EQIX Equinix Inc

For Immediate Release

Chicago, IL – February 22, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Equinix Inc. (EQIX), AT&T Inc. (T), Verizon Inc. (VZ), Qualcomm Inc. (QCOM) and Apple Inc. (AAPL).

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Here are highlights from Tuesday’s Analyst Blog:

Equinix Adds Capacity in U.S.

Leading data center solutions provider Equinix Inc. (EQIX) announced its intention to set up a new 232,000 square foot customer floor space International Business Exchange (IBX) data center (DC11) in Washington, D.C.

The first phase of the IBX, which is scheduled to start operation by 2013, will cost $88.0 million. With a total work area of 42,800 square feet, the first phase of DC11 will accommodate 1,200 cabinets. The subsequent phases will allow the setting up of an additional 1,800 cabinets.

Apart from scheduling a new data center, Equinix also announced plans to proceed with the second phase of another local data center (DC10). Development costs are estimated to be $21.0 million, with the extension expected to be operational by March 2012.

The expansion was expedited upon sensing the high demand for Equinix’s colocation platform in the region. Washington, D.C. serves as the eastern hub of Internet traffic exchange in the U.S., and is therefore an important business area for Equinix. Increasing data exchange through Internet calls for the development of more data centers in the region. Now, with the tenth operating IBX and the eleventh one underway, it will be easier for Equinix to meet the growing business needs.

Equinix boasts a presence across various geographical regions and is increasingly becoming popular among major players in the tech industry. The company’s worldwide presence has resulted in high network density with a vertically focused approach, which will continue to support demand growth.

During the last quarter (fourth quarter 2011), the company witnessed substantial year-over-year revenue growth of 25.0% on solid geographical contributions partially offset by foreign exchange headwinds. The U.S. was the strongest of all the regions, with relatively strong growth.

In the Americas, the average monthly recurring revenue (MRR) per cabinet increased to $2,133 from $2,110 in the third quarter of 2011. In the Asia-Pacific, MRR per cabinet was $1,863, relatively flat with $1,868 in the previous quarter. In Europe, cabinet pricing decreased slightly to $1,199 from $1,210, on account of foreign exchange weakness.

We believe that the favorable pricing trend in the U.S. coupled with the planned expansion will boost revenue growth in the upcoming quarters. Apart from the U.S., Equinix is planning to capture share in the emerging markets. The company is now targeting China, India, Japan and Australia for further expansion.

We are also optimistic about the company’s recurring revenue model and future expansion plans. Despite all the positives, competitive threats from the likes of AT&T Inc. (T) and Verizon Inc. (VZ) raise our apprehension. European exposure and industry consolidation are also causes for concern.

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

Earnings Scorecard: Qualcomm

Qualcomm Inc. (QCOM) reported record first-quarter fiscal 2012 financial results, where both the earnings per share (EPS) and revenues exceeded the Zacks Consensus Estimates. The out performance was primarily attributable to the surge in demand for high-end 3G smartphones and tablets.

The company’s Snapdragon platform and product diversification strategy induced management to significantly raise the company’s outlook for the second quarter of fiscal 2012 and beyond.

First Quarter Highlights

On a GAAP basis, quarterly net income was $1,401 million or 81 cents per share compared with $1,170 million or 71 cents per share in the year-ago quarter. However, adjusted (excluding special items) EPS in the reported quarter came in at 85 cents, surpassing the Zacks Consensus Estimate of 81 cents.

Total revenue of $4,681 million in the quarter was up 40% year over year, and surpassed the Zacks Consensus Estimate of $4,569 million. During the first quarter of fiscal 2012, Qualcomm shipped approximately 156 million CDMA-based MSM chipsets, up 32% year over year and 23% sequentially.

Gross margin was 62.5% compared with 68.9% in the year-ago quarter. Quarterly operating margin was 33.1% compared with 37.3% in the prior-year quarter.

Agreements of Analysts

Of the eight analysts covering the stock in the last 7 days, seven analysts revised the estimates upward for the second quarter of fiscal 2012. Likewise, for the third quarter of 2012, all the seven analysts covering the stock raised their EPS estimates.

Similarly, for fiscal 2012, all the seven analysts covering the stock in the last 7 days raised the estimates. Likewise, for fiscal 2013, out of the eight analysts covering the stock, seven analysts increased the estimates.

Most analysts raised the EPS estimate on the back of increased penetration of 3G-based smartphones into the huge Chinese market. Moreover, the growing popularity of new Snapdragon S4 processors has made the analyst more bullish on the stock.

Currently, the Zacks Consensus EPS Estimate for the second quarter of fiscal 2012 is pegged at 85 cents. The projected annual growth is 9.74%. Similarly, for the third quarter of fiscal 2012, the Zacks Consensus EPS Estimate of 78 cents indicates an annual gain of 24.04%.

Magnitude of Estimate Revisions

During the last 7 days, the current Zacks Consensus Estimates for the second and third quarter of 2012 remained in line with the previous estimates of 85 cents and 78 cents, respectively. Likewise, for fiscal 2012 and 2013, the current Zacks Consensus Estimates were in line with the prior estimates of $3.35 and $3.78, respectively.

Earning Surprises

With respect to earnings surprises, the company’s consistent track record of beating the estimates in the last four quarters is expected to persist in the coming quarters. In the last quarter, Qualcomm outpaced the Zacks estimate by a whopping 6 cents or 7.59%.

No surprises are expected for the ongoing and the third quarter of fiscal 2012. EPS growth potential for fiscal 2012 is also at breakeven. However, in fiscal 2013, there is an upside potential of 1.32%.

Our Recommendation

We believe Qualcomm’s record-high earnings; strong balance sheet, huge product pipelines and better market segmentation by introducing chipsets for mid-tier and upper-tier smartphones and tablets segment will act as positive catalysts in the long run. Moreover, Qualcomm chipsets are recently being used in most CDMA-based iPhone 4S from Apple Inc. (AAPL) will further bolster the company’s top-line growth in the forthcoming quarters.

We maintain our long-term Outperform recommendation on Qualcomm. Currently, Qualcomm has a Zacks #1 Rank, implying a short-term Strong Buy rating on the stock.

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