(EQIX) Equinix Sells 16 Data Centers

It is difficult these days for companies to operate without data centers. However, surplus availability of data centers has somewhat affected the demand for data centers in recent times.

San Francisco-based data center developer 365 Main Inc. has announced the purchase of 16 data centers from Equinix (EQIX) in 16 markets across the country.

The sale enables Equinix to streamline its business and possibly consolidate some of the existing operations into a new data center in Seattle to open early next year.

Equinix is selling the 16 data centers for a total purchase consideration of roughly $75 million. 365 Main will utilize this full set of data centers to serve a range of corporate customers.

Equinix’s John Churchill has joined 365 Main as the vice president of sales. Also, three other employees from Equinix — Ross Warrington, senior director of operations; Rene Vazquez Rivera, director of operations in the East; and Jason Kiser, director of operations in the West — joined 365 Main’s executive team.

Equinix’s worldwide presence has resulted in high network density with a vertically focused approach, which will continue to support demand.

The need for data centers has increased over the years and demand has grown with the growing popularity of Facebook (FB) and Twitter. This remains a long-term driver of Equinix’s business.

The data center market received a blow in recent times when there were multiple bank failures. A lack of balance in demand and supply could see this happening yet again.

While we remain optimistic about the company’s recurring revenue model and expansion plans, competitive threat from the likes of AT&T Inc. (T) and Verizon Inc. (VZ) should not be discounted. European exposure and industry consolidation are also causes for concern.

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