CHSI Catalyst Health Solutions, (MM)

Global data center solution and service provider Equinix Inc. (EQIX) recently announced that it has been selected by Rackspace Cloud to provide data center solutions. Equinix would be mainly responsible for customer-building and deploying private and hybrid clouds.

Enterprise customers now have the option of deploying Rackspace Cloud’s Private Edition in International Business Exchange (IBX) data centers located across the world. Equinix’s user-friendly platform is expected to provide customers the global reach, scalability, security, high availability, and better connectivity necessary for cloud application performance.

Equinix’s recent association with Rackspace is expected to help the later in efficiently managing its cloud infrastructure and will also help the company in efficiently enhancing its cloud based solutions. So it is evident that Equinix is slowly but surely building a position for itself in the cloud computing domain.

This apart, the company recently won a couple of deals. Firstly, TeliaSonera International Carrier, a global provider of cross-border IP and managed services, has selected Equinix to expand its offerings globally through 25 of Equinix’s IBX data centers in North America, Europe and the Asia-Pacific.

Secondly, the company secured a deal from Catalyst Health Solutions, Inc. (CHSI), a pharmacy benefit management services company in the U.S. The company has entered into a technical collaboration with Equinix to host critical business functions, including claims processing and data warehousing.

Equinix’s geographical diversity and preferred data destination among major players have resulted in high network density with a vertically focused approach, which will continue to support demand. Moreover, the combination of Switch & Data facilities will provide additional capacity in some markets & enhance pricing over time.

On the other hand, the oversupply of data centers has resulted in significant pricing pressures, while technological advancements that obviate the need for additional data center space, may act as a dampener for the company.

Equinix delivered mixed third quarter results with the bottom line missing our expectation despite the fact that revenue improved on a year-over-year basis. We believe further growth in the client base and strategic acquisitions will enhance the company’s revenue potential and expand its geographic reach.

Moreover, we are encouraged by Equinix’s effort to expand the current facilities and maintain its fiscal discipline. We are also positive about its recurring revenue model. Despite all the positives, competitive threat 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 holds a Zacks #3 Rank, implying a short-term Hold rating.

 
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