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Equinix, Inc. (EQIX) is a global provider of network-neutral data centers and Internet exchange services for enterprises, content companies, systems integrators, and network service providers. The company was incorporated on June 22, 1998, and has U.S. headquarters in Foster City, California. Equinix has a direct sales force and channel marketing program. In addition to its worldwide headquarters located in Silicon Valley, the company has two more regional headquarters, one in London, Europe and the other in Singapore, Asia-Pacific.
With a rapid rise in Internet usage, an organized approach for network interconnection was needed to accommodate this Internet traffic growth. The exchange of traffic between these networks became known as peering. Peering occurs when networks trade traffic at relatively equal amounts and set up agreements to trade traffic at no charge to the other party. At first, government and non-profit organizations established places where these networks could exchange traffic, or peer, with each other. These points were known as network access points (NAPs). Over time, many NAPs became a natural extension of carrier services. However, these NAPs were unable to scale with the growth of the Internet. The lack of "neutrality" by the carrier owners of these NAPs also created a conflict of interest with the participants. This created a market need for network neutral interconnection points that could accommodate the rapidly growing need to increase performance for enterprise and consumer users of the Internet, especially with the rise of important content providers such as AOL, Google, Microsoft, Yahoo!, and others. In addition, the providers as well as a growing number of enterprises required a more secure and reliable solution for direct connection to a variety of telecommunications networks as the importance of their Internet operations continued to grow. To accommodate Internet traffic growth, the largest of these networks left the NAPs and began trading traffic by placing private circuits between each other. Peering, which once occurred at the NAP locations, was moved to these private circuits. Over the years, these circuits became expensive to expand and could not be built fast enough to accommodate the growth in traffic. This made it essential for the large carriers to find a more efficient way to exchange network traffic or to peer. Equinix's solution, which has the ability to peer across the room instead of across a metro area, has increased the scalability of customers operations. Through its Internet Business Exchange hubs (IBX hubs) in 10 markets in the U.S. and Asia-Pacific, customers can directly interconnect with each other for critical traffic exchange requirements. Direct interconnection to its aggregation of networks, which serve more than 90% of the world s Internet routes, enables customers to increase performance while significantly reducing costs. Equinix's suite of services allows customers to achieve greater efficiency of their IT infrastructure while reducing the cost (by nearly 70%) and the complexity of administering and managing these functions internally. This combined with the difficulty and cost associated with changing infrastructure providers, gives Equinix a long-term, loyal customer base of over 1,800.
Equinix's business is based on a recurring revenue model comprised of colocation, interconnection and managed infrastructure services. These services are considered to be recurring as customers are billed on a fixed and recurring basis each month for the duration of their contract, which is generally one to three years in length. Historically, approximately half of Equinix's then existing customers order new services in any given quarter representing more than half of the new orders received in each quarter. Recurring revenues, as a total, accounted for 95.2% of total 2006 revenues.
Colocation Services This segment (that contributed 70.3% of total 2006 revenues) includes cabinets, power, and IBXflex. The company's customers have several options for colocating their networking and server equipment. They can place the equipment in one of the company's shared or private cages or customize their space. Equinix offers both alternating current (AC) and direct current (DC) power circuits at various amperages and phases customized to a customer's individual power requirements. IBXflex service allows customers to deploy mission-critical operations personnel and equipment on-site at the company's IBX centers. Equinix's IBX centers include multiple layers of physical security, scalable cabinet space availability, on-site trained staff around the clock, dedicated areas for customer care and equipment staging, redundant alternating current AC/DC power systems, and multiple other redundant, fault-tolerant infrastructure systems. This space can also be used as a secure disaster recovery point for customers' business and operations personnel. As such, customers can place their equipment and interconnect with a variety of networks or other business partners.
Interconnection Services This segment (18.8%) includes physical cross-connect/direct interconnections, Equinix Internet Core Exchange, Equinix Exchange, Equinix IBXLink, and Internet connectivity services. These services provide scalable, reliable, and cost-effective connectivity that allow customers to exchange traffic directly with the service provider of their choice, or directly with each other. These interconnection services operate either on a one-to-one basis with direct cross-connects or on a one-to-many basis through one of the company's peering services. In peering, Equinix acts as the relationship broker between parties who would like to interconnect within its IBX centers. Equinix Internet Core Exchange is a pre-provisioned interconnection package that enables direct peering interconnections between Internet protocol (IP) backbone networks. Customers can peer through and connect to the Equinix Exchange via a central switching fabric. With a connection to this switch, a customer can aggregate multiple interconnects over one physical connection with up to 10 gigabits of capacity. The company has a partnership with Neustar to facilitate voice-over-Internet protocol (VoIP) peering. The Exchange service is offered as a bundled service that includes a cabinet, power, cross-connects, and port charges. IBXLink allows customers to seamlessly interconnect between IBXs at capacities up to 10 gigabits per second level. Customers who are installing equipment in the company's IBX centers generally require IP connectivity or bandwidth services. Equinix offers customers the ability to contract for these services through it from any of the bandwidth providers. This service, which is provided in Asia, is targeted towards customers who require a single bill and a single point of support for their entire services contract.
Managed information technology (IT) infrastructure Services This segment (5.7%) includes Professional Services, Smart Hands Services, Equinix Direct, Equinix Mail Service, and Equinix Command Center, allowing customers to leverage Equinix's telecommunications expertise, maximize the benefits of IBX hubs, and optimize their infrastructure and resources. Equinix's IBX centers have Internet and telecommunications specialists who are onsite and available around the clock, and are trained to perform installations of customer equipment and cabling. The company's Smart Hands Service gives customers access to its IBX staff for a variety of tasks such as equipment rebooting, power cycling, card swapping, and performing emergency equipment replacement when their own staff is not on site. Equinix Direct is a managed multi-homing service that allows customers to provision and manages multiple network connections over a single interface. Equinix Mail Service, available only in the company's Singapore location, is an outsourced solution, primarily based on the Lotus Notes and Microsoft Exchange platforms, to which customers entrust the operation and support of their messaging applications. Equinix Command Center, available only in Asia-Pacific, is a suite of managed services for the management and monitoring of enterprise-level information systems and network infrastructure.
Equinix also generates a nominal amount (0.5% of 2006 revenue) of recurring rental income from the other tenants located on its Ashburn campus property, which it purchased in October 2005. Non-recurring revenues comprise professional services, installation services related to a customer's initial deployment, and customer settlements, which represent fees paid to the company by customers who wish to terminate their contracts prior to their expiration. These services are considered to be non-recurring as they are billed typically once and only upon completion of the installation or the services performed. These non-recurring revenues are typically billed on the first invoice distributed to the customer. Non-recurring revenues are generally less than 10% of total revenues. They accounted for 4.8% of Equinix's total 2006 revenues.
Equinix operates 37 data centers in nine countries, serving approximately 17 markets with a footprint in Asia, U.S. and Europe. As of September 30, 2007, Equinix operates IBX centers in the Chicago, Dallas, Los Angeles, New York, Silicon Valley, and Washington, D.C. metro areas of the U.S., Hong Kong, Singapore, Australia, and Japan in the Asia-Pacific region, and the U.K., France, Germany, and Switzerland in European region. The company's target customer segments include service providers, digital media/content providers, financial services, and general enterprise. Its IBX hubs include carriers such as AOL, AT&T, British Telecom, Cable & Wireless, Comcast, Level 3, NTT, Qwest, SingTel, Sprint, and Verizon. Access to such a wide variety of networks has attracted nine of the top ten Internet properties and numerous other enterprise and government customers, including Amazon.com, Bank of America, Electronic Arts, Fox Interactive Media, Gannett, The Gap, Goldman Sachs, Google, IBM, McGraw Hill, MSN, NASA, News Corporation, Salesforce.com, Solo Cup, Sony and Yahoo!. IBM, Equinix's single largest customer, represented approximately 9% of total revenues for fiscal 2006. As of September 30, 2007, customer count was 1,453, excluding the impact of the IXEurope acquisition.
