Equinix (EQIX) (1 Viewer)


Chapter 11
2 Maggio 2004
Carpi - MO -
Equinix è leader nel settore della colocation, ed ha appena acquisito il suo più grosso competitor nel mercato americano.

Le quotazioni sono molto elevate (priced for perfection), ma il settore continua ad avere tassi di crescita elevati, anche in periodo di crisi, che lo rendono estremamente interessante.

Da Seeking Alpha:

Equinix (EQIX) will be reporting 2Q 2010 results on Wednesday, July 28th. This call will be particularly interesting as Equinix completed the acquisition of Switch and Data in the quarter - while we do not expect that the two Companies might have already developed significant synergies, we are sure that the conference call will be useful to give investors additional color on the status of the integration.
According to its updated guidance given on May 7, Equinix expects revenues to be in the range of $296.0 to $298.0 million, with cash gross margins of about 64%. This forecast reflects a closing date of April 30, 2010 for the Switch and Data acquisition, which therefore will contribute to Equinix’s results from May 1, 2010 onwards only.
As a side note, the strength of the US dollar (or, said in a different way, the recent weakness of the Euro, which represented about 16% of revenues for the former stand alone Equinix) might have negatively impacted Equinix's non-US results for the quarter, as guidance was given using, for example, $1.36 dollar to the euro.
On a same currency basis, we expect Equinix's performance in Europe and Asia to show very good strength, in spite of currency conversions.
Analysts estimate revenues of 295.9M on average, slightly below Company's guidance, and EPS of $ 0.24.
The strategic importance of the Switch and Data merger deserves spending a good part of this article reviewing, once more, the reasons behind the acquisition and its potential impact on Equinix numbers/synergies going forward.
Equinix's recent “Update Call on Closure of Switch and Data Acquisition” comes in handy:
The strategic rationale for this acquisition centers around five key elements. Gaining a quick entry in new markets, securing additional capacity in our existing markets, enhancing our core focus on network density and interconnection services, and producing strong financial synergies to enhance the accretiveness of this transaction. Finally this transaction continues to distance Equinix from other data center providers, and further establishes us as the only global network neutral data center provider, and clearly with the largest North American footprint. -- Steve Smith, Equinix Inc. President, CEO
The comment about the additional capacity is interesting, as Equinix, with this acquisition, has basically doubled the number of cabinets available for sale in the North American market.
We believe that the impact of this new inventory will start producing positive effect mostly in the second half of 2010:
Secondly, we will drive top-line growth with a strong focus on achieving revenue synergies across both sales organizations. An early sign of success over the past week is that we have already identified several Equinix customers that are interested in the Switch & Data inventory, and we have also started to receive inbound lead opportunities to cross-sell Switch & Data customers into Equinix's global footprint.
In our opinion, the New York metro area will strongly benefit from the combination of the Switch and Data inventory and the great success that Equinix is achieving within the financial vertical (comment added in Italic):
In the New York metro area, we have now acquired three data centers in New York City, two of which are located within key telecom landing points. Additionally, the capacity gain from their sizable new data center in Bergen County, will supplement our existing footprint in New Jersey, which we expect to be important in meeting the demand from our financial services customer base.
Given our historical fill rates in this metro, we are very excited by the additional capacity in both New Jersey locations (the former Switch and Data Bergen facility and the new Equinix NY4 third phase expansion).
Equinix has recently been in the news for several wins within the financial community, like Deutsche Börse Systems, selecting Equinix as strategic data center provider in Frankfurt, Germany and the Australian Securities Exchange, operator of the Australian futures market, deploying its new hosting solution within the Equinix Chicago (CH1) data center. Several networks have also announced connections to different Equinix's data centers worldwide, targeting the low latency needs of financial institutions. As a reminder, Equinix is the only colo provider with a presence at all major exchange markets worldwide.
Focusing on the New York market, Direct Edge has just converted its trading platforms to formal Exchanges, and is now operating from the Equinix NY4 data center, a move which could represent an important catalyst for the financial community.
These comments are taken from Securities Technology Monitor:
In 2,500 square feet of space, you can house a typical Radio Shack store, with hundreds of electronic products, ranging from smart phones to car security systems to MP3 players to weather radios to cables and batteries.
Or, in roughly the same amount of space, you can house a stock exchange. Or two.
Such is the case with EDGA and EDGX, the two newly approved stock exchanges owned by Direct Edge, which formally debut Wednesday in Secaucus, N.J. As competition in securities trading venues goes up, so does the drive for speed and “scalability,’’ the ability to expand rapidly and reliably.

Unlike the New York Stock Exchange, you won’t see a monster-sized flag draped over where Direct Edge operates the new trading platforms that will power EDGA and EDGX. The two exchanges sit side by side, in a black wire cage inside a nondescript industrial building that could just as easily hide a distribution warehouse.
Spare servers in this cage provide immediate backup, in case of failure. A second cage with copies of the entire EDGA and EDGX trading exchanges sits in another nondescript building in North New Jersey, just in case.
From the get-go, the new system will be able to handle 220,000 messages every second, while keeping up the pace of acknowledging each order in less than half a million. Each of the two exchanges can handle 2.5 billion transactions a day. “That is four times the capacity of even the days surrounding the Flash Crash,’’ said O’Brien. “So there is significant head room there.”
“There is no theoretical limit” to the amount of transactions Direct Edge will be able to handle each day, Bonanno said, at these speeds.
More information about the Direct Edge Exchange come from wallstreetandtech.com:
Direct Edge Chief Executive William O'Brien said the company is not about to venture into unfamiliar territory with its exchange status, which means tighter regulatory oversight.
But he said a new data center launched during the conversion opens a new battle front with competitors in selling trading data to increasingly hungry investors.
"That's something we view as a way to broaden our competitive footprint," O'Brien said in an interview. "As great as this company has progressed so far, I still feel like it is still getting started."
Just hours before ringing the exchanges' opening bell in Jersey City Wednesday, O'Brien told Reuters Insider that Direct Edge "could potentially" list its shares in an initial public offering. The IPO plan was originally set for this year.
From an interconnection stand point, Equinix has increased the number of networks and ISPs connected to its data centers from 410 to 575. Switch and Data's success in network density was unparalleled in the industry, and approximately 31% of revenues were represented by interconnection services, or more than double Equinix numbers. Switch and Data Palo Alto and Equinix Ashburn represent the two most important peering points on the West and East Coast of the USA, and both Company’s regional data centers will benefit from the wider offer of ISPs and networks that they will now be able to offer to their existing customers base.
From a financial point of view, Equinix will take advantage of Switch and Data'S NOLs, and expects to generate about $20 million of synergy savings within one year, which is quite a substantial amount, if we consider that it does represent about 10% of Switch and Data cash costs.
Equinix is also estimating acquisition costs of about $23 million for professional and legal fees, that will be split between 2009 and 2010. Integration costs will also be substantial:
For each of the quarters through the integration period, we will provide you an estimate of what we believe the integration costs to be, and compare those costs against the savings attributed to our synergies. For 2010 we expect the integration costs to be $2 million greater that the cost savings relating to the synergies. But as we looked at the entire integration period, as Steve mentioned, we expect to receive a minimum of $20 million in annual cost savings from this transaction, half of those annualized savings should be realized by the end of the year. The restructuring costs associated with this deal will primarily be incurred over the next three or four quarters, and will be expensed to the income statement on a separate income statement line. The restructuring costs will not affect our adjusted EBITDA metric. -- Keith Taylor, Equinix Inc. CFO
As some key operating metrics were used in slightly different ways by the two Companies, Equinix provided a reconciliation sheet on its web side for Switch and Data's recent quarter.
As far as revenues, Equinix hasn't really included any synergy in its forecast:
David Barden - BofA Merrill Lynch - Analyst
But no revenue synergies in the guidance at all?
Keith Taylor - Equinix Inc. - CFO
At this stage we haven't.
Clearly there is some expectation, again, as Steve alluded to, that we are already starting selling into their assets, and I understand from our sales team we are getting leads from the Switch and Data team into our (global) assets. So I think that there is going to be a strong opportunity for us. I think it will create some synergies, but we have not made that assumption today.

The combined business would be already in a position to generate about 1.8 billion of revenues, excluding further expansions that the now combined Company might need to take into consideration quickly:
Yes, they actually, they do have a couple of projects that they have had under review, and we need to make decisions pretty much in the next 30 to 60 days, but given the commonality of the businesses and the markets we are focused on, they are projects we are very interested in, and we would like to pull right into our portfolio. So we see some good opportunities for expansion. -- Mark Adams, Equinix Inc., Chief Development Officer
Disclosure: Long EQIX


Chapter 11
2 Maggio 2004
Carpi - MO -
Il recente conference call è disponibile a questo link.

Articolo da Seeking Alpha:

Equinix (EQIX) reported 2Q 2010 results last Wednesday night (see its press release and conference call transcript). On separate press releases, the Company also announced the opening of DC6, its sixth IBX data center in the Washington, DC metropolitan area, with a capacity of 1,750 cabinets, and the third expansion phase within the Singapore SG2 IBX data center, that will add another 850 cabinets to that specific market (more on these expansions later).
Here are some highlights on a few metrics we usually follow for a better understanding the Company's performance:

  • Revenues came at $296.1 million, at the low end of Company's guidance and met analysts' expectations. Exchange rate negatively impacted the 2Q revenues by $3.4 million
  • 2Q EPS of -$0.05 may not be comparable to consensus, and the negative result was mainly impacted by restructuring, integration and acquisition costs related to the Switch and Data acquisition
  • Churn remained at 2.2%, in line with Company's expectations
  • 216 new customers in the quarter, including Switch and Data
  • Cash gross margins remained at 65%, ahead of expectations
  • Adjusted EBITDA came ahead of expectations, at $132.2 million, or 44.6% of revenues (as a reminder Switch and Data negatively impacted this metric, exiting 1Q with 35.9% against Equinix's 47.2%)
  • Strong cabinet additions in all markets [over 800 in North America (combined Company), over 2,200 in Europe and over 300 in Asia Pacific]
  • Record cross connects in Europe (plus 11.9%, or almost 1,200 new connections), as the interconnection business is getting traction in that market, too.
  • 359 10 Gig ports on the Equinix exchange, and 160 on the Switch and Data corresponding service
  • Equinix narrowed 2010 guidance, lowering the mid point from $1,232.5 to $1,230 million (including a $4 million negative FX impact), but increased EBITDA guidance from $525 to $535 million to $535 to $540 million.
  • Record bookings in all regions.
Back to the announced expansions:
DC6 will complement Equinix’s existing five data centers in the Washington, DC market, that currently feature more than 470,000 square feet of data center space and access to more than 180 networks, making the campus one of the richest IP network interconnection points in the US, and the most important peering point on the east coast.
The expansion, at full occupancy, will add about $40 million of revenues a year.
The newly announced Singapore expansion may come unexpected to some readers.
Singapore SG2 Phase 1 was launched in July 2009, with a capacity of 700 cabinets. More than 500 cabinets (or 75%) are now billing, and the recently announced Phase 2, due to open in September 2010 with a capacity of 1,000 cabinets, is already nicely booked. Here are some comments, recently published on the Business Times Singapore:
"We continued to experience strong growth within the Asia-Pacific region even during the global recession in 2009, and more so this year," Mr Lee (Equinix's Asia-Pacific president) says. "In fact, last year we opened a second DC in both Singapore and Sydney, and expanded our Hong Kong DC as well. This year the boom is back and we should see a strong surge in enterprise data. Much of that data would need to sit in DCs."
In 2008, Singapore had a total of about 170,000 sq m of DC capacity, up 15 per cent over 2007. Not much capacity was added in 2009 due to the recession in 2008. But in 2010, demand may outstrip supply by up to 20 per cent, according to industry sources. Apart from Equinix, there are a slew of DC players such as SingTel, NCS, Tata Communications (TCL), ST Engineering and Fujitsu Asia (FJTSY.PK).
According to industry analysts, the demand for DC space significantly outpaces supply in the Asia-Pacific, including Japan (APJ) region, with 50 per cent of the demand being driven by government initiatives, and the rest by Internet media, telecom and IT companies.
"Demand for DC hosting currently exceeds supply," research house Frost & Sullivan's analyst Wu Chengyu says. "In fact, over 80 per cent of the major DCs in the Asia-Pacific are running at close to 90 per cent capacity, and space is at a premium."
1Q Red Flags
Some readers may remind that Equinix added 100 cabinets only in the USA (on a weighted average basis, the metric we prefer) during the first quarter of 2010. Looking at quarter end cabinets equivalents billing, the result was even worse, as the Company showed a zero net addition.
This quarter's result (more than 600 organic cabinets added by Equinix alone, plus about 200 by the former Switch and Data at quarter end), bring Equinix back to its standards.
Here is an interesting view of cabinets' billing and weighted MRR for each region (slides from Equinix earnings conference call presentation):
Click charts below to enlarge

Excluding currency fluctuations for Europe (and Asia to a lesser degree), monthly recurring revenues per cabinets show continuous strength, as customers keep adding more services (cross connects, etc.) and pricing remains stable in all markets served by Equinix. Switch and Data is basically in line with Equinix as far as cabinet MRR in the North American market.
Switch and Data
While we were a bit disappointed by the former Switch and Data result in the quarter (lower than our expectations, in spite of a good cabinets addition), Equinix stated that the integration is ahead of schedule, and the first sales synergies are emerging between the footprints of the two former separate Companies.
Equinix is working on standardizing metrics between the two Companies, and will have to wait for 2Q for additional color on this.
On the cost side, Equinix now expects to be able to achieve about 75% of synergy savings by year end, a steady improvement from the previous forecast of about 50%.

Financial Vertical
During the call management reiterated that the Financial vertical is representing today a very strong market worldwide, as already noted by some competitors like SAVVIS (SVVS) during its recent conference call (transcript):
Jim Ousley
Last week I spent a day with our lead salespeople from around the world, and I can tell you the message was loud and clear. The financial vertical has returned to strength. The challenges from 2008 and 2009 are behind the financial companies and there’s been an important change in how many of these companies are thinking about their IT requirements.
An interesting article on the role of the neutral data center in 21st century trading has recently been published by Equinix's Robin Manicom, director of financial services:
The complexity and volume of electronic trading has increased exponentially over the past decade as the financial industry continues to invest heavily in computer-driven technology. The Financial Information Forum reports that from 2006 to 2009 peak messages per second increased more than fivefold, leaping from 314,733 to 1,795,348 – and this growth rate continues its climb unabated.
This evolving landscape means today’s market participants are under unprecedented pressure to process higher and higher volumes of data – and fulfil their increasing compliance obligations – all without compromising their ability to execute their trades in real-time. It is this requirement that has placed technology at the very centre of trading in the 21st century. And if technology has become the key facilitator for trading, then it is fair to conclude that the neutral data centre has become the cornerstone for the rapidly expanding world of global financial markets.
We'll come back with more thoughts about Equinix's results later on, but for the time being we would like to end the article looking at the long-term potential of the Company.
Equinix's growth has made it difficult to evaluate the real strength of the business model. Each time a new data center opens, costs associated with the ramp up of operations (employees, etc.) put a shadow on the Company's real performance.
Some of the slides prepared by Equinix for this quarter's call help put some numbers in perspective, both for the expansion rationale and the long term operating plan (emphasis added):



Chapter 11
2 Maggio 2004
Carpi - MO -
:) leggo leggo... Ho fatto anche qualche ingresso/uscita con piccoli gain ma poi sono rimasto incastrato. Adesso sono in parità e aspetto fiducioso.... :up:

Ciao e a presto!
il "problema" è che le quotazioni sono già di tutto rispetto, ed ovviamente molto dipenderà dalle condizioni generali del mercato. Dopo il c.c. diversi analisti hanno "sparato" target ambiziosi. Io sono a tre cifre... ;)

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