Jim Cramer, host of CNBC's Mad Money.
(WEB HOST INDUSTRY REVIEW) — Jim Cramer discussed the data center sector on his CNBC finance program “Mad Money” last Thursday, where he told viewers to “get out of the data-center stocks”.
Cramer told viewers of the popular television program that he believed “the data center industry is in decline” and that it was “about to be brought low by new technology” so they “should sell, sell, sell.”
The nine minute rant surrounded news of Equinix’s acquisition last week of Switch and Data, calling it an act of desperation.
Citing a recent Intel conference call, Cramer said that the strong sales for Intel’s new Nehalem DP processors for servers — one of which has the ability to “take the place of eight to nine older-generation servers” — will eventually drive data centers out of business.
He argued that Intel’s new server technology will lead companies like Equinix to have more extra space than they will know what to do with, and eventually make “the data center model obsolete.”
These statements caused a quite a stir among many industry experts, such as the Data Center Knowledge’s Rich Miller, Tier1 Research’s Dan Golding, and Gartner’s Lydia Leong, and rightfully so when considering just the opposite is true.
As Miller explains, the evolving technology of computer processors have brought along faster and more powerful chips.
But this advance in technology does not affect the demand for data center space, which Miller says is driven by a “profound, long-term shift toward the Internet and digital business models.”
Dan Golding, VP and research director at Tier1 Research, was also quick to point out Cramer’s mistakes.
For instance, Cramer stated that companies like Equinix are square-footage based when the data center’s main metric is power. Golding says that Cramer overstates the importance of processors versus the real issue of virtualization for server consolidation.
The Intel processors Cramer mentions are at the higest end of the chip spectrum and are far too expensive for mass-market usage, says Golding.
Finally, Cramer misunderstands Equinix as being purely a server farm, when most of its customers are drawn to Equinix for its interconnection capabilities.
Supporting this believe, a recent Interxion-commissioned study showed that the ongoing demand for outsourced data centers will likely result in an estimated CAGR of 23 percent in the sector’s major European markets over the next four years.
