Equinix Adds Capacity in Asia - Analyst Blog
May 04 2012 - 2:45PM
Zacks
Data center provider
Equinix Inc. (EQIX) is set to acquire an aggregate
of six data centers and a disaster recovery center from Asia Tone
for a cash consideration of $230.5 million. Asia Tone is a Hong
Kong-based data center and colocation service provider. Its
facilities are located in Hong Kong, Shanghai and Singapore, which
creates an opportunity for Equinix to expand its footprint across
the Asia-Pacific. Those three regions happen to be the
fastest-growing data center markets.
Of the six data centers, one is new
and located in Shanghai. The facility is expected to be fully
operational by the second half of 2012 and will provide 80,000
square feet of data center space. Another one is still under
construction.
The cash deal is expected to be
completed by the third quarter of 2012. Post completion, Equinix
will be operating 104 data centers in 38 markets across the world.
We believe that the acquisition will be commensurate with the
increasing demand for its data center support.
As per recent studies conducted by
research firms Frost and Sullivan and Gartner, data center growth
in the Asia-Pacific will be the most sought after. Gartner also
expects China to grow into the second largest global data center
market by 2015.
Equinix has seen an annualized
revenue growth rate of 30% from the Asia-Pacific region. In the
recently concluded first quarter of 2012, the region generated
13.9% of total revenue, up from 13.3% in the prior-year quarter.
The region also witnessed strong bookings growth in the
quarter.
We believe that with support from
the newly acquired data centers, Equinix will be able to provide
colocation, interconnection and managed services to match the
growing demand in China.
Equinix has delivered strong first
quarter results and provided a decent guidance for the coming
quarter and fiscal 2012. We believe that strategic acquisitions and
international expansion will help expand its client base, thus
enhancing its revenue growth potential.
We are also optimistic about the
company’s recurring revenue model and current expansion plans.
However, despite all these positives, competitive pressures from
the likes of AT&T Inc. (T) and Verizon
Inc. (VZ) should not be ignored. European exposure and
industry consolidation also concern us.
Equinix has a Zacks #3 Rank,
implying a short-term Hold rating.
EQUINIX INC (EQIX): Free Stock Analysis Report
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VERIZON COMM (VZ): Free Stock Analysis Report
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