FOCUS EQUINIX
Issue 13, Dec 10/Jan 11
THE WORLD ACCORDING TO EQUINIX
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It all began in 1998 when Equinix founders Jay Adelson and Al Avery met while working at Digital Equipment Corporation’s R&D department. Their ideas eventually became PAIX (the Palo Alto Internet Exchange). After realizing the Internet needed to expand, and that it required physical connection points where networks could interconnect, and be run by a neutral party (a Neutral Internet Exchange), the seed for Equinix was born. It was the first time an offering had eliminated the ‘middle man’. They wanted to build data centers for both colocation and exchange traffic.
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In 1999 Equinix brought together its management team, which worked to bring networks to Equinix. It set the goal of building 40 International Business Exchange (IBX) centers. AT&T and UUNet joined, as did others. In fact, seven networks planned to join forces and interconnect under Equinix’s roof.
In 2001 the first SV1(Silicon Valley data center) was opened – it was the largest data center in the industry.
• As the dot-com bubble burst Equinix found itself struggling but restructured its business and acquired network-neutral data center providers Pihana Pacific and i-STT which served the Asia-Pacific region. It was restructured in 2002 and a new growth plan was formed.
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In 2003 Equinix started gobbling up companies left behind by the telecommunications companies that suffered when the dot-com bubble burst. In 2003 it sub-leased a data center in Santa Clara, California and in 2004 it signed a long-term lease for an additional 95,000 sq ft of data center space in Washington DC and purchased 103,000 sq ft of data center space in San Jose. The same year it had the best performing stocks on the NASDAQ.
In 2005 Equinix leased seven new data centers and also started to build its next generation of IBX centers, designed to meet high power density operations. It opened IBXs in Chicago, Washington DC and Los Angeles. By 2007 it expanded in Tokyo, Singapore, Washington and purchased a new site in Los Angeles and expanded its presence in Silicon Valley. It also acquired European colocation player IXEurope.
• Today Equinix operates in 35 markets covering 11 countries. It works with more than 600 network service providers and has 91 International Business Exchanges (way above it original goal of 40) and partner data centers in 35 metropolitan areas in North America, Europe and Asia Pacific.
the business, obviously has a large affect on the results and there were several things that took place in North America that quarter that drove us to make our revised forecast.”
First there was the takeover of Switch and Data in May for US$683.4m. The purchase gave Equinix a presence in 16 new metropolitan markets in Canada and the US but sales did not perform as well as expected. According to Schwartz, it was a merger that came with lessons. “Our sales activity with Switch and Data was lower than expected,” Schwartz says. “In retrospect, it would have been better for us to be a bit more conservative with our revenue forecast so we would have avoided the need to revise our guidance.
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With any acquisition there is going to be uncertainty. Any acquisition you are going to do diligence to a point, then make a decision [on the purchase]. It is not until after the transaction that you get to see everything and pull it together.”
The Switch and Data buy saw Equinix consume the company, merging staff, laying off others as well as changing all operations over to the Equinix brand. Business systems also had to be integrated into Equinix’s core. It wasn’t only the identity of Switch and Data that was lost that quarter. Equinix also lost customers.
“We had a number of large customers during
that period that we negotiated with, some with large discounts. This took our revenue down,” Schwartz says.
“We also experienced greater churn – the cancelling of more contracts than we originally expected.
“There is a certain amount of churn that happens in our business all of the time, and we expect that 2% of our contract base will churn every quarter. In this case, it was a little bit higher.”
Only mentioning the best case scenarios, Schwartz says churn generally takes place at Equinix because a customer has merged
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