DCK Must Know: Top Data Center News This Week – August 6, 2021

Switch mulls REIT status, closes earnings season with QTS and Iron Mountain; Vantage makes zero-carbon pledge; and more.

Yevgeniy Sverdlik

August 7, 2021

8 Min Read
IT engineers

Welcome to the week’s roundup of all the biggest news in the data center industry, curated, distilled, and put in context by Data Center Knowledge.

Switch Exploring Potential REIT Conversion

Switch and Elliott Investment Management, the data center provider’s largest Class A shareholder, are taking a close look at the company’s financial structure, exploring a REIT conversion as one of the potential outcomes of the review.

Elliott, a well-known activist investor, holds 11 percent of Switch Class A shares. As part of the process being kicked off, Switch plans to add Elliott portfolio manager Jason Genrich to its board of directors. He will be one of four Switch directors on the REIT committee evaluating the conversion.

  • Some of the largest US-based data center providers operate as REITs, including Equinix, Digital Realty, CoreSite, QTS, CyrusOne, and Iron Mountain.

  • REITs don’t pay corporate taxes in exchange for an obligation to pay out dividends to their shareholders, who then pay taxes on those dividends.

  • Switch stock rose sharply on the announcement of the review Friday, jumping from roughly $20 to $25 per share.

  • The company went public in 2017, with the opening IPO price of $17 per share and a $4.2 billion valuation.

  • Switch reported second-quarter earnings Thursday (see results below).

QTS, Iron Mountain, Switch Report Solid Q2 Earnings

The US-based publicly traded data center operators’ 2021 second-quarter earnings season is now complete. QTS, Iron Mountain, and Switch reported their results this week, following last week’s reports by Equinix, Digital Realty, CyrusOne, and CoreSite.

All three operators that reported this week had a solid quarter, with healthy revenue growth. (Numbers in the chart below)

  • This is probably the last earnings report we’ll see from QTS, which is in the process of being acquired and taken private by Blackstone. Shareholder approval of the acquisition is still pending, with a vote scheduled for August 26. If the approval is secured, the deal is expected to close before the end of the third quarter.

  • “We believe the announced acquisition of QTS by Blackstone represents a strong return for shareholders while positioning QTS to achieve our strategic objectives in our next phase of growth,” QTS CEO Chad Williams said in a statement.

Iron Mountain’s numbers in the chart below reflect the entirety of its business, which in addition to a growing data center operation also includes the document storage and management services the now seven-decades-old company is best known for. (Iron Mountain is celebrating its 70th anniversary this month.)

  • Iron Mountain doesn’t break out revenue from its data enter business. The company, however, said its data center revenue grew 15.3% year over year in the second quarter.

  • Iron Mountain said it signed 12.6MW in leases during the quarter and now expects to have leased more than 30MW in the full year. Its previous data center leasing guidance for 2021 was 25MW to 30MW.

A couple notes on the Switch numbers in the chart:

  • Switch isn’t a REIT yet, so FFO per share isn’t reported.

  • The revenue number doesn’t include Data Foundry’s revenue for the quarter, which was $3.3 million. Switch closed its Data Foundry acquisition in early June.

 Q2 2021

dc earnings q2 2021

Dropbox Says Energy Powering Its Storage Servers Is 100% Renewable

Dropbox announced that the energy used by storage servers in its data centers is now “covered by 100% renewable electricity.”

It’s unclear whether that 100% is achieved through offsets, renewable energy credits, purchases of energy that powers facilities directly on the local grids, or a combination of all three. (A combination is the most likely scenario.)

  • Dropbox said it’s making “significant investments to procure renewable energy” this year.

  • Last year it committed to sourcing 100 percent renewable energy for all its operations and achieving carbon neutrality for scope 1, 2, and 3 business travel emissions by 2030.

  • Complicating matters on the data center side of things is Dropbox’s reliance on a mix of on-prem data centers and cloud services. It has to negotiate with its data center providers and cloud operators region by region to get renewable energy to each site.

  • Even in places where it’s possible to secure enough generation capacity to match a data center’s power consumption, there’s currently no scalable solution to intermittency of wind and solar.

  • Solving the technology, market-structure, and regulatory obstacles to powering data centers with carbon-free energy around the clock is a goal some of the world’s largest data center operators, most notably Google and Microsoft, have set out to hit by 2030.

Hyperscaler Landlord Vantage Makes Zero-Carbon Pledge

Vantage Data Centers has set a goal to fully eliminate carbon emissions that result from its operations by 2030. It plans to get there by working with utilities, investing in technology, and collaborating with its data center tenants.

The company acknowledged that it may not be possible to go fully carbon-free within the timeframe it’s committed to and that it will likely have to use carbon offsets to fill the gap.

  • As outlined in the story about Dropbox above, powering data centers with carbon-free energy around the clock is a gargantuan challenge.

  • But Vantage’s business revolves around building and leasing data center space wholesale to the world’s largest tech companies, including the likes of Google and Microsoft, both of whom have committed to get to zero carbon by 2030 as well.

  • Because hyperscaler platforms lease a lot of their capacity from the likes of Vantage, their solution to reaching their carbon goals will include energy that powers their data center landlords’ facilities.

I Squared Capital Agrees to Buy Mexican Operator Kio

I Squared Capital has agreed to acquire Kio Networks, which it described as the largest data center provider in Mexico.

The sale price was not disclosed, but Bloomberg reported last year that Kio, backed by Tresalia Capital, was exploring a potential sale that could fetch as much as $1 billion.

Kio is a major data center provider to the Mexican government. Its reliance on that relationship as a business was cited as a factor working against Tresalia’s efforts to sell. Moody’s last year explained its B2 rating of Kio’s stock (a rating reserved for risky, junk stocks) by the provider’s “weak liquidity and revenue concentration in Mexico, with a particularly large exposure to the government of Mexico and to some large contracts.”

I Squared Capital, also known as ISQ, is an infrastructure investment manager. It has invested in utilities, energy, transport, and social infrastructure and says it has made six investments in digital infrastructure that total $3 billion.

  • Kio operates 11 core data center campuses and 11 edge facilities in Mexico, Central America, and the Caribbean, totaling 20MW of installed capacity and “significant expansion potential,” according to the announcement.

  • ISQ owns the Hong Kong network and data center operator HGC, which it acquired in 2017.

  • In July, ISQ announced acquisition of the Houston-area fiber network operator ICTX WaveMedia through a newly formed Ezee Fiber platform for investment in fiber networks in growing and underserved US markets.

  • In 2020, ISQ reached an agreement to acquire the global network operator GTT for $2.15 billion, but the deal appears to have stalled.

Mantra Data Centers Says It Has $1 Billion to Build Data Centers in India

Another new player is promising to enter the global data center market. A company called Mantra Data Centers announced plans to invest $1 billion in data center construction in India, one of the hottest emerging cloud and data center markets.

MDC, which describes itself as an “independent platform and wholesale colocation provider,” said it will start by building 20MW data centers in Mumbai, Delhi, Chennai, Bangalore, Hyderabad, and Kolkata. The company said it has signed MOUs for data center development in three of those markets with the respective state governments.

  • American and Chinese cloud providers are investing in infrastructure to serve India’s massive population. International and Indian data center providers – both established and newly formed – are racing to take advantage of the opportunity to lease data center facilities to those cloud platforms and support enterprise requirements.

In its announcement, MDC said that besides India’s growing digitization, data center demand in the market could be further spurred by enactment of the Personal Data Protection Bill that’s been under consideration since 2019. If enacted, the bill would require all “sensitive personal data” of Indian citizens to be stored in India.

Other Great Reads (and a Podcast) on DCK This Week

Pliops Decides Its SSD Performance Accelerators aren’t Just for Hyperscalers - The startup promises massive SSD performance and efficiency improvements for enterprise data centers.

VPS CEO Dean Nelson on Flipping Data Centers’ Wasteful Status Quo - The former infrastructure head at eBay and Uber talks about his first year on the vendor side, VPS’s technology vision, zero carbon, and more on The Data Center Podcast.

SolarWinds CEO Talks Securing IT in the Wake of Sunburst - Lessons learned from the pandemic and the aftermath of the Sunburst cyberattack puts the IT trends report issued by SolarWinds in a special context.

Inside the Famed Black Hat NOC - Network operations center managers Bart Stump and Neil Wyler (aka Grifter) again head up the show network, but with a new hybrid twist.

A Look Into an XR Future With IFTF's Toshi Anderson Hoo - AR/VR technology is on its way to becoming bigger than gaming. Get a feel for what work may be like a few years from now at Data Center World.

Open Compute Project: Redefining Open Source for the Data Center - OCP expanded the meaning of "open source" beyond software to address the same problems open source software is meant to address.

Digital Realty’s Hybrid Cloud Strategy Rests On Connectivity, Partnerships - The company’s focus is on making connectivity easier for customers, while partners enable hybrid architecture solutions.

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