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Equinix to Expand Further; Announces $4.5B Plan for 2016

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It seems that the data center major, Equinix Inc. (EQIX - Free Report) , is firing on all cylinders to expand the business across different regions. Following last year’s initiatives, the company recently announced an aggressive expansion plan for 2016.

The company has targeted more than $4.5 billion investment this year in this regard which will include opening of data center openings, expansion of colocation space and acquisitions. This amount includes the acquisition price of $3.8 billion for Telecity which the company completed in January this year.

Equinix plans to open four data centers in Tokyo, Dallas, Sao Paulo and Sydney — bringing the total to 150 — this year.

Expansions in important markets and consolidation of facilities in the existing ones have been part of Equinix’s core strategy. The company is continuously striving to boost the revenue base as well as profitability through technological upgrades to attract more clients.

Notably, last year, the company opened five data centers in key economic centers, namely New York, London, Singapore, Melbourne and Toronto. The company currently operates 146 data centers across 40 markets globally.

Moreover, its recurring revenue model has provided the much needed support to its revenue stream over the years. The company’s cloud and IT service businesses are its fastest growing segments and account for approximately one fourth of the total revenue.

Equinix remains positive on the growing demand for data centers attributed to the Big Data exchanges. To meet this demand, the global interconnection and data center company is expanding its IBX data centers globally and gaining popularity among tech companies looking for data management.

Thus, the company expects its total addressable market for retail data centers to increase at a CAGR of 8% from 2013 to 2017 and reach $24.0 billion. Based on this projection, the company estimates 10% revenue growth rate through 2017.

Nonetheless, Equinix competes with established communications carriers such as AT&T (T - Free Report) , Level 3 Communications and Verizon Communications (VZ - Free Report) , which also operate data centers.

Moreover, the telecommunication industry is currently undergoing consolidation. As customers combine businesses, they may require less colocation space with fewer networks available to choose from. In addition, increased utilization of existing colocation space could reduce the attractive expansion opportunities available to the Zacks Rank #3 (Hold) company.

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