Equinix Extends Data Center Presence

Equinix Inc. recently announced the expansion of its second International Business Exchange in Singapore. This particular data center, dubbed SG2, is expected to cater to the growing market demand from cloud-based service providers as so then as financial service providers. The expansion involves an additional investment of $28.5 million to increase the cabinet count to 3,256.

We believe this is good news for networking companies and data center service providers like Equinix, Juniper and Cisco Systems, which are taking necessary steps to seize this possibility in the data center business.

Apart from Singapore, China, India, Japan and Australia, the United States offers good growth opportunities. We believe that favorable pricing trends in the U.S., coupled with planned expansion, have the potential to boost revenue growth in the upcoming quarters.

The other hand

On the other hand, another set of industry experts believe that the telecommunications industry is currently in the middle of cut-throat competition. In many cases, clients are combining their businesses, in doing so reducing their co-location space requirements. They are as well looking for innovative ways to better utilize existing co-location space. These actions are secular headwinds for a company just as Equinix.

However, we expect that these actions will be more than offset by the growing demand for data center services, since many more companies are moving to the cloud, and Internet usage continues to grow steadily year afterwards year.

Equinix delivered good first quarter 2012 results with EPS exceeding our expectation. In addition, revenue grew substantially on a year-over-year basis as the company is witnessing improvement in mobility, cloud computing and data management. The company is as well experiencing improvement in business fundamentals across all segments, along with a better supply chain process and better pricing environment.

The company’s recurring revenue model

We are as well optimistic about the company’s recurring revenue model and current expansion plans. In spite of all the positives, competitive threats from the likes of AT&T Inc. and Verizon Inc. raise our apprehension. European exposure and industry consolidation as well concern us.