Data Center and Data Storage Industry Review: An Exclusive Interview with Jonathan Atkin, Award Winning Equity Analyst with RBC Capital Markets

Wall Street Transcript

67 WALL STREET, New York - September 19, 2012 - The Wall Street Transcript has just published its Data Hosting Centers and Data Storage Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Data Hosting Centers - Flash Memory - Cloud Computing Secular Trends - Internet Infrastructure Build - IT Consolidation Activity - Mobile Computing - Cybersecurity

Companies include: Equinix Inc. (EQIX), Cortex Pharmaceuticals Inc. (COR), Rackspace Hosting, Inc (RAX), Amazon.com Inc. (AMZN), Microsoft Corporation (MSFT), Google Inc. (GOOG), American Tower Corp. (AMT)

In the following excerpt from the Data Hosting Centers and Data Storage Report, an award winning equity analyst discusses the outlook for the sector and for investors:

TWST: What is your coverage in data and data storage?

Mr. Atkin: I cover the data centers, both REITs and the C-Corps.

TWST: What are the big trends in terms of data centers?

Mr. Atkin: It varies. Retail trends are robust, while wholesale trends are mixed. There are fewer barriers to entry in the wholesale segment. There is sporadic oversupply and pricing pressure in certain markets over certain periods. Historically, when that has happened, scarcity does return to the market, and so the markets that appeared oversupplied at one point right themselves over time. We are going through various parts of that cycle as it pertains to the REIT and the overall wholesale segment right now. Then in retail, I think the fundamentals are strong. Barriers to entry are higher. There's not a lot of overbuilding going on, which is what leads to oversupply, and pricing continues to be stable and even increasing in some regions of the world.

Another trend worth highlighting is the activity around REIT conversion. Equinix (EQIX) is evaluating this path. CoreSite (COR) converted prior to its public listing. And according to its S-1 filing, CyrusOne is evaluating this path as well. That is introducing a gradual convergence of the valuation metrics between what are historically EV to EBITDA stock to price to AFFO stocks. I think we are in the beginning of that process.

TWST: Is demand for data centers continuing?

Mr. Atkin: I have seen no letup in demand for colocation services, whether it's retail or wholesale. And companies are still, in some cases, newly adopting outsourcing and choosing to become data center tenants for the first time. Many are also repeat customers and are expanding their requirements. So I have seen no letup in that demand.

Hosting and cloud services are a separate segment. Rackspace (RAX) is the only pure play in that area. I would say that demand for that type of service is probably accelerating, whereas demand for colo is strong and stable.

TWST: Are we going to see more pure plays enter the cloud and hosting area?

For more from this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers, and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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