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Equinix (EQIX) Opens 5th IBX in Sau Paulo, Expands in Brazil

Global data center service provider, Equinix Inc. EQIX recently announced that it has opened the fifth International Business Exchange (IBX) data center – SP3 – in Sao Paulo, Brazil. The new center will enable the company to meet growing demand for data center services in the region.

Notably, Equinix has spent $69 million for the SP3 IBX data center which spans across an area of 215,000 square feet. This enables the company to proceed aggressively with its plan of developing data centers across different geographies.

In the first phase, the SP3 data center provides a total capacity of 725 cabinets and has provision to add another four phases. Upon completion of all phases, the facility will provide a total capacity for 2,775 cabinets.

Including SP3, Equinix now operates five data centers in Brazil, of which two are located in Rio De Janeiro and three in Sau Paulo. Upon completion of data center assets buyout from Verizon Communications VZ, Equinix will add one IBX in Sau Paulo.

Notably, the two companies entered into definitive agreement on Dec 6, 2016, under which Equinix agreed to acquire Verizon’s 24 data center sites, consisting of 29 data center buildings across 15 metro areas, for a total cash consideration of $3.6 billion. The deal is likely to close by mid-2017.

Expansion in important markets and consolidation of facilities in existing ones have been an important part of Equinix's core strategy. The company consistently strives to boost its revenue base as well as profitability, by offering upgraded technology to clients. Moreover, the recurring revenue model has provided much-needed support to the company's revenue stream over the years. The company's cloud and IT service businesses are its fastest growing segments, and account for roughly one fourth of the total revenue.

Further, Equinix remains positive on the growing demand for data centers. To meet the rising demand for cloud services, this global interconnection and data center company is expanding its IBX data centers globally, and gaining popularity among tech companies looking for data management. Thus, the company expects its total addressable market for retail data centers to increase at a CAGR of 8% from 2013 to 2017 and reach $24.0 billion. Based on this, Equinix projects revenue growth rate of 10% through 2017.

However, Equinix has to compete with established communications carriers such as AT&T T and Level 3 Communications LVLT, both of which operate data centers.

Moreover, the telecommunication industry is currently undergoing consolidation. As customers combine businesses, they may require less colocation space with fewer networks available to choose from. In addition, increased utilization of existing colocation space could reduce the attractive expansion opportunities available to the company.

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Equinix, Inc. (EQIX): Free Stock Analysis Report
 
AT&T Inc. (T): Free Stock Analysis Report
 
Level 3 Communications, Inc. (LVLT): Free Stock Analysis Report
 
Verizon Communications Inc. (VZ): Free Stock Analysis Report
 
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