Posted by: Peter Burrows on October 22, 2008
Equinix, the largest pure-play maker of data centers, announced plans to build two pricey new facilities today, along with solid quarterly earnings which rose 77% from the year before. The centers, in London and Singapore, will cost a bit over $300 million by the time they’ve been fully stuffed with serves and such in the next few years.
One might think such big-ticket expansions would be the sort of projects that would get delayed in these troubled economic times. But Equinix CEO Steve Smith says that try as he might, he’s just not seeing any slowdown in demand so far. “We’re going to be eyes wide open for the next few quarters, but the demand really has not changed so far,” he says. “In fact, demand could accelerate in some cases.”
Ironically, the clearest uptick is courtesy of beleaguered Wall Street. Obviously, huge volatility and trading volumes means lots of extra electronic transactions. And even troubled brokerages have to make sure they’ve got the fastest links to exchanges, so they get the best prices possible on their trades. Equinix is also seeing increased interest from other corporations, who would rather invest in their core business at times like these rather than deal with expanding or building new data centers of their own.
It seems Smith has something else going for him: luck. It just so happens the company has grown to the point of being able to fund its own expansions, just as credit markets are drying up. “We’re at an inflection point,” Smith says. “We’ll move into a self-funding situation in 2009.”
Clearly, the stock still has some detractors. But since there’s no question that the world is going to need a lot more data center capacity to support the great “cloud computing” future, being among the few that can afford to build new data centers is a good thing. And I’m talking not just about capital to buy land and build buildings, but some fairly hefty R&D investments as well to make sure they can be operated efficiently—say, with the lowest possible energy costs.