One of the first internet infrastructure companies to report earnings will be Equinix on Wednesday. Nortia Research has a nice writeup of the financials and expectations on the company, it is worth a read. I think it may be smart to pay attention to what Equinix says this quarter, because they represent one of the few bright lights out there given that they have largely maintained their valuation in a very tough environment.
They have earned that valuation by maintaining their focus, executing their business, and thus fulfilling or exceeding expectations (see Q1). The datacenter business has been hot, but not everyone is reaping the benefits yet. One only has to look at competitors Internap and Savvis to see how poor execution has been punished in the stock market over the last year despite expansion plans in favorable colocation/hosting market.
So if Equinix misses and warns of economic dangers ahead, then I think we’re going to be hearing alot of shrill voices from other internet infrastructure players in coming weeks. On the other hand, if they continue to plow ahead successfully, it may show that the headwinds in this sector haven’t gotten any worse and thus a recovery may be reasonable to hope for amongst others in the sector from Internap and Savvis on up to Level 3 – all of whom are trying to regain the trust of the market.
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Categories: Datacenter
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Rob,
I think Equinix is really going to be solid this QTR….I think they could really do well in tier II markets close to cheap power places like Pryor OK(where GOOG is building a DC)….
I expect them to do ok, but will remain cautious. I do wonder though, there is so much new datacenter space coming online in the next year, is it too much? Will it swamp demand?
>>I do wonder though, there is so much new datacenter space coming online in the next year, is it too much? Will it swamp demand?
This is THE question. Another data center glut?
Against this theory, the fact that many times the new space announced “coming available” suffers from a kind of double-counting (example, Main 365 wholesaling to Internap, reselling the space to SoftLayer and others in Chantilly – Washington DC metro; or similar situations involving Digital Realty Trust, etc.).
The credit crunch might also limit data center supply, as a few Companies will not really be able to finance new constructions from their cash flow.
Some of them might go for leasing turn key solutions from REITS, or the Equinix like.
Demand seems still quite good, and pricing is strong, at the moment.
Just a recent comment, slightly related, from IBM:
>>Cefola (Marketing Manager for IBM’s Site and Facilities Services) noted projections that 80 percent of data center operators will need to expand their facilities in the next two years.
“Nine out of 10 of our clients say they can’t build a data center fast enough,” said Cefola.
http://www.datacenterknowledge.com/archives/2008/Jul/21/ibm_containers_will_provide_instant_capacity.html
Time will tell. By the way, thanks for the quote and the very nice comment.
Paolo, I agree, I don’t have any actual indication that there is a datacenter glut in the immediate future, and I realize there is double counting – I have avoided trying to quantify the square footage for that reason. I was just expressing a wariness about the boom in buildouts, this industry tends to overreact sometimes, if you know what I mean…
Rob, what is the consensus on what Equinix is doing right and Saavis/Internap are doing wrong? I’m new to their stories, so I don’t have the background on the different execution plans…