Equinix Offers $280M for Bit-isle to Boost Position in Japan Data Center Market
Inside Equinix’s SV5 data center in San Jose, California (Photo: Equinix)

Equinix Offers $280M for Bit-isle to Boost Position in Japan Data Center Market

Deal to add data centers in Tokyo, Osaka, and make Equinix Japan’s fourth-largest provider

Equinix, the world’s largest data center services company, announced earlier this week it has offered about $280 million to buy Bit-isle, one of its competitors in Japan. Both companies have data centers in Tokyo and Osaka. The acquisition, if closed, will bring the number of Equinix’s facilities in Tokyo to 10 and in Osaka to two.

The deal will also increase diversity of Equinix’s customer base in Japan and potentially put it in greater position to compete with some of its biggest rivals in Asia Pacific, according to market analysts. Equinix executives were not available for comment in time for publication.

This will be the second big acquisition Equinix will have made this year to strengthen its position in a foreign market. In July, the company announced a $3.6 billion offer to buy TelecityGroup, one of Europe’s largest data center providers, in a deal that would secure its lead in Europe.

Several other big acquisitions in the data center services space took place this year. NTT Communications Corp., one of Equinix’s biggest rivals in Japan, acquired a majority stake in German data center provider e-shelter in March. In June, Digital Realty, another big Equinix competitor in Asia, acquired Telx, substantially increasing its play on Equinix’s turf in the US.

Redwood City, California-based Equinix has had success providing data center space in Japan to multinationals based elsewhere, Kelly Morgan, research director at 451 Research, said in an email. “Bit-isle, by contrast, has had success with local Japanese firms, particularly systems integrators,” she said. “The deal will therefore broaden Equinix’s customer base in Japan and perhaps lead to cross-selling opportunities for space outside of Japan for multinational firms, as well as for the cloud exchange.”

Equinix’s cloud exchange is a platform through which its data center customers can buy services from cloud service providers globally. The cloud exchange provides private network connectivity to servers running cloud infrastructure services by Amazon, Microsoft, Google, and IBM. Private links to public cloud are important to enterprises because they bypass the public internet, making for a faster and more secure way to use those services. These connectivity services have emerged as one of the most important and rapidly growing revenue streams for Equinix.

If it goes through, the acquisition will create the fourth-largest data center operator in Japan, Equinix said in a statement. Its biggest rivals in the country are NTT and KDDI Corp., owner of the data center services giant Telehouse. Another major player is Internap Japan, a subsidiary of the Atlanta-based service provider.

In Asia Pacific, the fastest growing region for Equinix and all other data center service providers, Japan already contributes the biggest share of the Silicon Valley colocation firm’s interconnection revenue, the company said. While it has had success in the market, that success is not likely to have come easy, according to Jabez Tan, senior analyst at Structure Research. “The Japanese data center market has traditionally been a closed market and therefore tougher to penetrate from the perspective of an international data center provider looking to enter and establish a footprint there,” he said via email.

Physical proximity of Bit-isle and Equinix data centers in Tokyo and Osaka are likely to have been an important driver for the deal. “This greatly shortens time to lay down additional fiber infrastructure to interconnect Bit-isle’s data centers into Equinix’s and could potentially drive greater interconnection volume and revenue for Equinix in Tokyo and Osaka,” Tan said.

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