Mixed Month for Data Center Stocks, Yet Year-to-Date Remains Strong

Read the whole article at Seeking Alpha:

>>Data center related stocks enjoyed a mixed performance in May, as the REIT category was the only sub-sector delivering a solid positive performance (with increases ranging from 3.4% to 12.1%), while the other stocks fluctuated on average from slightly positive to single-digit declines. The worst performance was achieved by Limelight Networks (LLNW), falling about 10% in the month. However, it's today's news that Jim Cramer, in spite of the recent soft performance, still likes the stock.

21Vianet: Solid Growth in Data Center Services

Read the whole article at Seeking Alpha:

>>21Vianet Group (VNET) announced yesterday its unaudited financial results for the first quarter of 2011. The company describes itself as the largest carrier-neutral Internet data center services provider in China, and completed its IPO at the end of April, selling about 14,950,000 American depositary shares ("ADSs"), including 1,950,000 ADSs purchased by the underwriters pursuant to the exercise of their over-allotment option at $15, or $2 above the high end of the originally proposed range. Each ADS represents six Class A ordinary shares of the company.

Earnings Preview: Digital Realty

Read the whole article at Seeking Alpha:

>>Digital Realty Trust, Inc. (DLR) will be holding its Q1 2011, conference call Thursday, April 28, at 1:00 pm ET.

The company's results will be closely watched as Digital Realty may be considered a bellwether for the wholesale data center market that has so far delivered solid returns YTD. Other players in the sector include Dupont Fabros Technology (DFT) and CoreSite (COR).

Savvis Q1 Earnings Preview

Read the whole article at Seeking Alpha:

>>Savvis (SVVS) will be reporting its Q1 2011 financial results before the market opens on Wednesday, April 27.

The company is one of the best performers in the data center sector, having appreciated more than 47% YTD, mainly thanks to the hype surrounding cloud computing stocks, especially after two competitors, Terremark (TMRK) and Navisite (NAVI) were both acquired at a strong premium at the beginning of the year.

A Quick Look at Interxion's Q4 Results

Read the whole article at Seeking Alpha:

>>InterXion (INXN), a a leading European provider of carrier-neutral colocation data centre services, today reported Q4 and full year 2010 results.

All Eyes on Interxion Q4 Earnings This Week

Read the whole article at Seeking Alpha:

>>Interxion (INXN) will report Q4 2010 results Wednesday, March 23. The company will host a conference call on the same day at 8.30 a.m. ET.

Analysts have just started covering the company, which recently priced its IPO at $13.00 per share, and started trading on the NASDAQ market on January 28.

Nasdaq: technology is key in exchange mergers

from www.datacenterdynamics.com:

>>Technology is a key driver in rapid consolidation that has been taking place in the stock exchange space, Robert Waghorne, senior VP of European markets technology at Nasdaq OMX, said. Waghorne delivered a keynote presentation at the DatancenterDynamics New York 2011 conference on Thursday, March 10.

Cloud Computing Buyout Game: Is Savvis Next?

Read the whole article at Seeking Alpha:

>>On Friday, PE Hub reported the rumor that Savvis had hired investment bank Qatalyst Partners as its financial adviser, fueling takeover speculation that have surrounded the company since the Terremark (TMRK) and Navisite (NAVI) acquisitions by Verizon (VZ) and Time Warner Cable (TWC) took place.

February performance

Cloud Computing: Bubble or Revolution?

Article available at Seeking Alpha:

• Few technology trends have captured as much popular attention as Cloud Computing. The level of hype associated with the ‘Cloud’ hasn’t been seen since the hoopla created during the Dot.com era. As a result, there has been plenty of debate about whether the Cloud Computing phenomenon is headed to a similar demise.

This quote is taken from a Seeking Alpha article by Jeffrey Kaplan, published in December 2010.

Just a few weeks after Jeffrey's comments, two separate but similar acquisition moves of cloud computing providers, made by Verizon (VZ) and Time Warner Cable (TWC), have investors wondering whether the multiples used in these transactions are a reminder of the past “bubble times” or the sign of a new revolution coming.

Earnings Preview: DuPont Fabros Technology

Article available at Data Center Knowledge:

>>DuPont Fabros Technology (DFT) will be the first real estate investment trust (REIT) in the data center sector to report its fourth quarter results, which are expected after the close of the market today (Tuesday, February 8).

Buyout Binge for Cloud Computing Companies?

Article available at Seeking Alpha.

>>On Thursday, Jan 27, 2011, Verizon (VZ) purchased Terremark (TMRK) for $1.4 billion in a move to accelerate its "everything-as-a-service" cloud strategy.

Yesterday, Time Warner Cable (TWC) announced that it will acquire managed hosting and cloud services provider NaviSite (NAVI) for $230 million.

Although the acquisitions are relatively different in size and cost, two cloud related deals in less than a week by cable/telcos did not happen by chance. The question is: will this represent only the start of a series of acquisitions in this space, as Michael Nelson, an analyst at Mizuho Securities USA Inc., seems to suggest?

Noise Filter: European Data Center Firm InterXion’s IPO

from www.thewhir.com (thanks for the quote):

>>There was quite a bit of coverage in the buildup to the initial public offering of European Data Center provider InterXion’s (www.interxion.com) initial public offering. The company’s stock was set to start trading as INXN Friday on the New York Stock Exchange.

...

Seeking Alpha posted quite an exhaustive two-part examination of the company earlier in the week, written by Paolo Gorgo.

The first part examines the offering itself, and the competitive landscape for colocation in Europe, for the benefit of potential investors in North America.

“Interxion’s operations are all based in Europe and have been, so far, reported in the euro currency. Interxion’s proposed IPO on the NYSE will represent a unique opportunity for U.S. investors to access a leader in the fast growing European multi-tenant network neutral data center market, but may also raise questions about the company’s strategy in the North American market.”

The second part delves in greater detail into the company’s financials.

“It is interesting to note that about fifty-three percent of Interxion’s Monthly Recurring Revenue for the nine months ended September 30, 2010 was generated by contracts with terms of one year or less remaining. However, the company has, so far, experienced a very low churn of less than 2% per quarter, similar to its peers (Average Monthly Churn rate was 0.6% in the nine months ended September 30, 2010).”

INXN opened trading Friday up at $14.55.

InterXion shares rise in debut

from Reuters:

>>Shares up as much as 18.5 percent

"It'll be interesting over the next two or three years to see if InterXion makes a bigger play in the United States," said Todd Weller, Internet infrastructure analyst at Stifel Nicolaus & Co.

"They will have to prove they can compete," he said.

In the U.S. market, InterXion is facing competition from heavyweight incumbents such as Equinix Inc (EQIX.O), which last spring bought out Switch & Data, which had served as InterXion's access to the U.S. market through a business partnership.

Late last year, InterXion entered into another transatlantic agreement, partnering with privately held data center host Telx.

"We can read into these partnerships that it's a really important market for InterXion," Weller said, suggesting the European firm could expand by either building data centers in the United States or acquiring established U.S. peers.

InterXion's U.S. listing comes four months after people familiar with the matter said InterXion-owner Baker Capital had hired Morgan Stanley (MS.N) to explore a sale of the company.

However, some of the people said at the time that Baker's high price expectations -- equivalent to more than 10 times earnings before interest, tax, depreciation and amortization -- could deter bidders.

...

Its top-of-range pricing on Thursday helped lift shares of its UK competitor, data center operator Telecity Group Plc (TCY.L), which rose as much as 6 percent to a six-week high on Friday.

Inside Interxion's IPO

you may read the articles at Seeking Alpha:

>>On January 12, 2011, European colocation and data center specialist Interxion announced plans to launch an initial public offering of its shares on The New York Stock Exchange, where it expects to start trading under the ticker symbol “INXN”. The IPO is scheduled for Friday, January 28.

Interxion IPO: Is a $780M Market Cap Reasonable?

At Seeking Alpha:

>>Colocation contracts with customers are typically for three to five years, however it is interesting to note that about fifty-three percent of Interxion’s Monthly Recurring Revenue for the nine months ended September 30, 2010, was generated by contracts with terms of one year or less remaining.

This may be considered both as a red flag (more than half of its recurring revenues will be due for renewal in the next few months, which is a risky situation especially for a business whose average contract is supposed to be 4 years) or as an opportunity, as a strong market might allow renewing rates at higher prices. As usual, the market will decide, and the success of the IPO may be seen as a vote of confidence toward this aspect.

Competition, in the meantime, will certainly be looking at this information with interest.

Interxion Plans to Launch IPO on NYSE

>>Interxion’s SEC filing gives us an opportunity to dig into its financial performance. Here are a few highlights for our readers: Interxion supports over 1,100 customers through 28 data centers in 11 European countries. The average data center in Europe is usally smaller than in the USA, and Interxion’s centers range from as little as 500 square meters (5,400 sqft.) to 6,400 square meters. (68,900 sqft.). The company houses more than 350 carriers and Internet service providers and 18 European Internet exchanges.

Read more at Data Center Knowledge

Interxion Announces Commencement of Initial Public Offering

AMSTERDAM 12 January 2011 – Interxion Holding N.V., a leading European provider of colocation data center services, announced today that it has commenced an initial public offering of 18,550,000 ordinary shares. Interxion is offering 16,250,000 ordinary shares and certain selling shareholders are offering 2,300,000 ordinary shares. The estimated price range for the initial public offering is $11.00 to $13.00 per ordinary share.

Interxion has applied to have the ordinary shares approved for listing on The New York Stock Exchange under the ticker symbol "INXN." The underwriters have a 30-day option to purchase from certain selling shareholders up to an additional 2,782,500 ordinary shares.

BofA Merrill Lynch, Citi and Barclays Capital will act as joint bookrunning managers for the offering. The offering of these securities will be made by means of a prospectus. Copies of the preliminary prospectus relating to the offering may be obtained by contacting:

• BofA Merrill Lynch, 4 World Financial Center, New York, NY 10080, Attn: Prospectus Department or email dg.prospectus_requests@baml.com;
• Citi, Brooklyn Army Terminal, Attn: Prospectus Dept., 140 58th Street, 8th floor, Brooklyn, NY 11220. By telephone: (800) 831-9146 or by email at batprospectusdept@citi.com; or
• Barclays Capital, c/o Broadridge Financial Solutions, 1155 Long Island Ave. Edgewood, NY 11717. By telephone at (888) 603-5847 or by email at barclaysprospectus@broadridge.com.

A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective.

The preliminary prospectus is also available at www.sec.gov

This press release shall not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any such offer or solicitation or any sale of securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

colocation long term fundamentals

Ken Baudry started an interesting serie of articles about the long term potential of the colocation sector at http://datacenterpractice.com.

Here are a few quotes from the first two articles:

>>There isn’t a single “data center market”. There are multiple submarkets. Each submarket must be analyzed separately. An illustration is probably in order; Suppose that I told you that the average price of a new car was $30,000 and that I could buy a new car for $45,000. Is my $45,000 deal a good deal. Well, if I’m buying a $70,000 Mercedes then yes it is. But if I’m buying a $16,000 Hundai than I’ve kind of screwed myself looking at averages.

...

What all the analyst, investors, brokerage industry have tried to do is to say is that “its all one big market”. This is a big mistake that leads to poor investment decisions.

...

There are colo providers that sell plain old rack space, QTS. Providers that sell cross-connects; Telx and Equinix, Providers that sell managed service, etc. Don’t expect to buy whole space in Telx or Equinix, or in a managed services facility or in a retail colo facility at a competitive price, its not what they sell. Different target markets. Yes both WalMart and Saks are both retailers. No they do go after the same customers. Can you comparre them? Yes? Do they respond the same to changing economic conditions. NO!

...

>>Is there a danger of technical changes making today’s collocation facilities obsolete? Yes! But the bigger probablity is that changing technology will make office buildings obsolete! But let us put this in prospective.

...

Companies that exist on the internet, those that must be collocated with a major peering point or immediately adjacent to it are probably running close to the 5MW/Cab level, will continue to do so and perhaps exceed these densities.

...

Today only 20%+/- of all data center needs are being met by colo facilities. The rest being are located in single tenant owned or leased facilities. The power density in these centers average around 2kW/Cab (80 W/sf). Which brings me to my next point.

The colo industry has been very successful at attracting the “early adopters” and companies who don’t have the capital to invest. I believe that the lack of activity from enterprise customers, those not providing internet services, is largely due to fears about the economy but also because the colo industry has built a product that doesn’t fit the remaining 80% of the market. So in that sense, these facilities are already obsolete.

The threat to colo isn’t technolgy change (virtualization) or obsolesence . It is the failure to understand that this isn’t a one size fits all industry. To be wildly successful, the industry will need to do a better job at attracting the 80% that are currently on the sidelines.

...

To conclude, changing technologies will not make facilities obsolete, if management understands the concepts of submarkets and how to reposition the assets. On the other hand, changing technologies might make some management and colo operators obsolete.

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