She’s Still a Believer

From her perch at the helm of Exodus Communications Inc., Ellen Hancock had a front-row seat for the high-tech boom and subsequent meltdown that transformed Silicon Valley twice in a few short years.

The Santa Clara, Calif., company, which manages Internet systems and hosts Web sites for businesses, seemed perfectly positioned to take advantage of the sudden demand for all things dot-com.

Just days after Hancock took over as president, Exodus made an initial public offering and saw its stock rise 84% in its first day of trading. After six months of explosive growth, Hancock was promoted to chief executive.

Unlike many of her Silicon Valley counterparts, Hancock came to her assignment with copious experience in the technology industry.

She spent 29 years at IBM Corp., where she rose from programmer to senior vice president for networking hardware and software and software solutions. She then jumped to National Semiconductor Corp., where she served as chief operating officer, then became chief technology officer for Apple Computer Inc.

But it wasn’t enough to protect Exodus from the dot-com implosion, which wiped out a sizable chunk of the company’s customer base.

With losses and debts mounting, Hancock resigned Sept. 4, two weeks before the company filed for bankruptcy protection. British telecommunications giant Cable & Wireless agreed in November to buy a large part of the company for $850 million.

After gaining some perspective, Hancock is eager to rejoin the Silicon Valley fray. She spoke with The Times about what she has learned.

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Question: What went wrong with the Web hosting sector? Why did it collapse?

Answer: I wouldn’t say it collapsed. It certainly got damaged, but I believe there’s still a future for the Web hosting business.

Customer demand diminished in two very significant places.

A lot of the original Web hosting was with dot-coms and start-ups. They ran into some serious issues, and many of them collapsed.

The second impact, which unfortunately hit right around the same time, is that enterprises [large corporations] got cautious. They weren’t buying as much. That hit the hosting business because that’s pure outsourcing.

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Q: How can the business recover?

A: These Web hosting companies have expertise in building data centers. They have power experts, security experts and networking experts, and they have massive Internet networks. Once we all stabilize from the effect of the dot-coms and we start to see enterprise growing again, you’ll see Web hosting survive.

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Q: Was the dot-com meltdown enough to force Exodus into bankruptcy, or could the company have made it if the enterprise market had held steady?

A: It’s hard to say. Clearly the company would have been in a much better position if we had seen in 2001 the growth in enterprise we had seen in 2000. That would have been a tremendous safeguard.

But there’s no question the dot-coms were the bigger problem. They wound up to be about 40% of the business, but they were more than 50% of the failures. Some people just literally couldn’t pay you.

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Q: Looking back, did the industry expand too rapidly and build too much capacity?

A: Even as we were going into 2001, we were out of space in several cities. Our salespeople were legitimately concerned that customers would say, “We want more space.”

The construction we had underway at the end of 2000 matched the demand we saw. We felt we were still responding to real customer demand. Practically everyone in the industry had construction underway.

In hindsight, there’s a choice, and one could choose not to do that much buildup and give up market share.

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Q: Is there still a future for dot-coms?

A: I believe so. I happen to still be an optimist.

Many of the promises of the Internet were over-hyped, and there were many business cases that were not appropriate. Some of the business plans were way too early. Some of them didn’t really consider the distribution system.

Everyone just assumed there was going to be hyper-growth on the Internet and they didn’t pay attention to the costs of selling or marketing. But the Internet still has an amazing ability to improve supply chain management and to improve customer support.

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Q: Everyone recognizes now that the expectations and stock prices for tech companies were overheated during the boom. Do you think people are being too hard on the tech sector now?

A: Many investors--individuals as well as venture capitalists--were so burned that they got very cautious. Hopefully they’ll start investing again in some of the companies that in fact deserve investment. Now some companies are getting hurt by that reaction.

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Q: What do you mean by “hurt”? Are you afraid that good ideas will die from lack of funding?

A: I think that’s happening in some cases. We probably have lost some technology as we went through 2001 and into 2002 in the form of companies that did not get funded and had to shut down.

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Q: How are things different in a downturn for a young company like Exodus compared with a stalwart like IBM?

A: IBM had built up a lot of processes over the years. Although they felt the pain of it, at least they had been through this before.

Many of these Silicon Valley companies had never seen a layoff before. They had no procedures for how to do it. They also didn’t know about severance or medical benefits, or how to help their employees find new jobs.

A company like IBM can put the brakes on in a very clear fashion a little faster than others, whereas the start-ups don’t even have procedures for putting the brakes on. It was also harder for the start-ups because they depended so much on their stock, and once the stock declines, the economic situation becomes harsher.

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Q: After you left Exodus, pundits were predicting that women executives would become a casualty of the tech meltdown. Do you think women are more vulnerable than men?

A: I don’t think so. I did my own look at how many CEOs made it out of a bankruptcy, male or female, and the number’s not too good. What will be interesting to see is whether women bounce back as fast as some of the men seem to. There’s still a concern as to whether a board would be more sensitive to a female running the company than a male.

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At a Glance

Name: Ellen Marie Hancock

Born: April 15, 1943, in the Bronx, N.Y.

Personal: Married to W. Jason Hancock, no children. The couple has homes in Los Altos Hills, Calif., and Ridgefield, Conn.

2001 salary: $460,000

Education: Bachelor’s degree in mathematics from the College of New Rochelle, 1965; master’s degree in mathematics from Fordham University, 1966

Career: The bulk of Hancock’s career was spent at IBM, where she served in various staff and executive positions. In 1995, she moved to Silicon Valley to become chief operating officer of Santa Clara-based chip maker National Semiconductor. A year later, she followed Chief Executive Gilbert Amelio to Apple Computer as chief technology officer. In 1998, Hancock signed on as chief executive at Exodus Communications, a position she resigned in September.