Equinix to Add Fourth Data Center in Zurich

Equinix, Inc. (EQIX) will expand its colocation footprint in Zurich, Switzerland by building a new data center adding 12,920 square feet (1,200 square meters) of high-density data center space. The facility will be the fourth in Zurich for Equinix, which said the new build was in line with its “continuing program of measured global expansion to meet demand.” The ZH4 center is expected to open in the second quarter of 2010 and will add approximately 500 cabinet equivalents.

“With its position as a strategic hub for network service providers and the financial services and media sectors, Zurich is an ideal market for Equinix’s data center colocation and interconnection services,” said Eric Schwartz, president of Equinix in Europe. “By investing in the construction of this new center in a market that has seen few recent data center builds, and at a time when demand continues to outpace supply, Equinix is signaling its strong commitment to this market and to building upon its leadership in the region.”

Debt Markets Open, Construction to Follow

The credit crunch has had a meaningful impact on data center supply, sidelining many projects that weren’t fully funded prior to the meltdown on Wall Street last fall. But the deep freeze in the credit markets appears to be thawing, as two leading colocation providers announced debt financing this week:

• On Monday Equinix (EQIX) announced plans to issue $250 million in convertible debt to “fund the development of expansion opportunities.” Interest in the offering was strong enough that Equinix wound up selling $325 million in debt, while granting an over-allotment to underwriters for another $48 million.
• On Tuesday Terremark Worldwide (TMRK) announced plans to borrow $400 million through a private debt placement. The company will use the funds to repay $258 million in existing debt and make “capital investments to build out facilities and acquisitions of complementary businesses.”

As we’ve noted, the supply of data center space is getting tight in some key markets. Now that expansion-minded colocation providers are able to raise money through the debt markets, we can expect to see new construction soon. Data center REITs Digital Realty Trust and DuPont Fabros previosuly raised debt financing this spring. These companies, along with Equinix and Terremark, are well known to lenders and have a serious track record in building and filling data centers, and thus good candidates to serve as “icebreakers” for the data center industry in the credit markets. In the short run, this market access will likely extend the “incumbent advantage” for these veteran players in the data center industry, allowing them to build while smaller and newer players must wait for the credit crunch to ease further - a development we predicted back in March 2008.

The Internet’s Busiest Intersection

The cages housing customer equipment inside an Equinix data center.

The Internet is ultimately about connections - one computer connecting to another to display a web page, and networks connecting to move the data across the web. The exchange points where these networks meet are some of the most valuable data center real estate in an information-driven world.

The busiest of these Internet intersections is a campus in Ashburn, Virginia housing five large data centers operated by Equinix Inc. Massive volumes of digital traffic flow between the nearly 200 networks that meet inside these buildings. These are the hubs powering the digital economy, and the strategic focal point for Equinix, which has built a prosperous business helping companies avert Internet traffic jams.

The central role of Equinix is noted by one of its co-founders, Jay Adelson, who is now CEO at Digg. On his profile page, Adelson notes that Equinix, “if shut off, would screw up the Internet.” 

Equinix hosts most of the infrastructure for Digg and Salesforce.com, and provides colocation and interconnection services to a lengthy list of marquee customers, including Google, Yahoo, IBM, America Online, Akamai, Electronic Arts, GE and Merrill Lynch.

Network Meeting Place
Equinix data centers are where these companies make the physical connections between their networks, usually through traffic-swapping agreements known as peering. Any interruption in that high-speed bitstream would quickly ripple across the Internet. 

That’s why the company’s data centers are supported by the industry’s sturdiest power and cooling infrastructure, with several levels of redundancy built into each system to ensure that power failures won’t knock servers offline. Visitors to Equinix data centers must pass through five layers of biometric security between the street and the servers. (See our video tour offering a look inside an Equinix data center). 

Why is Ashburn, which lies about 30 miles west of Washington, such an important site? The Equinix campus is just north of a former UUNet facility that was a key hub in MAE-East, the Internet’s first major interconnection point. Equinix built its first data center here in 1998, providing a “carrier-neutral” facility where companies could gain access to Internet backbones operated by UUNet and AT&T.

Inside an Equinix Data Center

Equinix has built a reputation for engineering its data centers for reliability. The company says its U.S. data centers reached “six nines” of reliability (99.9999 percent uptime) for 2008. That track record has attracted more than 2,200 customers hosting mission-critical equipment in the company’s data centers. The Equinix uptime strategy is built atop a redundant power and cooling infrastructure. During a recent visit to Equinix in Ashburn, Virginia, we had a chance to look inside one of the company’s newer data centers. We couldn’t film the cages or racks, but were able to have a look at much of the mechanical and electrical infrastructure supporting the site. This video runs about 2 minutes, 20 seconds.

For additional information, check out our Equinix Channel. For additional video, check out our DCK video archive and the Data Center Videos channel on YouTube.

Equinix Offers $250M in Convertible Debt

Is Equinix (EQIX) ready to start building again? The colocation and interconnection specialist announced plans to issue $250 million in convertible debt to “fund the development of expansion opportunities.” Shares of Equinix fell $4.15 to close at $71.76, a decline of 5.5 percent.  

Equinix also said it was taking steps to address concerns about potential dilution in its common shares in the event the subordinated notes are converted into common stock. The company said it was using a hedging strategy known as a “capped call transaction” with underwriters to reduce potential dilution upon conversion of the notes. Citi, J.P. Morgan Securities Inc. and Goldman, Sachs & Co. are acting as joint book-running managers for the offering.

In the company’s first quarter conference call, Equinix executives said they are continuing plans to build out expansion space in the New York, Los Angeles and Chicago markets, where the company is feeling capacity constraints. Equinix currently has no new construction underway in the Silicon Valley and northern Virginia markets.

Equinix Remembers Co-Founder Avery

Colocation and interconnection provider Equinix (EQIX) issued the following statement Sunday night:

“It is with sadness that Equinix announces that Al Avery, one of the co-founders of Equinix, has passed away. Al, who retired from Equinix in 2003, had been diagnosed with pulmonary fibrosis and had recently received a lung transplant. He battled this illness valiantly, but passed on peacefully earlier this week with family at his side. Al and Jay Adelson started Equinix in 1998 when they worked together as facilities managers at Digital Equipment Corporation (DEC), where they developed the idea for a Neutral Internet Exchange (NIX) to create a physical place for networks to exchange critical information. Their critical work helped the Internet grow and today, the company Al helped build is the home to the mission-critical infrastructure of over 2,300 customers, many of which are vital to the information-driven world. Equinix has Al’s legacy to thank. A memorial service will be held at a later date. Donations can be made in Al’s name to the Pulmonary Fibrosis Foundation.”

Equinix Opens Secaucus Expansion

Equinix has opened the second phase expansion of its huge New York-4 (NY4) data center in Secaucus, New Jersey, which will add space for an additional 1,100 cabinets, the company said today. The company said the $82 million expansion is already 50 percent booked, reflecting the strength of the the New York/New Jersey data center market.

“In the New York area, we continue to see strong customer demand, especially from the financial services market, even in the face of a challenging economy,” said Steve Smith, president and CEO of Equinix.

Tenants moving into the new expansion space at NY4 include financial data specialist ACTIV Financial and fast-growing market provider Direct Edge, two of the many participants in the Equinix Financial eXchange. At Equinix, these companies can optimize their electronic trading operations by directly exchanging data with strategic partners, customers and vendors. The Financial eXchange provides access to a broad range of data center services and high-performance network connectivity providers.

Equinix: ‘Significant Pickup’ in March

Colocation and interconnection specialist Equinix (EQIX) saw a “significant pickup” in customer activity in the month of March, as customers that had deferred decisions made commitments. Company executives discussed their first-quarter performance yesterday in a conference call with analysts.

Equinix said that many of the colocation deals in March were with companies that had considered leasing space in the fourth quarter of 2008 but had postponed decisions due to the uncertain economy. 

“I think we started to see confidence show up back with decision makers back in March,” said Equinix President and CEO Stephen Smith. “I wouldn’t tell you that we’ve seen a trend here, but we feel good about what the pipeline’s showing us and we feel good about some of the decisions that weren’t made in the fourth quarter that did get made in the first quarter. So there’s a lot of positive signals here, but we’re early days into this thing.”