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Equinix Plans to Build New IBX, Expand in Netherlands

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Global data center service provider, Equinix Inc. (EQIX - Free Report) , recently announced its plan to build a new International Business Exchange (IBX) in Amsterdam. The new IBX infrastructure, which will be known as AM4, will be developed at the company’s existing Amsterdam Science Park campus.

As per the plan, Equinix will invest $113 million in the first phase of the project’s development, facilitating the accommodation of 1,555 cabinets. This will be followed by the company’s initiation of three more phases to increase the capacity to 4,200 cabinets. The total investment on AM4 project will amount to $189 million.

According to Eric Schwartz, president of Equinix, “Amsterdam has long been a key digital gateway and a significant piece of Equinix's global data center footprint. By moving IT to these sort of environments, businesses create a digital edge that increases performance and end-user experience, but also allows them to adopt to meet future needs. The addition of AM4 gives these businesses yet another way to interconnect in this key market."

The recent venture is in sync with the company’s $1 billion investment plan announced in Apr 2017. According to the plan, Equinix has declared to unveil five IBX data centers in Sao Paulo, Frankfurt, Amsterdam, Silicon Valley and Washington D.C., within this year. Apart from this, the company intends to expand 14 of its existing data centers.

Expansion in important markets and consolidation of facilities in existing ones has been an important part of Equinix's core strategy. The company consistently strives to boost its revenue base and profitability, by offering upgraded technology to clients. Moreover, the recurring revenue model has provided the much-needed support to the company's revenue stream over the years. The company's cloud and IT service businesses are its fastest growing segments and account for roughly one fourth of the total revenue.

Further, the company remains positive on the growing demand for data centers. To meet the rising demand for cloud services, this global interconnection and data center company is planning for global expansion and is gaining popularity among tech companies looking for data management. Thus, the company projects its total addressable market for retail data centers to increase at a CAGR of 8% from 2013–2017 and reach $24.0 billion. Based on this, Equinix projects revenue growth rate of 10% through 2017.

Thus, we believe that by expanding its data center assets, Equinix will be in a better position to capitalize on this opportunity. Furthermore, this expansion will help the company to fortify global footprint and rake in additional revenues.

Shares of Equinix have been steadily trading higher on a year-to-date basis. The stock generated a return of approximately 18.6% compared with the Zacks REIT-Equity Trust industry’s decline of 5.2% during the same time frame.

Currently, Equinix carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Applied Optoelectronics Inc. (AAOI - Free Report) , Broadcom Ltd. (AVGO - Free Report) and Applied Materials, Inc. (AMAT - Free Report) . Broadcom and Applied Materials, sport a Zacks Rank #1 (Strong Buy), while Applied Optoelectronics carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Optoelectronics, Broadcom and Applied Materials have expected long-term earnings per share growth rates of 18.7%, 13.6% and 16.6%, respectively.

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