Data center major Equinix Inc. EQIX is in an expansion mode. The company recently revealed its plan to expand its operations in Dallas with the opening of a new International Business Exchange (IBX) data center later this year. This will enable Equinix to meet the growing demand for such services in the region.
Equinix had announced its plans to spend approximately $20 million to open its sixth IBX data center in Dallas covering a total area of approximately 40,000 square feet, which is anticipated to accommodate about 1,100 cabinets.
At the first phase the facility will accommodate about 300 cabinets while the remaining 800 cabinets can be accommodated by the second quarter of 2016. Once fully completed, the total colocation space and Equinix's total Dallas footprint will exceed 214,000 square feet.
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 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 colocation space, and there may be fewer networks available to choose from. In addition, increased utilization of existing colocation space could reduce the attractive expansion opportunities available to Equinix.
Currently, Equinix has a Zacks Rank #2 (Buy).
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