Data center major
Equinix Inc.
(
EQIX
) is on a roll. The company has been winning new deals at regular
intervals. One of the most recent wins is a deal from a well known
Russian telecommunication operator CJSC TransTeleCom (Company
TTK).
As per the terms of the agreement, the company will deploy a new
core network node in Tokyo and a series of high-capacity Internet
and Ethernet exchange connections in Tokyo, Hong Kong, Silicon
Valley, Ashburn, London, Amsterdam and Frankfurt. This new tie up,
mainly focused on Layer 2 connectivity, is expected to help expand
TTK's connectivity capabilities across three continents. This is
expected to minimize cost and improve efficiency for TTK.
The company has reached an important milestone in its business
volume, after setting its strategy for data center expansion in
Asia and Europe. Moreover, the company also helped IRESS to seize
the opportunity in the financial services sectors, especially in
some of the world's most dynamic economies.
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.
The company has attained its critical mass of customersand the
resultant network effect within its IBX centers. Direct
interconnection with its aggregationof networks, which serve more
than 90% of the world's Internet routes, enables customers
toincrease the efficiency of their IT infrastructure, remove some
complexities of administering andmanaging their infrastructure,
while significantly reducing costs.
Service offerings, such as EquinixExchange and Equinix Internet
Core Exchange significantly reduces the cost of critical transit,
peering and traffic exchange operations by eliminating the costs of
private peering or local loops.The difficulty and cost associated
with changing infrastructure providers has also worked in favor of
the company, helping it to increase its customer base.
However, some industry experts believe that the
telecommunications industry is currently facing cut throat
competition. Moreover, customers are also combining their
businesses, and so they require less co-location space. In
addition, increased utilization of existing co-location space could
reduce the attractive expansion opportunities available to
Equinix.
Equinix has delivered good first quarter 2012 results with EPS
exceeding our expectation. Moreover, revenue improved substantially
on a year-over-year basis as the company is witnessing improvement
in mobility, cloud computing and data management. The company
is also experiencing improvement in business fundamentals across
all the segments, along with better supply chain process and a firm
pricing environment.
However, while the company has a recurring revenue model and is
cash rich, its debt level appears high. Additionally, competitive
threat from the likes of
AT&T Inc.
(
T
) and
Verizon Inc.
(
VZ
) is cause for concern. European exposure and industry
consolidation are also concerning.
Equinix therefore 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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