Please read domestic and foreign disclosure/risk information beginning on page 5 and Analyst Certification on page 8.
© 2009 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
October 22, 2009
Frank G. Louthan IV, (404) 442-5867, Frank.Louthan@RaymondJames.com
Jason Fraser, CFA, Sr. Res. Assoc., (404) 442-5804, Jason.Fraser@RaymondJames.com
Telecommunications Services: Wireline___________________________________
EQIX, SDXC: Raising Estimates, Buying Switch and Data
♦ Equinix reported better than expected 3Q09 results, with constant currency revenues of
$223.4 million vs. our $221.4 million estimate and normalized EBITDA of $104.2 million vs.
our $97.8 million estimate.
♦ Equinix announced it was acquiring Switch and Data for $689 million, in an 80% stock and
20% cash transaction. Switch and Data shareholders will receive $19.06 in cash for each
share, or 0.19409 shares of Equinix per share. Equinix is paying 9.9x our 2010 EV/EBITDA
for Switch and Data. The combined company will have 79 data centers in 34 markets.
Equinix will expand into 16 new markets with the deal, notably Seattle, Miami, Atlanta,
Toronto, and Denver. The deal is pending SDXC shareholder approval as well as the
traditional regulatory approval.
♦ The combination of the two largest pure plays in colocation offers some challenges but is
likely to get approved. Management did not offer much in the way of details regarding
synergy opportunities other than overhead redundancy, and we believe some customer
growth on the part of SDXC will be thwarted. That said, the deal values SDXC on par with
Equinix, which is where we believe it should trade, with Equinix historically at a premium
due primarily to liquidity advantages.
♦ Europe came in ahead of our estimates (benefiting from b