Equinix Adds Frankfurt Data Center

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Data center provider Equinix Inc. (EQIX) is acquiring Frankfurt-based data center operator, ancotel GmbH. Financial terms of the deal were not disclosed.

The acquisition brings Equinix 2,100 square meters of data center space and adds 400 customers across Europe.

In Europe, most of the business infrastructures such as banking, commerce, transport and telecom are clustered in Frankfurt. This has created the need for data center hubs and hence, the region has turned into a popular business zone for Equinix. The company already operates four data centers across Frankfurt that extend superior colocation services and multiple connectivity and interconnection choices.

The acquisition of ancotel will further boost the strength of Equinix’ service offerings, and help the company to flourish in the EMEA (Europe, the Middle East and Africa) region. In the first quarter ended April 2012, Equinix generated strong revenues from the EMEA region, with particular strength in the U.K. and Germany despite the uncertain economic backdrop prevailing in Europe. Strong bookings from the region suggest continued revenue growth momentum. We believe that in such a situation, the acquisition of ancotel will be an added advantage.

Apart from this, Equinix is also spreading in the Asia-Pacific region. Earlier this month, the company took over six data centers and a disaster recovery center from Asia Tone for a cash consideration of $230.5 million.

Both the acquisitions are expected to be wrapped up by the third quarter of 2012. We believe that the acquisitions will be commensurate with the increasing demand for its data center support.

Equinix has delivered strong first quarter results and provided a decent guidance for the coming quarter and fiscal 2012. We believe that strategic acquisitions and international expansion will help it grow its client base, thus enhancing its revenue growth potential.

We are also optimistic about the company’s recurring revenue model. However, despite these positives, competitive pressures from the likes of AT&T Inc. (T) and Verizon Inc. (VZ) should not be ignored.

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

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