Equinix Inc. EQIX recently announced the opening of its first International Business Exchange (IBX) data center in Melbourne, Australia, named ME1. This is in line with the company’s announcement made earlier this month about opening five data centers in four continents. The new data center brings the company’s total count to 105 across 33 markets.
This is the company’s fourth data center in Australia, the other three being in Sydney. The more than 105,000 square feet facility can accommodate about 1,400 cabinets of which 375 are in the first phase of operation. Currently, the facility is offering its data center and interconnection services to more than 40 customers.
We believe that the new data center will expand the company’s footprint in Australia and address the rising demand for cloud services in the country. The increase in demand is also evident from the findings of independent research firm, Dimensional Research.
According to Dimensional Research, “85% of Australian enterprises are planning to deploy to multiple clouds within the next 12 months, 77% of which will use clouds operating in more than one country”.
Furthermore, another technology research firm, Gartner predicts that Asia-Pacific will witness the highest growth rate in the total public cloud services market and is expected to reach $7.4 billion in 2015, up 14.2% from $6.5 billion in 2014. Additionally, Gartner predicts that total cloud services spending in Asia Pacific and Japan will touch the $11.5 billion mark by 2018.
The Gartner report also revealed that the emerging markets, including India, Indonesia and China, will witness high growth rates while the same will remain consistent and stable in the mature markets such as Australia, Japan, New Zealand, Singapore and South Korea. The increase in public cloud services would automatically increase data center demand.
Expansion in important markets and consolidation of facilities in the existing ones has been 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. The company’s cloud and IT service businesses are its fastest growing segments and account for approximately one fourth of its 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 projects a 10% revenue growth rate through 2017.
Nonetheless, Equinix competes with established communications carriers such as AT&T T, Level 3 Communications LVLT and Verizon Communications VZ which also operate date centers.
Moreover, the telecommunication industry is currently undergoing consolidation. As customers combine businesses, they may require less co-location space, and there may be fewer networks available to choose from. In addition, increased utilization of existing co-location space could reduce the attractive expansion opportunities available to Equinix.
Currently, Equinix has a Zacks Rank #3 (Hold).
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