Leading data center solutions provider Equinix Inc. (EQIX) announced the construction of its fourth International Business Exchange (IBX) data center, PA4, in the Paris metropolitan area.
The expansion will strengthen the company’s footprint in Europe and serve the growing demand for interconnection and colocation services in Paris and across Europe.
The company expects to add a total of 4500 cabinets by 2012. The construction will be in three phases, with the first phase aimed at building 1500 cabinets, expending $145.0 million. The entire development will be operational by the third quarter of 2012.
The new facility, which will leverage the latest energy efficient technologies and meet ISO9001 certification, will allow Equinix to continue meeting the strong demand for interconnection and colocation services in Paris. The first phase of Equinix’s PA3 data center, which opened in April 2010, is now effectively full, and the second phase is expected to be operational by the second quarter of 2011 and reach its full capacity by the time PA4 is set up.
We are also encouraged by Equinix’s expansion strategy in the Asia-Pacific region. In 2010, the company expanded its operations in Tokyo. Equinix constructed its second IBX data centre in Tokyo (TY2) and is planning to develop its third IBX data center (TY3). 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. TY2 IBX illustrates Equinix’s focus on this strategic market and its ability to add customer-driven capacity to its global platform.
Initial reports revealed that TY1 and TY2 are performing at their normal pace after the earthquake last Friday. But the recent radiation leaks at Japan’s Fukushima Daiichi plant are forcing foreign firms to shut down operations in the region. We think this could ultimately affect Equinix as well.
The company also announced its second IBX data center (HK2) in Hong Kong, which brings the total cabinet capacity in the region to 1,450. The expansion of its SY3 data center in Sydney and the third expansion phase of its SG2 center in Singapore further illustrate this point.
Equinix is expanding its current facilities and client-base and is also exercising fiscal discipline. We are positive about its recurring revenue model and current expansion plans. Despite all the positives, we remain a bit apprehensive regarding stiff competition from leading network providers such as AT&T Inc. (T) and Verizon Inc. (VZ). European exposure and industry consolidation are also causes for concern.
Equinix has a Zacks #3 Rank, implying a short-term Hold rating.
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