Data center provider
) 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
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
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
) should not be ignored. European exposure and industry
consolidation also concern us.
Equinix has a Zacks #3 Rank, implying a short-term Hold
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