Zacks_Analysts' Blog : Equinix Expands in Brazil - Analyst Blog

Global data center service provider Equinix Inc. (EQIX) recently announced its intention of expanding operations in Brazil. The company also secured a couple of new contracts, which will likely improve its business volume in the coming quarters.

As per the recent disclosure made by the data center major, Equinix has opened its third International Business Exchange (IBX) data center in Brazil, based on the platform provided by ALOG Data Centers of Brazil S.A.

This newly developed data center (SP2) is ALOG’s second facility in the Sao Paulo metropolitan area, and is situated at Tamboré. ALOG also has operations in Rio de Janeiro. This new SP2 facility will provide approximately 400 cabinet equivalents, with a capacity expansion provision of 1,200.

The partnership between Equinix and ALOG is expected to benefit the former, as ALOG has a better knowledge of the Brazilian market and currently operates a leading carrier-neutral data center that serves around 1,000 local and international customers.

Following the declaration of the Brazilian expansion, the company announced that its NY4 data center has been selected by Orange Business Services - Trading Solutions, a company dealing in voice and electronic trading infrastructure and services, to enable direct market access to its trading partners in Brazil.

Moreover, Trading Solutions has already chosen the New York area and chose Equinix’s IBX NY4 data center in Secaucus, NJ, to extend its financial services network to Brazilian customers within 24 to 48 hours.

The company also won another customer, Omega ATS, the low-cost alternative trading system for Canadian exchange-listed equities and fixed income instruments. Omega has chosen Equinix to enhance its performance and enable them to connect to global services and trading partners. The ATS service was located in Equinix’s TR1 International Business Exchange (IBX) data center in Toronto.

Equinix boasts a presence across various geographical regions and is increasingly becoming popular among major players in the tech industry for data management. The company’s worldwide presence has resulted in high network density with a vertically focused approach, which will continue to support demand.

Equinix is expanding its current facilities and client-base, and is also exercising fiscal discipline. The new data centers were kicked off successfully, especially in Europe, and were accretive to the overall revenue growth in 2010. We believe that the company possesses a decent line up of new data centers for 2011.

We are also optimistic about the company’s recurring revenue model and current expansion plans. Despite all the positives, we remain a bit apprehensive regarding stiff competition from leading network providers, such as AT&T Inc. (T) and Verizon Inc. (VZ). European exposure and industry consolidation are also causes for concern.

Equinix has a Zacks #3 Rank, implying a short-term Hold rating.