Zacks_Analysts' Blog : EQIX-SDXC Merger Delayed - Analyst Blog

The proposed merger between the leading data center and network service provider company Equinix, Inc. (EQIX) and Switch & Data Facilities Co. (SDXC) has been delayed for another month. The companies applied to the Securities Exchange Commission (SEC), to extend the period for completion of the merger process. The merger process was scheduled to be completed within March 21 previously and is now being extended until April 21.



A few days back the shareholders of the Switch & Data Facilities Co. gave the final approval to move ahead with the merger plan, wherein more than 85% of Switch & Data's outstanding common stock holders participated in the vote, of which in excess of 99% were in favor.



Equinix and Switch & Data jointly made their merger announcement during October 2009. After the completion of the acquisition, Equinix is expected to gain access to Switch & Data Facilities’ 34 data centers in 22 markets in the U.S. and Canada. One million gross square feet of data center capacity, will be added to Equinix’s existing data center area, bringing the total global footprint to 79 data centers in 34 markets and more than six million square feet across North America, Europe and Asia-Pacific.



Equinix has made a number of acquisitions in the past that have added to its growth. In 2003, the company started expanding its data center aggressively through a series of acquisitions. Then the company acquired Virtu Secure Webservices B.V. in 2008. Virtu is a provider of network-neutral data center services in the Netherlands, so this acquisition was intended to expand the company’s operations in the European market.



Not only acquisitions, but the company is extending its business operations through partnerships as well. Recently the company announced a strategic partnership deal with a leading systems integrator for network and communications services Shanghai Data Solution Co., Ltd. (SDS), having its operation in Shanghai, P.R. China. Equinix customers will get similar level of reliable co-location services in China through the SDS data center, as they do within the 49 International Business Exchange (IBX) data centers operated by Equinix worldwide. This partnership is expected to provide Equinix with a strong foothold in the Chinese market.



Equinix has delivered encouraging fourth quarter numbers and provided a decent first quarter and fiscal 2010 guidance. The company is continuously increasing its client base and acquiring companies that could enhance its revenue potential and expand its geographic reach. It is also expanding its current facilities and at the same time exercising fiscal discipline.



We are positive about the company’s recurring revenue model and its expansion into the European market, which has very favorable characteristics. While we are happy with the company’s progress, increased competition, industry consolidation, huge debt, increasing interest outflow and a long sales cycle make us cautiously optimistic on the company.
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