Equinix Completes ALOG Buyout - Analyst Blog
27 Avril 2011 - 8:20PM
Zacks
The leading global data center service provider Equinix
Inc. (EQIX) and private equity firm Riverwood Capital have
completed the acquisition of a 90% stake in ALOG Data Centers of
Brazil S.A. announced in February.
The transaction will cost Equinix approximately $127.0 million
in cash. Under the terms of the deal, Equinix will retain the
controlling interest in ALOG, with Riverwood getting a minority
stake.
Of the total contribution, Equinix has already paid $83.0
million, of which $68.0 million was for the acquisition and the
rest for providing additional capital to fund future data center
expansions.
ALOG serves almost 1,000 customers at two data centers in Brazil
and is currently building the third facility. Collectively, the
three centers are expected to comprise 67,000 square feet, with
capacity for 56,000 servers.
The Brazilian data center space will allow Equinix to cater to
the strong demand from its network, content, cloud and financial
services customers eyeing this rapidly growing market. This deal
reaffirms service providers’ preference for data centers in their
race to win market share. It also gives Equinix an opportunity to
tap the as yet unexplored Latin American market.
Post acquisition, Equinix will operate 95 data centers across 37
global markets and compete against Verizon Communications
Inc. (VZ). Recenly, Verizon expanded its data center
footprint in Latin America with the acquisition of
Terremark Worldwide Inc. (TMRK), an information
technology services provider and data center operator in the United
States, Europe and Latin America.
Equinix delivered an impressive fourth quarter, beating the
Zacks Consensus Estimates both in respect of revenue and earnings
per share. The company is increasing its investments in sales and
capex as it sees solid demand trends across all geographical
regions.
We believe that this activity will boost sales in the upcoming
quarters. The analysts are optimistic on the data center space
based on continued growth of IP and Internet traffic, which Equinix
can capitalize on.
Equinix is expanding its current facilities and client-base, and
is also exercising fiscal discipline. The new data centers kicked
off successfully, especially in Europe, and made a good
contribution to overall 2010 revenue growth. We believe that the
company has a decent line-up of new data centers for 2011. We are
also optimistic on its recurring revenue model and current
expansion plans.
Despite all the positives, we remain a bit apprehensive
regarding stiff competition from networking aces like
AT&T Inc. (T) and Verizon Communications Inc.
European exposure is also a cause for concern. Moreover, capex
growth could also impact near-term results.
Details of Equinix’s first quarter performance are expected
soon, with results scheduled to be announced after the market
closes on April 27, 2011.
Currently, Equinix has a Zacks #3 Rank, implying a short-term
Hold rating.
EQUINIX INC (EQIX): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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