding Registrant's 5 1/4%
           Convertible Subordinate Notes. (Incorporated by reference from
           Exhibit 4.35 to the 2000 Annual Report on Form 10K).

10.01      Registrant's 1997 Equity Incentive Plan and related forms of
           agreements. (Incorporated by reference from Exhibit 10.04 to the Form
           S-1).

10.02      Registrant's 1998 Directors Stock Option and Stock Award Plan, as
           amended through May 31, 2001. (Incorporated by reference from Exhibit
           10.02 to the Registrant's Quarterly Report on Form 10-Q for the
           quarter ended June 30, 2001 (the "June 2001 Form 10-Q")).

10.03      [Intentionally Omitted].

10.04      Form of Executive Employment Policy to be entered into between
           Registrant and certain officers. (Incorporated by reference from
           Exhibit 10.17 to the Form S-1).

10.05      [Intentionally Omitted].

10.06      Form of Agreement used to sell stock to certain directors and an
           officer of Registrant. (Incorporated by reference from Exhibit 10.26
           to the Form S-1).

10.07*     Qwest Communications Private Line Service Agreement Business
           Services, between Qwest Communications Corporation and Registrant,
           dated as of July 17, 1998. (Incorporated by reference from Exhibit
           10.37 to Registrant's Quarterly Report on Form 10-Q for the quarter
           ended June 30, 1998 (the "June 1998 Form 10-Q")).

                                       40

<PAGE>

10.08      Form of Non-Plan Stock Option Agreement for an option to purchase
           shares granted to James J. McInerney. (Incorporated by reference from
           Exhibit 4.06 to Registrant's Registration Statement on Form S-8 filed
           with the SEC on February 17, 1999).

10.09*     Worldcom Data Services (Revenue Plan) effective February 1, 1999
           between Worldcom Technologies, Inc. and Registrant. (Incorporated by
           reference from Exhibit 10.48 to the March 1999 Form 10-Q).

10.10*     Capacity Sales Agreement effective February 23, 1999 between MFS
           Cableco (Bermuda) Limited and Registrant. (Incorporated by reference
           from Exhibit 10.51 to the March 1999 Form 10-Q).

10.11*     Worldcom Capacity Access Service Agreement effective March 1, 1999
           between Worldcom Technologies, Inc. and Registrant. (Incorporated by
           reference from Exhibit 10.56 to the March 1999 Form 10-Q).

10.12      Capacity Purchase Agreement between Registrant and Global Crossing
           USA, Inc. dated August 27, 1999. (Incorporated by reference from
           Exhibit 10.68 to Registrant's Quarterly Report on Form 10-Q for the
           quarter ended September 30, 1999 (the "September 1999 Form 10-Q")).

10.13      Service Metrics, Inc. 1998 Stock Option Plan. (Incorporated by
           reference from Exhibit 4.06 to Registrant's Registration Statement on
           Form S-8 filed with the SEC on December 14, 1999).

10.14      Registrant's 1999 Stock Option Plan, as amended through January 24,
           2000. (Incorporated by reference from Exhibit 10.74 to Registrant's
           Annual Report on Form 10-K for the fiscal year ended December 31,
           1999 (the "1999 Annual Report on Form 10-K")).

10.15      [Intentionally Omitted].

10.16      [Intentionally Omitted].

10.17      [Intentionally Omitted].

10.18*     Networking Services, Marketing and Cooperation Agreement by and
           between Registrant and Global Crossing Ltd., dated as of September
           28, 2000 (Incorporated by reference from Exhibit 99.01 to the October
           2000 Form 8-K).

10.19*     Networking Services, Marketing and Cooperation Agreement by and
           between Registrant and Asia Global Crossing Ltd., dated as of
           September 28, 2000 (Incorporated by reference from Exhibit 99.02 to
           the October 2000 Form 8-K).

10.20      Joint Venture Agreement relating to Exodus Asia-Pacific Ltd. Among
           Registrant, Asia Global Crossing Ltd. and Exodus Asia-Pacific Ltd.,
           dated as of September 28, 2000 (Incorporated by reference from
           Exhibit 99.03 to the October 2000 Form 8-K).

10.21      Credit Agreement dated as of October 31, 2000 among Registrant, The
           Lenders Party Thereto, The Chase Manhattan Bank, as Administrative
           Agent and Collateral Agent, Chase Manhattan International Limited, as
           London Agent, Chase Securities Inc., as Sole Book Manager and Joint
           Lead Arranger, Goldman Sachs Credit Partners L.P., as Joint Lead
           Arranger and Co-Documentation Agent, Merrill Lynch, Pierce, Fenner &
           Smith Incorporated, as Syndication Agent, and Morgan Stanley Senior
           Funding, Inc., as Co-Documentation Agent. (Incorporated by reference
           from Exhibit 10.07 to Registrant's Quarterly Report on Form 10-Q for
           the quarter ended September 30, 2000, as amended (the "September 2000
           Form 10-Q")).

10.22*     Capacity Agreement by and between Registrant and Global Crossing
           Bandwidth, Inc., dated September 28, 2000. (Incorporated by reference
           from Exhibit 10.08 to the September 2000 Form 10-Q).

10.23*     Amendment No. 1 to the Capacity Agreement dated October 17, 2000 by
           and between Registrant and Global Crossing Bandwidth, Inc.
           (Incorporated by reference from Exhibit 10.09 to the September 2000
           Form 10-Q).


                                       41

<PAGE>

10.24      Registrant's 1998 Equity Incentive Plan, as amended through May 31,
           2001. (Incorporated by reference from Exhibit 4.04 to the
           Registrant's Registration Statement on Form S-8 filed with the SEC on
           July 6, 2001).

10.25      Exodus Communications, Inc. 1998 Employee Stock Purchase Plan, as
           amended through February 29, 2000. (Incorporated by reference from
           Exhibit 4.05 to Registrant's Registration Statement on Form S-8 filed
           with the SEC on June 9, 2000).

10.26      Amended Executive Employment Policy. (Incorporated by reference from
           Exhibit 10.17 to Registrant's Quarterly Report on Form 10-Q for the
           quarter ended March 31, 2000).

10.27      Loan Agreement between Development Bank of Japan and Exodus
           Communications K.K. dated December 11, 2000 (Incorporated by
           reference from Exhibit 10.29 to the 2000 Annual Report on Form 10-K).

10.28      Contract Deed of Cash Loan for Consumption (Money Market/Spread Loan)
           between Fuji Bank, Limited and Exodus Communications K.K. dated
           December 17, 2000 (Incorporated by reference from Exhibit 10.30 to
           the 2000 Annual Report on Form 10-K).

10.29      Loan Agreement between The Bank of Tokyo Mitsubishi, Ltd. and Exodus
           Communications K.K. dated December 11, 2000 (Incorporated by
           reference from Exhibit 10.31 to the 2000 Annual Report on Form 10-K).

10.30      Sale and Purchase Agreement dated April 25, 2000 by and among Exodus
           Communications K.K., The Nomura Real Estate Development Co., Ltd. And
           Nomura Research Institute, Ltd. (Incorporated by reference from
           Exhibit 10.32 to the 2000 Annual Report on Form 10-K).

10.31      GlobalCenter Management Stock Plan and related form of Stock Option
           Agreement. (Incorporated by reference from Exhibit 4.07 to
           Registrant's Registration Statement on Form S-8 filed with the SEC on
           January 16, 2001 (the "January 2001 Form S-8")).

10.32      Global Crossing Ltd. 1998 Stock Incentive Plan and related form of
           Stock Option Agreement. (Incorporated by reference from Exhibit 4.08
           to the January 2001 Form S-8).

10.33      First Amendment and Waiver to the Credit Agreement dated April 18,
           2001 among Registrant, the lenders party thereto, Chase Manhattan
           Bank as administrative agent and collateral agent and Chase Manhattan
           International Limited as London agent. (Incorporated by reference
           from Exhibit 10.33 to Registrant's Quarterly Report on Form 10-Q for
           the quarter ended March 31, 2001 (the "March 2001 Form 10-Q)).

10.34      Transition Agreement among GlobalCrossing Ltd., GlobalCrossing North
           America, Inc., GlobalCrossing GlobalCenter Holding Co., Registrant,
           GlobalCenter Holding Co., and GlobalCenter, Inc. dated as of January
           10, 2001 (the execution date of the merger). (Incorporated by
           reference from Exhibit 10.34 to the March 2001 Form 10-Q).

10.35      Indemnification Agreement between Registrant, Einstein Acquisition
           Corp., GlobalCrossing North America, Inc., GlobalCenter, Inc.,
           GlobalCenter Holding Co., and the Participants thereto dated as of
           January 10, 2001. (Incorporated by reference from Exhibit 10.35 to
           the March 2001 Form 10-Q).

10.36**    Loan Agreement between Lehman Brothers Bank FSB and Exodus
           Communications Real Property I, LLC and Exodus Communications Real
           Property I, LP dated as of March 30, 2001. (Incorporated by reference
           from Exhibit 10.36 to the March 2001 Form 10-Q).

10.37**    Amendment to Loan Agreement between Lehman Brothers Bank FSB and
           Exodus Communications Real Property I, LLC and Exodus Communications
           Real Property I, LP dated as of May 4, 2001. (Incorporated by
           reference from Exhibit 10.37 to the March 2001 Form 10-Q).

10.38**    Second Amendment to Loan Agreement between Lehman Brothers Bank FSB
           and Exodus Communications Real Property I, LLC and Exodus
           Communications Real Property I, LP, dated as of June 27, 2001.
           (Incorporated by reference from Exhibit 10.38 to Registrant's quarter
           report on form 10-Q for the quarter ended June 30, 2001(the "June
           2000 Form 10-Q")).


                                       42

<PAGE>

10.39      Employment Agreement by and between Registrant and Richard S. Stoltz,
           as amended. (Incorporated by reference from Exhibit 10.39 to the June
           2001 Form 10-Q).

10.40      [Intentionally Omitted].

10.41      [Intentionally Omitted].

10.42      Waiver and Amendment dated June 27, 2001, to the Credit Agreement
           dated as of October 31, 2000, as amended by the First Amendment and
           Waiver dated as of April 18, 2001, among Registrant, the Lenders
           party thereto, and The Chase Manhattan Bank, as Administrative Agent
           and Collateral Agent, and Chase Manhattan International Limited, as
           London Agent. (Incorporated by reference from Exhibit 10.42 to the
           June 2000 Form 10-Q).

10.43#     Offer Letter dated July 12, 2001 between Registrant and William M.
           Austin.

10.45#     Offer Letter dated September 3, 2001 between Registrant and L.
           William Krause.

10.47#     Equity-For-Debt Exchange Agreement dated August 22, 2001 between
           Exodus Communications, Inc. and Fir Tree.

10.48#     Equity-For-Debt Exchange Agreement dated August 24, 2001 between
           Exodus Communications, Inc. and CRT Capital Group LLC.
__________

*    Confidential treatment has been granted for certain portions of this
     document pursuant to an application for confidential treatment filed with
     the Securities and Exchange Commission. Such portions have been redacted
     and marked with an asterisk. The non-redacted version of this document has
     been sent to the Securities and Exchange Commission.

**   Confidential treatment has been requested for certain portions of this
     document pursuant to an application for confidential treatment filed with
     the Securities and Exchange Commission. Such portions have been redacted
     and marked with an asterisk. The non-redacted version of this document has
     been sent to the Securities and Exchange Commission.

#    Filed herewith.

(b) Reports on Form 8-K

       On September 5, 2001, we filed a report on Form 8-K under Item 5
announcing the appointment of L. William Krause as Chairman of the Board of
Directors and Chief Executive Officer our effective immediately. We also
announced that Ellen Hancock resigned from her positions as a member of the
Board of Directors and Chairman and Chief Executive Officer. Concurrent with Ms.
Hancock's resignation, we reduced the size of our Board of Directors from seven
members to six.

       On September 12, 2001, we filed a report on Form 8-K under Item 5
attaching a letter to our stockholders and bondholders from our Chairman and
Chief Executive Officer L. William Krause.

       On September 27, 2001, we filed a report on Form 8-K under Items 3 and 7
announcing that on September 26, 2001 we filed a voluntary petition for
bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware. A copy of the press release dated
September 26, 2001 announcing the filing was attached as an exhibit to the Form
8-K.


                                       43

<PAGE>

                                   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.

Dated: November 27, 2001           By:     /s/ William Austin
                                          --------------------------------------
                                           William M. Austin
                                           Executive Vice President,
                                           Chief Financial Officer, and Chief
                                           Administrative Officer

                                       44