Equinx shares dropped 30 percent from Tuesday to Wednesday
(WEB HOST INDUSTRY REVIEW) — Shares of colocation giant Equinix (www.equinix.com) dropped 30 percent on Wednesday morning in response to the company lowering its revenue outlook for the third quarter late on Tuesday, falling as low as $72.64 from Tuesday’s close of $105.09, which was close to its 52-week high of $110.07.
The company said Tuesday it expects third quarter revenue of between $328 million and $330 million, whereas it had previously anticipated revenue between $335 million and $338 million.
“This updated guidance is due to underestimated churn assumptions in Equinix’s forecast models in North America, greater than expected discounting to secure longer term contract renewals and lower than expected revenues attributable to the Switch and Data business acquired in April 2010,” said the company, in the announcement.
Its revised guidance prompted downgrades from Citiroup, Wells and Oppenheimer.
The rush to sell Equinix stock might be an overreaction, or an illustration of Wall Street still being nervous around the Internet infrastructure business. The revised Q3 earnings estimate was a reduction of about 2.2 percent, and a reduction of 1.2 percent for its 2010 earnings in total. The new projection of $328 million (at the low end) is still an increase of almost 11 percent over the company’s Q2 earnings of $296.1 million.
Analysts may also see the reduction in outlook as indicative of a future trend. Citigroup and Oppenheimer, for instance, reported that “sales growth is likely to decelerate in 2011,” and “company is facing increased competition,” respectively.
“The announcement raised questions about the competitiveness of the colocation market and the assumptions driving the deal to acquire Switch and Data. In a conference Tuesday afternoon, Equinix said the fundamentals of its business remained sound,” wrote Rich Miller, in a report on Data Center Knowledge that recapped some of the content of Equinix’s Tuesday evening conference call.
Equinix falling short of its guidance sent ripples through the relatively limited ranks of publicly traded hosting business, with the stock price of other colocation companies (Internap, SAVVIS and Terremark) and even managed hosting (Rackspace and Navisite) and data center wholesalers (Digital Realty Trust, Dupont Fabros and CoreSite) all taking hits Wednesday morning.
About Liam Eagle
Liam Eagle has worked as a contributor to the Web Host Industry Review since its inception in 2000, and as editor since 2003. He has been editor of the WHIR's print magazine since its launch. His daily involvement in the gathering and reporting of Web hosting news and his regular interaction with Web hosting leaders gives him an uncommonly broad appreciation of the issues and tends facing the business. Through his WHIR blog, Liam spots Web hosting trends and offers opinions on the industry-wide impacts of major developments and the motivation behind big announcements. Follow him on Twitter @liameagle
No related posts.
