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Equinix Expands in South Korea With New Data Center in Seoul

Zacks Equity Research

Continuing with its ongoing global expansion, Equinix, Inc. EQIX announced a new International Business Exchange (IBX) data center in Seoul, South Korea. The carrier-neutral data center — SL1 — will provide interconnection and colocation services which will facilitate digital transformation initiatives and cloud adoption by businesses.

Specifically, the IBX data center will be situated in Sangam, popularly known as Digital Media City, in nearby Seoul’s central business district. In its first phase, the data center will offer nearly 18,000 square feet of colocation space. It is slated to open in third-quarter 2019with a capacity of 550 cabinets.

Notably, a study by Equinix indicated that the Interconnection Bandwidth capacity — a measurement of direct and private data exchange between businesses — is expected to witness a compound annual growth rate (CAGR) of 51% from 2017 to 2021 in Asia-Pacific. This will account for more than 27% of global Interconnection Bandwidth.

Having invested more than $800 million in organic growth in the Asia-Pacific region, over the past three years, the launch of the latest data center in South Korea will enable Equinix to take advantage for this trend. Further, the data center can enable the company’s customers to safely deploy infrastructure and increase exchange of private data between businesses globally.

Also, as Seoul is witnessing an increase in demand for carrier-neutral and network-dense data center services, expansion in the region is apt.

Admittedly, data-center REITs are experiencing a boom, with growing popularity of cloud computing, Internet of Things and big data, as well as the use of third-party IT infrastructure by several companies. In fact, demand has been outpacing supply in top-tier data-center markets. These markets are absorbing new construction at an accelerated pace despite enjoying high occupancy. This, along with an improved outlook for economic growth, will significantly aid data-center REITs such as Equinix, as well as Digital Realty Trust Inc. DLR, CyrusOne Inc. CONE, CoreSite Realty Corp. COR and others.

Currently, Equinix carries a Zacks Rank #4 (Sell).

You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The stock has depreciated 14.4% in the past six months compared to the 6.2% decline witnessed by the Real Estate industry.

While Equinix plans to add more data centers to meet the rising demand for co-location and interconnection services, this requires huge capital outlays. Amid rising interest-rate environment, increasing debt obligations will affect operating results as interest expense would flare up. 

Further, increasing consolidations in the telecommunication industry will likely result in lower demand for colocation space.

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