Equinix CEO: Digital Realty-Telx Deal Will Not Change Competitive Landscape

Data center provider’s execs confident in Equinix’s lead in interconnection and retail colo market

Yevgeniy Sverdlik

October 29, 2015

3 Min Read
Equinix CEO: Digital Realty-Telx Deal Will Not Change Competitive Landscape
Inside an Equinix data center. (Photo: Equinix)

Equinix executives are not worried about rival and landlord Digital Realty Trust buying Telx, a direct competitor.

Asked for their thoughts on the transaction by an analyst on Wednesday’s third-quarter earnings call, Equinix CEO Stephen Smith and the company’s COO Charles Meyers said their company was many years and millions of dollars of investment ahead of Digital in building a retail colocation business with interconnection as the centerpiece.

“Our general belief across the company is that the combination will not change the competitive landscape meaningfully,” Smith said. “Can they replicate what’s been going on here for 17 years?” It would be “a pretty high bar to attack and a huge investment in some fairly unfamiliar areas (for Digital).”

Like Equinix, Telx has made its retail colocation data centers attractive by developing rich interconnection ecosystems around meet-me rooms it operates in several strategic locations around the US. Equinix has deployed the model on much larger, global scale, and has made a lot more headway in attracting major cloud service providers to this interconnection ecosystem and building an IT platform to make interconnection easier.

Earlier this month, Digital revealed new product offerings that combine its strength in providing wholesale data center space in large chunks with access to interconnection in Telx facilities. Equinix does not sell wholesale data center space, so, while there is some overlap between the two companies models, it is far from being a one-to-one match.

Earlier this year, Digital hired Chris Sharp, who ran Equinix’s cloud interconnection strategy for two years, as CTO.

Equinix reported about $687 million in revenue for the third quarter – 3 percent up year over year – and $41 million in net income, or $0.72 in earnings per share.

Smith: Telecity Acquisition “on Track”

Equinix has made two major acquisitions of its own this year: the blockbuster $3.6 billion TelecityGroup deal which, if closed successfully, will make it the largest data center provider in Europe, and the smaller $280 million acquisition of Japanese data center provider Bit-isle.

Equinix is still waiting for a green light for the Telecity deal from European regulators. “We are seeking approval from the European Commission,” Smith said on Wednesday’s call.

The company has made a formal offer with proposed commitments to the commission, which are now in the process of being “market-tested,” he said. Smith declined to provide any details on the contents of that offer, saying only that he expected to hear back from the regulators by mid-November, and that the deal was on track to being closed in the first half of 2016.

Interconnection Reels in Enterprises

Today, a lot of focus at Equinix is on providing private network cross-connects between enterprise customers’ servers in its data centers and infrastructure by major cloud providers, such as Amazon Web Services and Microsoft Azure. The company announced it has added Oracle to the list of cloud providers accessible from its data centers Wednesday.

The enterprise space has become Equinix’s largest source of new customers, Smith said. Access to cloud providers and interconnection in general drive a lot of that enterprise momentum. Equinix now provides services to more than 100 companies on the Fortune 500 list, he said.

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