Global provider of network-neutral data centers and Internet exchange services for enterprises, content companies, systems integrators, and network service providers Equinix Inc. (EQIX), is in the process of expanding its cloud computing service network in association with Voxel, a leading provider of hybrid Internet infrastructure.
Voxel has been an Equinix customer for the past 10 years. Presumably, the advantages of using Equinix’s International Business Exchange data centers have encouraged the company to offer its cloud services through them. The long association with Equinix has helped Voxel to grow its market in Washington D.C., New York, Silicon Valley, Amsterdam, Hong Kong and Singapore.
Equinix has seen continued momentum with its significant clientele and the resultant network effect within its 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), MSN and Yahoo! Inc. (YHOO) can save between 20% and 70% of bandwidth costs using the traffic exchange services offered by the company.
In addition, content companies and enterprises can save significant bandwidth costs due to the large number of networks housed within Equinix. Bandwidth cost reduction is an important factor that will help Equinix win new customers from the Information Technology, Software and Telecommunications markets.
Moreover, experts believe that cloud computing is one of the fastest growing markets in the world. Merrill Lynch estimates that this market will reach $160 billion by the end of 2011, while some others expect the market to reach $150 billion by the year 2013. As large and medium enterprises adopt cloud solutions, we will see new players entering the market, which will generate more opportunities but will also intensify competition in the market.
We believe this optimum combination of cloud computing services, with enhanced data centre facilities will generate more business for the companies in the days to come.
The company is expanding its current facilities and simultaneously exercising fiscal discipline. We are positive about its recurring revenue model, and the company’s current expansion plans, are positives. However, increased competition, industry consolidation, exposure in the European market and a long sales cycle remain concerns.
We maintain our Neutral rating on Equinix. However, the company has a short-term Zacks #4 (Sell) Rank.
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