Equinix to Support Elastichosts - Analyst Blog
13 Mars 2013 - 7:09PM
Zacks
Data center deal wins continue for Equinix Inc.
(EQIX). This time the company won a deal from the cloud server
provider, Elastichosts.
Equinix’s International Business Exchange (IBX) data center in
Hong Kong will be supporting Elastichosts in providing its
easy-to-use, pay-as-you-go Cloud Servers to business houses across
Asia.
With the help of Equinix’s network density and rich cloud
ecosystem, Elastichosts plans to grow its business in the Hong Kong
region, along with other Asian markets such as Taiwan, China,
Singapore, and other ASEAN countries.
Given that the demand for data centers is increasing rapidly,
Equinix is slowly expanding its operations. To fund the expansion
plans and working capital requirement, the company made a public
offering of senior notes worth $1.5 billion (after deducting
issue-related expenses). This will give Equinix access to
sufficient funds.
Moreover, as per a recent research report published by
Gartner, the total public cloud services market size is
expected to increase from $91.4 billion in 2011 to $206.6 billion
in 2016. The emerging markets including India, Indonesia and China
will witness high growth rates.
The expansion plans have been a part of Equinix’s core
strategy. The company is continuously striving to boost its
revenue base as well as profitability by increasing its clientele.
Its recurring revenue model has provided the much needed support to
its revenue stream over the years.
On the other hand, Equinix faces problem with its longer sales
cycle. The company has to make a considerable effort to reduce its
turnaround time. A customer’s decision to license cabinet space at
one of its IBX centers and to purchase additional services takes a
lot of time. Moreover, the sales cycle has deteriorated further as
a result of the current macroeconomic conditions, as customers are
unable to accurately forecast their future business plans and are
therefore delaying their purchase decisions.
Although deal wins are adding to the company’s revenue, the high
debt level has resulted in the increase in interest costs. Despite
all the positives, competitive threats from the likes of
AT&T Inc. (T) raise our apprehension. European
exposure and industry consolidation are the other headwinds.
Equinix carries a Zacks Rank #2 (Buy). Investors can also
consider other stocks such as Arris Group Inc.
(ARRS) and CA Technologies (CA), both of which
have a Zacks Rank #2 (Buy).
ARRIS GROUP INC (ARRS): Free Stock Analysis Report
CA INC (CA): Free Stock Analysis Report
EQUINIX INC (EQIX): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
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