Zacks_Analysts' Blog : Equinix Secures Back-to-Back Deals - Analyst Blog

Global data center service provider Equinix Inc. (EQIX) has recently won a couple of new contracts, which will improve its pipeline considerably. First, TeliaSonera International Carrier, which is a global provider of cross-border IP and managed services, selected Equinix to expand its offerings globally through 25 of Equinix’s International Business Exchange (IBX) data centers in North America, Europe and the Asia-Pacific.

TeliaSonera’s customers can accelerate business growth by using the Equinix platform. This is because the platform is expected to protect their infrastructure from external threats and also help them place their assets and applications close to their target markets.

The company is of the opinion that this will particularly benefit media and gaming companies, which increasingly need to operate close to their end users in order to speed up content delivery and ensure optimal performance.

Another company Catalyst Health Solutions, Inc. (CHSI), a national level pharmacy benefit management (PBM) Services Company in the U.S., has entered into a technical collaboration with Equinix to host critical business functions, including claims processing and data warehousing.

As per this agreement, Catalyst will deploy different power grids at different Equinix International Business Exchange (IBX) data centers. This will help the company take advantage of the huge technical infrastructure of Equinix.

Equinix’s geographical diversity and preferred data destination among major players have resulted in high network density with a vertically focused approach, which will continue to support demand. Moreover, the combination of Switch & Data facilities will provide extra capacity in some markets & enhance pricing over time.

On the flipside, excessive data center creation has resulted in significant pricing pressures, while technological advancements that obviate the need for additional data center space, may act as a dampener for the company.

Equinix is expanding its current facilities and client base, and is also exercising fiscal discipline. The new data centers kicked off successfully, especially in Europe, and contributed strongly to the revenue growth in 2010. We believe that the company has a decent line-up of new data centers for 2011. We are also optimistic on its recurring revenue model and current expansion plans.

Despite all the positives, we remain a bit apprehensive regarding stiff competition from networking aces like AT&T Inc. (T) and Verizon Inc. (VZ). Moreover, capex growth could also impact near-term results.

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