Data Center Links: December 7, 2016

Here are some (mostly) recent things I found interesting:

1. Equinix buys Verizon data centers.  I 'think' I saw this one coming... but the biggest player in the industry just got bigger.  Just 5 years after Verizon paid $1.4 billion to acquire Terremark, it has sold 24 data centers to Equinix for $3.6 billion. It seems hard to top this asset sale, but I guess we'll see what 2017 brings. I liked Equinix co-founder Jay Adelson's link to the 1998 story about Equinix as a Cisco-backed upstart.  
2. HPE and Schneider Electric partner on Micro Data Centers. HP Enterprise and Schneider are partnering to deliver a complete pre-fab solution for drop-in-place modular data center. I always liked the previous respective versions of a modular solution that were offered, but this partnership makes sense (targeting the edge and IoT, etc).  Bonus points for not referencing the solution as a 'virtual data center'. Last week Schneider launched the next generation of its EcoStruxure architecture and platform.
3. Cray and Microsoft partner for deep learning.  At the 2016 Neural Information Processing Systems (NIPS) Conference this week Cray announced the results of a deep learning collaboration between Cray, Microsoft, and the Swiss National Supercomputing Centre (CSCS) that expands the horizons of running deep learning algorithms at scale using the power of Cray supercomputers.  Research at CSCS utilizes the Microsoft Cognitive Toolkit on a Cray XC50 with more than 1,000 NVIDIA Tesla P100 GPU accelerators. 
4. Dell EMC and VMware launch new Hyper-converged systems. Powered by VMware Cloud Foundation Dell launched the VxRack SDDC as a turnkey hyper-converged solution for both traditional and cloud-native workloads. The total lifecycle offering is built on Dell PowerEdge servers and VMware infrastructure software (vSAN, vSphere, and NSX) and VMware SDDC Manger. 
5. Micron announces 8TB SATA SSD. Micron launched a 8TB Enterprise 5100 series solid state drive this week with random write performances up to 74k IOPS. 

Data Center Debt to Asset Ratio

I've lamented in the past about the inability of comparing data center industry companies. I certainly don't think the financial analysts are able to properly categorize companies such as Equinix, Digital Realty Trust, Savvis or DuPont Fabros. Comparing them and looking at various ratios is interesting though and still worth the look - in my opinion.

Last summer I attended a finance class and we each picked a stock to analyze. I of course was the only one with a data center industry stock and every time the teacher came over to see how I calculated a particular ratio or figure for that stock he just shook his head - as if it was amazing that the company stayed afloat.

Anyway -- a couple of things I ran across this weekend is what tripped the topic : data centers are asset Heavy companies. This is no particular revelation to readers of this blog, as we all know what it takes to support these expensive, complex facilities.

First- Mr. Mad Money Jim Kramer is at it again for the data center industry -- talking about growth expectations and how he would 'sell' Equinix (EQIX). I don't claim to be a fortune teller of the industry any more than he is, but I (once again) think he is wrong. The last time he addressed the industry in late 2009, DCK posted one of my favorite titles (and article) - There's a Village Somewhere Missing an Idiot.

As if to counter the Jim Kramer prediction, earlier in the week Seeking Alpha had the story about the Analysts Best Picks for 2011 report from Raymond James. Sure enough, there listed was Equinix and Digital Realty Trust (DLR).

Finally, there was a generic Zacks Research article about the highest debt to asset ratio companies - which is where I again don't think that it is a fair thing to complain about for data center companies. Investopedia defines Total Debt to Total Assets as:

"A metric used to measure a company's risk by determining how much of the company's assets have been financed by debt. Calculated by adding short-term and long-term debt and then dividing by the company's total assets."

So, with my limited financial knowledge I figured that would be an interesting one to compare. Not only what this ratio is for these companies, but how they manage it throughout the year. I turned to one of my favorite new sites/tools Kapitall and here is a look at Debt to Assets for the aforementioned companies (hit the play button in the lower right corner):





No revelations or insightful punditry here -- just thought it was interesting. :)

Data Center Jobs

A number of 'data center' job openings have come up on my radar recently and so I went digging. Maybe the new year means new budgets and new initiatives to hire and fill data center jobs that the 2009 fiscal year just didn't allow. Maybe it's an indicator of a hot job market for the data center industry in 2010. Maybe I need to surf the web a little less and stop reading into things so much.

A nice trending tool for job searches can be found at indeed.com - a job search engine. Check out this graph on job trends for postings containing "data center" in them.

"data center" Job Trends

"data center" jobs

One of the items that started my search for data center jobs was a number of openings for the Google facility in Belgium. There were at least 10 'data center' related postings on LinkedIn by Google just today. Three of them were for the Saint-Ghislain, Belgium location. I've been very intrigued by Googles Belgium location ever since the Chiller-less data center information was out and I really think the 'follow-the-moon' concept is interesting.

On Google's web site they list current engineering openings for the Council Bluffs, Iowa, North Carolina, Oregon and South Carolina locations. Here is the Indeed.com job trends search for Google:

google Job Trends

google jobs

One final graph of interest given the acquisition of Switch & Data by Equinix:

equinix,"switch and data" Job Trends

equinix jobs - "switch and data" jobs

Merger and Acquisition Targets

Mergers and acquisitions are always fun to speculate on. In this industry it seems like a week doesn't go by where some M&A activity is happening. With the recent Equinix acquisition of Switch and Data I have to wonder if more data center industry acquisitions will happen before the end of the year. Both Google and Cisco have said that shopping sprees will continue to gain speed in 2010.

thedeal.com had a Barron's article summary that intrigued me today about M&A speculation. The article points to 10 technology companies that are potential takeover candidates, including several that I have thought of:

1. Riverbed (RVBD | $1.53B market cap): major competitor to Cisco's WAN Optimization and Application Acceleration products. I've always thought Cisco would buy them, but perhaps HP is better suited.
   
2. NetApp (NTAP | $9.63B market cap): another possible target for Cisco. Otherwise maybe HP or Dell?
   
3. F5 Networks (FFIV | $3.73B market cap): No idea; maybe HP or EMC
   
4. Brocade (BRCD | $3.69B market cap): seems like HP is the lead candidate... if not, maybe EMC or IBM
   

and others.... Check out the complete article and list here.

Switch and Data Shareholder Investigation

There was an interesting development in the Equinix acquisition of Switch and Data late this last week. Kendall Law Group announced a shareholder investigation into Switch and Data Board of Directors in connection with the proposed acquisition by Equinix.

Their release states:

"Kendall Law Group’s investigation concerns whether the consideration to be paid to shareholders below the fair or inherent value of the Company and whether the directors and may have breached their fiduciary duties by not acting in the shareholders’ best interests in connection with the sale process."

Kendall is a national law firm and are either very large, or sue-happy, because there were 8 other investigation or class-action lawsuits announced last week according to their site.

The law offices of Howard G. Smith are apparently investigating as well.

Data Center Stock Index Update

As I approach almost a full year of tracking my data center stocks, I thought I would post the chart for the wild ride it has been. I think for the most part these stocks have weathered the recession pretty well, and as you can see, they are doing quite well lately. Reference this blog post to see what stocks are included in my capitalization-weighted index.

Here is the October 2008 through August 21, 2009 graph:

Earlier this year I started a second index: Equinix, Savvis, Switch and Data and Terremark. Here is the graph for that index.

Tech Industry M&A Activity

It's always fun to speculate about IPO's, mergers and acquisitions. In the tech industry it happens so often it's hard to keep track of who bought who and how long ago it was.

My current train of thought on the topic surrounded the recent news of CoreSite. CoreSite is a Carlyle Group company, which as I mentioned before is a HUGE global private equity company. I wondered if CoreSite would do an IPO in the near future. Carlyle invested in Equinix in 1999 -- their site says "acquired" in 1999. Equinix then raised $240 Million in their IPO a year later.

Some other interesting ones I have seen a few times:

• Savvis and Global Crossing

• Level 3 and Spint Nextel?

With all of the news Cisco has made lately, there could be some acquisitions by the other big players to get deeper into the networking market:

• Either IBM or HP to buy Juniper or Brocade ?

I refuse to believe that Cisco would buy EMC, but do think they could/should buy NetApp. Or maybe Isilon Systems?

Either HP or Cisco could by F5

All speculation -- but the tech industry M&A activity does seem to be picking up.

Equinix Wins Engergy Innovator Award

The Silicon Valley Leadership Group Energy Summit, held yesterday, gave Equinix the Power Energy Innovator Award. The ceremony held at Stanford recognized their nearly $1 million in rebates received from the city of Santa Clara for energy efficiency measures implemented. Equinix optimized efficiencies at its Silicon Valley 2 (SV2) data center.

"As a part of Equinix’s expansion at its SV2 center, the company implemented a variety of efficient procedures, such as installing air-side economizers that use the outside air to provide “free cooling” and drastically reduce the amount of mechanically produced cold air needed for the center. This system has resulted in energy savings of more than 4,000,000 kWh and $300,000 per year. Equinix also installed variable frequency drive (VFD) fans that allow for greater efficiency by operating at reduced fan speeds when there is a lower demand for air distribution."

Check out the press release here.

Equinix stock has done quite well the last 3 months, starting at $55.67 March 30th and then closing up 3.66 at $72.74 today. Analysts at Morgan Joseph initiated coverage of Equinix with a 'buy' rating, and set a target price of $100.

Wikinvest has some nice new features on their site -- worth a look!

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Data Center Stock Market News

Just a couple of items I noticed today in regards to the data center stocks I monitor. First, is an update to the data center stock index I started last year. It has been a roller coaster -- here is the latest graph:

More details on what the index is comprised of can be found here.

The Dow Jones Internet Composite Index has also been graphing quite nicely the last 3 months.

The second story was one I some how missed last week -- Wachovia resumed coverage of the data center space. They immediately rated Equinix and Switch & Data with OUTPERFORM.

"Both companies have high visibility into its revenue base and low churn driven by 1 – 3+ year contracts with escalators. EQIX, SDXC, and other network neutral data centers benefit from a supply demand imbalance due to growth in IP and internet traffic and limited available space close to fiber hubs for telecom equipment and networking gear"

Also late last week submarine transport cable provider Hibernia announced they have expanded into Equinix's LD4 London Slough IBX data center.

Earlier today Datacenterknowledge reported on VMWare taking a 5% stake in Terremark. In terms of institutional ownership, that puts them in 2nd place, behind Ashford Capital Management, who has a 7.98% stake. I thought the comment on the BusinessWeek investing site was interesting:

"There is significant interest in TMRK by institutional investors. The 29.13% of the shares outstanding that they control represents a greater percentage of ownership than at almost any other company in the Specialty Telecommunications industry."

Equinix Q1 Profit Triples at $15.5 Million

Equinix announced their first quarter 2009 results today. Proving that the demand for colocation and data center services is still high, they had some good numbers:

• Increased quarterly revenues to $199.2 million, a 4% increase over the previous quarter and 26% increase over the same quarter last year.
• "Capital expenditures in the first quarter were $75 million, of which $10.3 million was attributed to ongoing capital expenditures and $64.7 million was attributed to expansion capital expenditures"
• For the second quarter of 2009, Equinix expects revenues to be in the range of $206 to $210 million

On their Investors web page there is a spreadsheet full of "non-financial" metrics that I found pretty interesting. For example:

• "head count" is up 226 people from Q1 2008
• It's funny how colo customers are 'somewhat' seasonal. They had 160 new customers in Q1 2008 and 161 in Q1 2009
• 10 Gig Exchange ports has more than doubled in the past year
• "Managed infrastructure Services % of recurring revenue" has not budged a single percentage since Q1 2008.
  

There is also a fairly detailed '2007-2010 Announced Expansions' PDF here.

The Seeking Alpha blog had a nice post on Monday on Equinix and the colocations sector.

When searching around for Equinix today I ran across a pretty interesting article at Forbes.com. It was from December 2, 1999. It gives the historical perspective on just how far Equinix has come..... I still put Jay Adelson as one of my top "Tech People to Know" list. Here is a quote from that 1999 article:

"Equinix announced an impressive $280 million in financing today, including a $200 million debt offering by Salomon Smith Barney, Morgan Stanley Dean Witter and Goldman Sachs. The remaining $80 million came from its initial backers--Cisco Systems csco (nasdaq: csco - news - people), Microsoft msft (nasdaq: msft - news - people), and Benchmark Capital--as well as a slew of new and less likely investors like Netscape co-founder Marc Andreessen and E*Trade Group egrp (nasdaq: egrp - news - people). So far the company has raised just more than $315 million."

Equinix closed down today -0.19 at $62.26 -- but shares rose 2% in Wednesday's extended trading.

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Data Center Stocks

Remember the part about the economy getting worse before it gets better? Well.... the data center stock index I started back in October continues to set new lows. Today's value was $16.41. I also started tracking 4 colocation companies in a separate index; Equinix, Terremark, Savvis and Switch and Data. Here are my Google Spreadsheet charts for those indexes:

DataCenter Stock Index


Colocation Stock Index




Forbes reported today that Google and Cisco are being eyed as possible Dow candidates. Cisco is getting almost as good as Apple at creating a buz on the net. Eweek reports that Cisco is planning to unveil a new data center strategy on March 16. Much of the speculation was about their new servers, potentially equipped with VMWare software.

"The company would not disclose details of the March 16 announcements on Monday, but a spokeswoman acknowledged that the event would be related to the
speculation. Chief Executive John Chambers and other Cisco executives will
unveil new technology and partnerships, Cisco said."

Speaking of creating a buzz.....I think this video at the Onion is perhaps the funniest one they have done in some time (and they do some funny stuff!).

Finally -- listen to the master investor for a good big picture on the economy and where we are going ; Warren Buffet talks on CNBC.

2008 Data Center Statistics

A lot of people reference statistics this time of year. Many will cite Tier1, Forrester, or Gartner...... me; I'll cite the only thing I have access to: Google. Google Zeitgeist is always interesting to look at and is usually a pretty good indication of what happened throughout the year. Here are some other random statistics that pretty much speak for themselves. Meaningful? Maybe. Maybe not.
Enjoy.

First - the "data center" vs. "data centre" in Google Trends (shows a trend of how often the term is searched in Google).
Next - Google and Microsoft data center projects were both big 2008 stories; here is how they compared in Google Trends:
Proof that Google has ALL of our personal search data, they have at least let us look into the aggregated data with Google Insight for Search. For instance, here is the chart and data for the category of "networking equipment" -- showing that 'cisco', 'router', and 'wireless' were the top 3 search terms in that category.

An Insight search for the term "data center" shows that Pakistan, India and Singapore are searching for that term the most. Equally interesting is the data for just the U.S. that shows top regional interest for "data center" coming from South Dakota!

Finally - here is a look at Equinix, Savvis and Terremark in 2008 U.S. Web search Volume.

Monday Links

My data center stock index was fairly steady last week, but closed down today, at $19.20. The Dow Jones Internet Composite Index tracked similarly and closed today at $58.83.

Here are some other items of interest I have run across recently:

• Wachovia initiates coverage on Data Center Space. "We believe the network neutral data center space represents a relatively safe derivative way to play on the continued growth of IP and internet traffic."

• Reuven Cohen has a very interesting blog post: "Cloud Interoperability and The Neutrality Paradox.

• Matt Stansberry has the Biggest Stories of 2008 article.

• The Seeking Alpha blog has a very nice write-up on the Equinix presentation, given with Dan Golding from Tier 1 Research: Operating Today's Data Centers & Key Industry Trends That Will Affect Your Business. This is a very nice presentation with some really good insights to supply and demand for the industry.
  

• As some of you know.... I have a pretty strong side interest in data center site selection. So much so I published a white paper on the topic last year. I am a visual learner, so I love having all of the maps of the U.S. for natural disasters and other things. I have started to work on a second version of the paper and recently found another map that is interesting. The International Journal of Health Geographics recently published some new research: Spatial patterns of natural hazards mortality in the United States. The paper "examines the spatial patterns of natural hazard mortality at the county-level for the U.S. from 1970-2004 using a combination of geographical and epidemiological methods". Click through to the PDF to see the various maps.

• DataCenterKnowledge has a nice video of the uber-awesome SuperNAP in Vegas.

• Even Bigger Nightmare on Tech Street

Review of Industry Leader Equinix

Seeking Alpha has a very nice write-up on Equinix. They cover key findings about the company, the data center market, and a review of the Equinix stock price recently. It (once again) proves just how hot the data center market is, and provides some good insight into the company.


Check out the article here