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Analyst Blog

Data center provider Equinix Inc. (EQIX - Analyst Report) recently announced the opening of the first phase of its fifth data center in Zurich (ZH5). The company announced the construction of this data center in Apr 2012 to meet increasing customer requirements and growing demand for data centers in Switzerland.

The ready-to-use Phase-I of ZH5 is capable of housing 420 cabinets within a total space of 11,200 square feet. The ZH5 is interconnected with Equinix’ other Zurich data centers, ZH1, ZH2 and ZH4, through a fiber ring. With such a broad connectivity, customers will be able to connect with 90 network service providers, the Swiss Stock Exchange and two important Internet Exchanges (Equinix Internet Exchange and Swiss IX).

Following its completion, ZH5 will encompass 6,670 square meters (roughly 71,800 square feet) of space and adhere to the Gold LEED (Leadership for Energy and Environmental Design) standards. The Gold LEED certification is awarded to office buildings that are energy-efficient, have proper water efficiency, low CO2 emissions, enable proper conservation of materials and resources and run mostly on renewable energy.

Opportunities in the field of data centers are increasing and the company is trying to grab a major share of the pie. The company is exploring opportunities not just in Zurich but also in other parts of the world. Earlier this year, Equinix opened new data centers in Seattle and Singapore.

Expansion in important markets and consolidation of facilities in existing ones have been a part of Equinix’s core strategy. The company is continuously striving to boost its revenue base as well as profitability by improving its technology to attract more clients. Moreover, its recurring revenue model has provided the much-needed support to its revenue stream over the years.

But the delay in order renewals and competitive threats from the likes of AT&T Inc. (T - Analyst Report) raise our concern.

Equinix carries a Zacks Rank #3 (Hold). Investors can also consider other stocks in the technology sector such as Symmetricom Inc. carrying a Zacks Rank #1 (Strong Buy) and Calix Inc. (CALX - Snapshot Report) carrying a Zacks Rank #2 (Buy).

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