Global provider of network-neutral data centers and Internet exchange services, Equinix Inc. (EQIX) is expanding its operations in Tokyo, Japan. The company has recently announced that it has plans to build its third International Business Exchange (IBX) data center in Tokyo, and christen it TY3. The $70.0 million, 79,600 gross-square-foot TY3 IBX data center is expected to be completed in mid-2011.
The data center will provide space for 960 cabinets to data centric industries, including cloud and IT service providers, as well as online content and financial market participants running businesses in Japan. The data center will provide security, environment control and power to end customers. This apart, it will also provide direct fiber connectivity to two other data centers, namely TY1 and TY2.
The sprawling network and interconnection services to strategic customers will help financial service players trade efficiently.
Of late, the company has been focusing on Japan and expanding its operations to grab market share in the country. Before the recent TY3 expansion, the company announced growth at its second IBX data center, TY2, in Tokyo. This expansion will strengthen the company’s footprint in Tokyo and serve the growing demand for data center services. The company expects to add 140 cabinets at a cost of $9.0 million by the fourth quarter of 2010. Upon completion, the total number of cabinets in Tokyo will reach 1,600.
Tokyo is a strategic market for Equinix due to the region’s access to bandwidth cable systems, and is regarded as the dominant market with respect to emerging wireless Internet access technology and networks in Asia. The TY3 IBX illustrates Equinix’s focus on this strategic market and its ability to add customer-driven capacity to its global platform.
Equinix has seen continued momentum with its significant clientele and the resultant effect on its network within the IBX centers. The Equinix exchange facilitates interconnection and peering via an Ethernet central switching fabric. Networks such as AT&T (T), British Telecom, Cox Communications and Japan Telecom, as well as content providers such as Electronic Arts (ERTS), Google Inc. (GOOG) and Yahoo! Inc. (YHOO) can save between 20% and 70% of bandwidth costs using the traffic exchange services offered by the company.
Equinix is increasing its client base and acquiring companies that could enhance its revenue potential and expand its geographic reach. We are encouraged by Equinix’s efforts to expand the current facilities, while at the same time exercise fiscal discipline. We are positive about the company’s recurring revenue model. However, increased competition, European exposure, industry consolidation and a long sales cycle are causes for concern.
We maintain our Neutral rating on the shares with a short-term Hold rating (Zacks #3 Rank).
EQUINIX INC (EQIX): Free Stock Analysis Report
ELECTR ARTS INC (ERTS): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
YAHOO! INC (YHOO): Free Stock Analysis Report
Zacks Investment Research
