Data center deal wins continue for
). This time the company won a deal from the cloud server
Equinix's International Business Exchange (IBX) data center in
Hong Kong will be supporting Elastichosts in providing its
easy-to-use, pay-as-you-go Cloud Servers to business houses
With the help of Equinix's network density and rich cloud
ecosystem, Elastichosts plans to grow its business in the Hong
Kong region, along with other Asian markets such as Taiwan,
China, Singapore, and other ASEAN countries.
Given that the demand for data centers is increasing rapidly,
Equinix is slowly expanding its operations. To fund the expansion
plans and working capital requirement, the company made a public
offering of senior notes worth $1.5 billion (after deducting
issue-related expenses). This will give Equinix access to
Moreover, as per a recent research report published by
Gartner, the total public cloud services market size is
expected to increase from $91.4 billion in 2011 to $206.6 billion
in 2016. The emerging markets including India, Indonesia and
China will witness high growth rates.
The expansion plans have been a part of Equinix's core
strategy. The company is continuously striving to boost its
revenue base as well as profitability by increasing its
clientele. Its recurring revenue model has provided the much
needed support to its revenue stream over the years.
On the other hand, Equinix faces problem with its longer sales
cycle. The company has to make a considerable effort to reduce
its turnaround time. A customer's decision to license cabinet
space at one of its IBX centers and to purchase additional
services takes a lot of time. Moreover, the sales cycle has
deteriorated further as a result of the current macroeconomic
conditions, as customers are unable to accurately forecast their
future business plans and are therefore delaying their purchase
Although deal wins are adding to the company's revenue, the
high debt level has resulted in the increase in interest costs.
Despite all the positives, competitive threats from the likes of
) raise our apprehension. European exposure and industry
consolidation are the other headwinds.
Equinix carries a Zacks Rank #2 (Buy). Investors can also
consider other stocks such as
Arris Group Inc.
), both of which have a Zacks Rank #2 (Buy).
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