Sometimes it's nice to have an "800-pound gorilla" as a customer. It's even better to have two of these huge companies as customers. But what happens if the two 800-pound gorillas merge? That's an important question in light of Microsoft's $44 billion bid for Yahoo (YHOO). Several publicly-held companies in the data center sector do big business with both Microsoft (MSFT) and Yahoo, to the extent that the two companies add up to half their revenues. Here are a couple of examples:
- Rackable (RACK) gets 57 percent of its revenues from its top three customers, which are Microsoft, Yahoo and Amazon (AMZN), with Amazon assumed to represent the smaller chunk of the three. Rackable's focus on DC power and energy-efficient servers has helped it gain traction among companies with the largest server farms. Its customer base has become more diverse with the emergence of Amazon's utility computing operation and the growth of Facebook, another large customer.
- Microsoft and Yahoo represent about 60 percent of revenue for DuPont Fabros (DFT), the data center real estate investment trust (REIT) focused on the northern Virginia market. The bad news: Microsoft's proposal envisions integrating the two companies' infrastructures. The good news: DuPont Fabros has long leases with its customers, as its average remaining lease term is 8 years. Its premium facilities are located in one of the nation's hottest geographic markets, and even in worst case scenarios, the company would have little trouble filling any empty space.
Will the merger of Microsoft and Yahoo create a 1,600 pound gorilla, or a slimmer entity that seeks to put its partners and vendors on a diet as well? These two companies will be watching closely, and they won't be the only ones.
