Last week industry bellweather Equinix (NASDAQ:EQIX, news, filings) warned of a revenue shortfall, and the entire sector shivered. The question was whether or not the datacenter business was about to take a bit of a breather, with growth slowing down, prices softening, etc. But a report today from Telegeography suggests its all bunk.
Well, Telegeography didn’t say that outright. What they said was that colocation capacity has been struggling to keep up with demand. From mid-2009 to mid-2010, the number of facilities filled to 80% of capacity rose to some 41%. Despite all that building going on, all that extra space built out – operators had less available space than they did at midyear 2009.
What does that mean? Well, at least at the colocation level there is no glut. Perhaps Equinix’s troubles really do come down to a bit of timing.
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Boy, much has been made of a 2.2% revenue shortfall against a forecasted number. Like you said previously, they probably need to forecast w/a wider range. EQIX looks attractively valued to me at 8-9X EV/EBITDA.
The issue for Equinix was the slowed sales and the unexpected churn. Both can be attributed to Equinix cutting the indirect channel programs. Agents are moving customers that they can to other collocation providers.
There is still huge supply for data center space. It’s just that Equinix screwed the pooch on this one.
Call me skeptical, but I don’t see many customers w/an EQIX-sized budget switching data centers due to an Agents suggestion. Doesn’t make sense to me given the high switching costs involved.
Curious, do you know what % of revenue the indirect channel is responsible for @ EQIX? Did they eliminate the indirect channel altogether or merely cut back on the comp for Agents?
I assume the Agents are moving those in their funnel to different providers, hence the view of the revenue decline in their forecast. Couple that with Equinix’s high rates and a wealth of higher end competitors (TelX, Digital Realty, CoreSite) smarter shoppers have more to choose from.