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Google's ???450m Data Center Expansion

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Google Inc. (GOOG) recently announced expansion plans for its data center in Southern Finland to meet the fast-growing demand for Internet usage and data storage capacity.

The €450 million ($607 million) expansion will take place over the next few years and create 800 additional positions.

The data center is located in a former paper mill in the south-eastern town of Hamina on the Baltic Sea coast. Google purchased it in 2009 for €40 million and invested another €350 million on converting and equipping it. The center began its operations in 2011 and currently employs approximately 125 people. The data center uses sea water from the Bay of Finland to reduce its cooling costs.

The growing demand for cloud computing has increased the need for data center expansion. The data centers comprise computer servers that process everything from Internet searches to emails, inquiries to maps, videos and other services.

Google’s investment to expand its data center comes as no surprise given the need for more data-intensive services, such as Google search, Gmail, Google+ and YouTube in Europe. Currently, Google has 19 data centers worldwide, with 70 offices in more than 40 countries employing some 30,000 people.

The U.S. independent research firm, Gartner, predicts that datacenter hardware spending will most likely cross $126.2 billion in 2015. These technology warehouses are witnessing strength, as video streaming, smartphones and apps are boosting the demand for hard drives on which they run.

Google has done very well in the third quarter, with its earnings exceeding the Zacks Consensus Estimate due to solid growth in the core business, a growing digital business, good cost control and a lower tax rate. However, its ad technology has not kept up, leading to poorer ROI for advertisers, which has affected spending on Google platforms.

Currently, Google retains a Zacks Rank #3 (Hold). Other stocks that are performing well at current levels include Melco Crown Entertainment Limited (MPEL), Akorn Inc. (AKRX) and Northern Oil And Gas Inc. (NOG). All these stocks carry a Zacks Rank #1 (Strong Buy).

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