Equinix On Deck for Q3

October 21st, 2008 by · 2 Comments

On Wednesday after the market closes, datacenter provider Equinix (EQIX) will report earnings and once again will give us an initial look at the rest of the sector.  If you recall, last quarter Equinix had one of the strongest quarters in the internet infrastructure sector, beating estimates handily and increasing its 2008 guidance.  Indeed, the colocation space has been on a tear all year, with most participants being well funded and engaging in massive buildouts to meet a raging wildfire of demand.

But the game has changed for everyone about a month ago with the implosion of the credit markets, and the effect on this sector remains unclear.  Here is Equinix’s guidance within the context of the rest of the year:

Q1 Q2 Q3(est) Q4(est)
Revenue $158M $172M $180-184M $186-200M
Gross Margin 61.0% 61.6% ~61% ~61%
Ebitda $62.3M $69.1M $70-74M $75-$85M
EPS $0.15 $0.06
Capex $125.6M $84.5M $125-130M $110-125M

Frankly, given the advance sales of newly opened space and the healthy demand thus far, Equinix’s revenue and EBITDA guidance seems entirely reasonable.  While I doubt they will raise their targets yet again, I don’t see a reduction as that likely either.  Their gross margin is unlikely to vary much since there is no indication of pricing pressure in the sector.  Their earnings per share are still small enough in magnitude that they can be impacted heavily by currency fluctuations, and I don’t pretend to have a clue what those numbers will be this quarter nor does the company give guidance.

However, those capex numbers are huge and are what may have to change.   After all, if the credit markets remain this tight, they can’t possibly keep spending at such a level.  Of course, their ongoing capex needs are much smaller, on the order of 10% of revenue.  All the rest represents their vast expansion plans, and it is those that will require further funding or else be reduced in scope.  The company likely has enough cash to handle its current expansion plans, but it will be interesting to hear what they have to say about what happens next.  If I had to guess though, I’d say they’ll express caution just like everyone else probably will.  After all if their customers slow down their own buildouts to save cash, then their current expansion plans may not need an immediate followup.

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Categories: Datacenter · Financials

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2 Comments So Far

  • Alfred J. Beljan says:

    how many square feet of data center space does Equinix run (own) – is this spece comparable to the 6 Million SF that LVLT has??

  • Rob Powell says:

    First let’s take that LVLT number and cut it in half, the first half being actual colocation/datacenter space as opposed to amplifier huts, regen facilities and various other space LVLT uses for its own purposes but lumps into the raw footprint size you mentioned. Equinix has over 3M square feet in service, although I don’t have an exact number – so they are comparable in raw size though rather different in customer focus.

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