Last night, Equinix (NASDAQ:EQIX, news, filings) did something they rarely do, they lowered revenue estimates for the third quarter and the full year. The company says it underestimated churn as well as discounting to secure longer term contract renewals, plus a dip on revenues from the assets acquired from Switch & Data. In July they had projected revenues to come in at $335-338M, but now see them 2.2% lower at $328-330M, while for the full year they cut back their forecast of $1.225-1.235B to $1.215B. Equinix's plans this year have been grand, with buildouts and initiatives all over the globe even while consolidating a rather large acquisition.
On the brighter side, they did raise third quarter and full year EBITDA to $140+ and $540M, up from forecasts of $136-139M and $535-540M. That didn't do much to console traders after hours, who sold off the stock - not to mention those of neighbors Savvis (news, filings) [a subsidiary of CenturyLink (NYSE:CTL, news, filings)] , Rackspace Hosting (NYSE:RAX, news, filings), Terremark (news, filings) [a subsidiary of Verizon (NYSE:VZ, news, filings)] . However, it is far from certain that there is a sector-wide trend here. Equinix has been gaining ground for so long that we often forget that sometimes the competition may get a turn now and then. The initial market reaction seems a bit of overkill though. While Equinix's stock has been hot for the last few months, it was rather cold for before that.
Honestly, part of the problem here is that Equinix offers such tight guidance ranges, they leave little room for error. Their guidance range is so very tight, even for a very predictable business. Perhaps they will come back next year with a bit wider goalposts? Of course, then it's harder to beat guidance as well, which is something they usually enjoy doing.
It does demonstrate that Equinix's purchase of Switch & Data did not damage competition in the sector, if anything it is increasing. All that space that has been getting built since the credit markets thawed last year is having an effect, overtaking demand briefly here. Equinix has been building more than its share of it too.
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