EQIX Equinix Inc

Leading data center solutions provider Equinix Inc. (EQIX) announced the opening of its fifth International Business Exchange (IBX) data center in Dallas, Texas. The opening marks the first phase of the company’s two-phase expansion plan and is expected to strengthen its footprint in the U.S. It will also serve the growing demand for interconnection and colocation services in Dallas, the fourth largest metro in the country.

The company has added a total of 450 cabinets in the first phase, expending roughly $25.0 million. In the following and final phase, Equinix will add another 450 cabinets. The second phase of the IBX data center will provide Equinix’ Internet Exchange and Carrier Ethernet Exchange. The features will facilitate local users in the performance of public and private peering through the Internet. Intercommunication among Ethernet buyers will also be made easier.

Dallas has been a hub of telecommunication companies and Equinix sees a lot of business opportunity in the city. the company’s peering and interconnection services have witnessed strong demand in this region. We believe the new center will further boost demand while securing revenue growth in the U.S.

We are also encouraged by Equinix’ expansion strategy in Europe and the Asia-Pacific region. In March, the company announced the construction of its fourth IBX data center, PA4, in the Paris metropolitan area. In Tokyo, after the success of its first IBX data center (TY1), it built the second one (TY2) last year. Equinix plans to develop the third IBX data center in Tokyo, given its access to bandwidth cable systems and dominant market position with respect to emerging wireless Internet access technology and networks in Asia.

Initial reports revealed that TY1 and TY2 were performing at their normal pace after the recent earthquake. But radiation leaks at Japan’s Fukushima Daiichi plant are forcing foreign companies to shut down operations in the region. We think this could eventually affect Equinix as well.

Equinix is expanding its current facilities and client-base, and is also exercising fiscal discipline. The new data centers were 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 about its recurring revenue model and current expansion plans. Despite all the positives, we remain a bit apprehensive regarding stiff competition from leading network providers, such as AT&T Inc. (T) and Verizon Inc. (VZ). European exposure and industry consolidation are also causes for concern.

Equinix has a Zacks #3 Rank, implying a short-term Hold rating.

 
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