Strong Euro Demand Drives IXEurope Deal

Demand for premium colocation space in leading European markets motivated Equinix to acquire IXEurope.

Demand for premium colocation space in leading European markets outpaces supply by a 6-to-1 ratio, executives of Equinix said today in a conference call with analysts to discuss the company's $482 million acquisition of IXEurope. "We've seen increasing demand from our U.S. customers for Equinix data center operations in Europe," said Equinix CEO Steve Smith, who said about a third of existing Equinix customers have expressed interest in European colo.

IXEurope has 280,000 square feet of data center space in 14 data centers, which are about 77 percent full, according to CEO Guy Willner. Most importantly, the company has new next-generation data centers under construction in London and Paris, providing short-term growth opportunities in the major European business centers.

In previous acqusitions, Equinix has invested in infrastructure upgrades to bring existing facilities up to the company's standards for its premium data centers. That won't be necessary in the IXEurope deal, according to Margie Backaus, the chief business officer of Equinix. "We don't anticipate putting any significant amount of CapEx into 'Equinizing' any of these facilities," she said.

Equinix conducts extensive demand research among its existing customer base, and has been cautious in pursuing opportunities in Europe. One reason is the different approach to peering and interconnections, which are a significant revenue source for Equinix in the U.S. In Europe, interconnections are settlement-free and managed primarily by non-profit exchanges.

But Backaus said IXEurope's customer base of 140 European network providers may provide other business opportunities, and be helpful in extending Equinix' financial data exchange business to Europe.