May 17, 2006
Equinix Announces New Data Center Openings and Continues Expansion Plans to Meet Growing Customer Demand
Foster City, CA — May 17, 2006 — As a result of growing customer demand, Equinix, Inc. (Nasdaq: EQIX), the leading provider of network-neutral data centers and Internet exchange services, today announced the opening of new data centers in the Chicago and Los Angeles areas, the details of a new data center build in the Chicago area, and the company's intention to expand in the New York market. Based on the results of a comprehensive worldwide demand study that Equinix recently conducted, these expansions will support the significant customer growth expected in Equinix's key markets. Equinix's 2006 data center openings and the planned builds in the Chicago and Washington, D.C. areas, represent a 35 percent increase the company's cabinet capacity. Equinix will discuss these expansions, results of the demand study and revised guidance for the quarter ending June 30, 2006 and for the year ending December 31, 2006 at the company's first Investor Analyst Day to be held today from 1:00 PM to 5:00 PM EDT in New York City. A live audio webcast of the presentations will be made available on the Investor Relations section of the Equinix Web site at http://invest.equinix.com.
"Driven by the proliferation of IP-based applications, from music downloads to content-rich web sites to businesses exchanging large amounts of data, the growth rate for colocation services nearly doubled in 2005, and is expected to experience double-digit growth in both 2006 and 2007 when the worldwide market is expected to comprise $3.5 billion,” said Andy Schroepfer, founder of Tier 1 Research. “Equinix has significantly outpaced this growth rate over the past several years and has risen to become the current worldwide market leader."
The opening of Equinix's expansion center in Chicago, adjacent to its current downtown Chicago Internet Business Exchange™ (IBX®) center, adds approximately 1,100 cabinets to the existing IBX, which has become a principal hub for the Chicago region's growing financial trading exchange industry. Offering direct access to the more than 60 networks and 150 enterprises and content companies already operating within Equinix's Chicago IBX, the new center has been in strong demand since plans were announced for the expansion in 2005. As a result, the new center is already more than 50 percent reserved at the time of its opening and is expected to be cash flow positive by the end of 2006.
Los Angeles data center also opening today, located in El Segundo, represents Equinix's third IBX center in the Los Angeles area, providing Equinix with additional data center space to respond to strong customer demand within the rapidly growing digital media and entertainment industry in the region. The expansion doubles Equinix's Los Angeles area cabinet capacity. As planned and announced separately today, Equinix has signed an anchor customer, MySpace, which when fully installed, is expected to generate approximately $6 million in annual revenues.
“The announcements today reflect Equinix's commitment to invest in support of our customers' growth and further extends our market leadership position,” said Peter Van Camp, CEO of Equinix. “With our IBX center openings in 2006 and our planned builds in the Washington, D.C. and Chicago markets, we will have increased our cabinet capacity by 35 percent.”
Equinix also detailed plans announced earlier this year for the construction of a new, third IBX center in the Chicago metro area, located near Chicago O'Hare Airport. After conducting extensive due diligence, Equinix will purchase the site in early June. Equinix intends to develop the site in multiple phases. The first building, at full capacity, will accommodate approximately 3,800 cabinets, of which 2,500 will be built out in phase one of the expansion plan. At capacity, Equinix expects this center to generate approximately $80 million in annual revenue, cash gross profit margins of approximately 70 percent, and a targeted 10-year IRR return in excess of 40 percent. The new center will support a new service specifically targeted to large enterprise deployments, and it will complement the strength of the Equinix Financial eXchange customer base in Equinix's existing Chicago IBX center located in the downtown area. The new center will be directly linked to the downtown IBX center through redundant dark fiber links managed by Equinix.
Equinix intends to invest approximately $165 million to build out the first phase of the Chicago center, of which $70 million is expected to be incurred in 2006. This includes an investment of approximately $50 million to purchase the land, construct a specially built 250,000 square foot shell, acquire access to power, and provision fiber for interconnection to Equinix's downtown IBX center location. This approach allows a second expansion phase of approximately 1,300 cabinets at an incremental investment of $30 million. Equinix intends to finance at least 50 percent of the build costs in a long-term financing arrangement at rates between 7 and 8 percent. As customer demand merits, this investment will support future growth with the build out of a second IBX center, contiguous to this site.
“Equinix will evaluate future expansion plans to ensure we have the ability for a measured build out approach and to secure attractive financing terms whereby Equinix limits its cash investment to less than 50 percent of the total build out costs,” said Renée Lanam, chief development officer of Equinix.
Also announced today, Equinix intends to build an additional center to supplement the two centers currently in operation in the fast growing New York metro area. The company expects to open the new center in the second half of 2007. Customers will have direct access to the networks already operating in Equinix's other centers in the region.
As a result of the Chicago expansion, Equinix has revised capital expenditures guidance for the second quarter and year-end 2006. Capital expenditures for the second quarter are expected to be approximately $42.0 to $47.0 million, including $32.0 to $37.0 million of expansion capital expenditures. Capital expenditures for the full year 2006 are expected to be in a range of $ 170.0 to $ 175.0 million, comprised of approximately $25.0 million of ongoing capital expenditures and approximately $145.0 to $150.0 million of expansion capital expenditures. Adjusted free cash flow is expected to be in a range of negative $75.0 to negative $80.0 million for the year. Adjusted free cash flow is defined as net cash generated from operating activities less net cash used in investing activities (excluding the purchases, sales and maturities of short-term and long-term investments). All other financial guidance remains unchanged.
Forward Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, the challenges of acquiring, operating and constructing IBX centers and developing, deploying and delivering Equinix services; unanticipated costs or difficulties relating to the integration of IXEurope into Equinix; a failure to receive significant revenue from customers in recently built out data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; the results of any litigation relating to past stock option grants and practices; and other risks described from time to time in Equinix's filings with the Securities and Exchange Commission. In particular, see Equinix's recent quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release.
Equinix and IBX are registered trademarks of Equinix, Inc. Internet Business Exchange is a trademark of Equinix, Inc.