Google Unveils Asian Data Centers - Analyst Blog

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Google Inc. ( GOOG ), the world's most popular Internet search engine provider, has opened two Asian data centers in Taiwan and Singapore, to meet the fast-growing demand for Internet usage and data storage capacity.

The Taiwanese data center , built on 15 hectares of land, is situated near wind turbines at the coastal industrial park. To improve its energy efficiency, the company uses nighttime cooling and thermal energy storage system. The system cools water at night when temperatures are lower which is then stored in large insulated tanks before being pumped throughout the facility during the day. This helps Google to reduce its power bill as electricity rates are lower at night.

Google believes this facility to be one of Asia's most efficient and environment-friendly data centers and so has increased its investment to $600 million from $300 million.

The Singapore facility is a multi-story data center situated on 2.45 hectares of land in Jurong West. The data center has been built next to a primary school and publicly-run housing (called HDBs). To conserve water, this facility will pump recycled water through tubes to cool their servers during hotter days.

The world's fastest growing consumer technology markets, Singapore and Taiwan, offer well-established data privacy policies, a highly trained workforce, a fiber broadband infrastructure and reliable power. All these factors attract the major Internet companies to invest in these markets. Microsoft Corp. ( MSFT ), Amazon ( AMZN ) and Rackspace ( RAX ) have already been increasing their presence in Asia in the recent years.

The need for data center expansion is rising due to the growing demand for cloud computing and the ever-increasing needs of Internet users. The data centers comprise computer servers that process everything from Internet searches to emails, inquiries to maps, videos and other services.

Google's investment to expand its data centers comes as no surprise given the need for more data-intensive services, such as Google search, Gmail, Google+ and YouTube services in Asia. We believe these two centers should speed up performance of Google-based sites and services in the region. Currently, Google has 19 data centers worldwide, with 70 offices in more than 40 countries employing some 30,000 people.

The U.S. independent research firm, Gartner, predicts that data-center hardware spending will most likely cross $126.2 billion in 2015. These technology warehouses are witnessing strength, as video streaming, smartphones and apps are boosting the demand for hard drives on which they run.

Google believes that the number of users accessing the Internet, particularly through mobile devices, has rocketed in the past two years in Asia. Per Google's figures, the number of Internet users in India doubled from 100 million to 200 million, while 60 million people in Asia used the Internet from a mobile device in the third quarter of 2013.

Going by the above numbers, we believe that there is much room for further growth in this region.

However, the company's decision to open a third data centre in Hong Kong has been scrapped for now.

Google has done very well in the third quarter, with its earnings exceeding the Zacks Consensus Estimate due to solid growth in the core business, a growing digital business, good cost control and a lower tax rate. However, its ad technology has not kept up, leading to poorer ROI for advertisers, which has affected spending on Google platforms.

Currently, Google has a Zacks Rank #3 (Hold). 



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AMZN , GOOG , MSFT , RAX

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