Equinix To Dominate the Interconnection Market: Analysts
- By David Hamilton, October 22, 2009
(WEB HOST INDUSTRY REVIEW) — Just a day after Equinix announced it would be acquire Switch & Data for $689 million, market analysts have predicted that Equinix’s dramatically expanded carrier interconnection business will make it the dominant force in the North American market.
According to a research note from market information firm Signal Hill (www.signalhill.com), carrier neutral colocation demand growth has heavily outpaced supply for years and continue to do so for at least two to three more, giving providers a lucrative market, and allow Equinix to gain market share by leveraging its brand, global footprint, leadership position, customer base, and favorable capital position.
We view the acquisition favorably as we feel Switch and Data brings significant strategic value to Equinix,” Signal Hill notes. “In addition to expanding its footprint and providing needed capacity, the acquisition will give Equinix a dominant share of the service provider interconnection market. The two companies were already the the leading providers of carrier interconnection services we believe the combined companies will be several times larger than the second largest provider interconnection services.”
National Bank Financial (www.nbfinancial.com) has noted that this is the first major deal in the Internet infrastructure space since October 2008, when Q9 Networks was acquired by private equity firm ABRY partners, and could lead interest in managed hosting and collocation provider Peer 1 Network Enterprises (www.peer1.com) as an acquisition candidate in a consolidating sector in coming years.
National Bank noted, however, “[T]here really aren’t any catalysts to get PIX [Peer 1] moving over the near term, which is an opportunity for patient investors.”
While Peer 1 will likely remain as it is for now, the Switch & Data deal, expected to close in the first quarter of 2010, will give Equinix a total data center capacity of more than six million square feet in North America, Europe and Asia-Pacific between 79 data centers in 34 markets, which will be sure to change the interconnection market in major ways.