Equinix Inc.
's (
EQIX
) board of directors has approved the company to convert its
business category from a global interconnection and data center
company to a Real Estate Investment Trust (REIT).
The board of directors studied alternative financing, capital
and tax strategies, before approving the conversion plan. The board
believes that this conversion will result in maximization of
shareholders value in the long run.
Senior management also believes that the REIT structure will
help the company to achieve its desired profitability along with
growth in the domestic and international markets. This apart,
management also believes that this restructuring will not have any
impact on the service delivery or on the performance of the data
center.
The company is quite hopeful about this conversion, and is in
the process of seek a private letter ruling (PLR) from the Internal
Revenue Service (IRS) for its proposed REIT conversion. The
company expects to file this request by the end of 2012.
If the company becomes successful in this conversion process, it
is should be able to secure its REIT status for its taxable year
beginning January 1, 2015.
Equinix boasts a presence across various geographical regions
and is increasingly becoming popular among major players in the
tech industry for data management. That is the reason for the
company's effort to project all its data center assets as real
estate assets. This would result in a higher tax benefit for the
company.
The company's worldwide presence has resulted in high network
density with a vertically focused approach, which will continue to
support demand. Moreover, the nature of business for the company
has some similarities, as companies in both the industries let out
property to the end customers and clients.
On the other hand, a heightened debt situation, competitive
threats from the likes of
AT&T Inc.
(
T
) and
Verizon Inc.
(
VZ
) and European exposure keep us on the sidelines.
Equinix carries a Zacks #3 Rank, implying a short-term Hold
rating.
EQUINIX INC (EQIX): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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