In an effort to meet the rising need for data centers, Equinix Inc. (EQIX - Analyst Report) opened the second International Business Exchange (IBX) data center in downtown Seattle. This new SE3 data center has been strategically placed near Equinix’s SE2 data center, enabling existing customers to expand their operations at the same location.
The improvement in demand is also evident from the findings of independent research firms such as Gartner. According to this technology research firm, the total public cloud services market size is expected to increase from $91.4 billion in 2011 to $206.6 billion in 2016.
The emerging markets including India, Indonesia and China will see high growth rates. The increase in public cloud services would automatically increase data center demand.
Another data center industry tracker - “lifelinedatacenter.com” explains that in 2013, data center companies will face new technological challenges such as a growing demand for hybrid technology (a collaboration of private and public clouds), IT-as-a-service, wherein service providers will maintain cloud infrastructure within the data center, and remote employee access technology.The data centers may have to also work on improving the infrastructure.
Expansion in important markets and consolidation of facilities in existing ones has 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.
Although Equinix is using new marketing strategies and improving its technological base to attract more customers, a long sales cycle, high debt level and lower business potential in Europe may rationalize its growth prospects.
Equinix carries a Zacks Rank #2 (Buy). Investors can also consider other stocks such as Acme Packet Inc. and Arris Group Inc. (ARRS - Analyst Report) , which have a Zacks Rank #1 (Strong Buy) or CA Technologies (CA) , which has a Zacks Rank #2 (Buy).