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Cj asked in Business & FinanceInvesting · 1 decade ago

Equinix good to buy now that the price per share is so low?

It dropped like -35 on Wednesday...

Do you think that Equinix will make a sharp recovery and increase quickly??

1 Answer

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  • John W
    Lv 7
    1 decade ago
    Favorite Answer

    Apparently it was because they revised their Q3 and full year outlooks downwards to below analysts estimates. It's more the fact that they would give guidance and then revise it that concerns investors as it brings into doubt the data that they have. It takes time to rebuild confidence, I don't think anything major changed with it's operation.

    Of course, cloud computing is going to be a tricky business. Remote access to virtualized computers will be the likely first generation product but such remote access is very dependent on network bandwidths and latency in order to be useful. Ultimately, business needs should be assessed and provided for in web based formats and really only Google has made in roads on that front.

    How the capacity of a cloud computing center is sized is going to be very critical to the perception of it's functionality. Many operations will tend to under provide in order to realize the cost savings advantages but this could really hurt the industry as a whole. If you have one disingenuous company in the lot, the business world could really be turned off by the concept. Revising the outlooks doesn't really help investors to trust the company's management.

    Keep in mind that corporate Windows 7 deployments are around the corner. It's quite possible that companies will judge cloud computing to be immature and just sink money into new computers instead. Certainly their IT departments would want that instead of essentially outsourcing their services.

    The testimonials on their website are for server hosting, not cloud computing. I suspect that their current customers are primarily there just for the floorspace and they haven't really got any takers on the cloud computing concept which means it's still unproven.

    Now if they were going after the bottom end batch processing services as a revenue base which wouldn't require as much redundancy then I would have more faith in them remaining solvent but they aren't in the cities where compute needs are typically batch processing.

    Also, they don't seem to be placing the data centers in remote locations. One of the main advantages to be realized would be to sign on with a smaller town that has reasonable access to the fibre network, many of these towns are offering tax cuts and even low priced power to bring a data center to them. I think we had a couple lined up to provide power at 3 cents a kilowatt hour. The cities listed on their website would suggest that they may be paying 12 cents a kilowatt hour, of course they just pass that on to their customers but power cost is a big part of the operating costs.

    It's true that the current overblown IT departments are plum pickings for outsourcing and centralization but centralization efforts in the past have always lead to an alienation of the user base resulting in the individual departments hiring their own personal geek and suddenly there are a distributed network of IT support personnel which get later assimilated into a a massive IT department. Cloud computing will be most effective in companies where the IT department wants to be a user oriented support group and are just outsourcing the more mundane provisioning and infrastructure roles of their job. Companies that sign on with cloud computing and then trim down their IT departments instead of refocusing them onto the users will find themselves caught in the cycle of centralization, alienation, distributed support, to massive IT and repeat.

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