Verizon (VZ) To Divest 29 Data Centers To Equinix For $3.6B
Zacks Investment Research | Dec 06, 2016 08:02PM ET
Shares of U.S. telecom behemoth Verizon Communications Inc. (NYSE:VZ) has had a moderate run on the bourses over the past one year. Year to date, Verizon has gained 8.96% but has failed to beat the Zacks categorized U.S. wireless national industry's growth of 14.78%.
However, we believe that Verizon’s diversified business model covering different fields like communications, technology, wireless industry, Internet of Things (IoT) and the media video and digital platform has been the primary reason for the company’s Zacks Rank #3 (Hold).
Toward this end, the telco recently finalized its deal with Eqinix Inc. (NASDAQ:EQIX) , to divest its data center business to the latter. As per the deal, Verizon has decided to sell 24 data center sites in the U.S. and Latin America to Equinix for $3.6 billion, in an all-cash transaction. The Verizon-Equinix deal is expected to close by mid-2017, subject to regulatory approvals.
Equinix’s Profit
Equinix is a global interconnection and data center company and also a major colocation facility provider. The company provides space, power and cooling facilities to customers. Growing implementation of cloud computing technology has increased demand for data center space. Amazon Web Services, the cloud computing business of Amazon.com Inc. (NASDAQ:AMZN) and Microsoft Corp. (NASDAQ:MSFT) are major clients of Equinix.
The recent deal will expand Equinix's global reach by boosting its operations in the U.S. and Latin America and help it foray into new markets like Bogotá, Culpeper and Houston. The acquired portfolio includes 900 customers and an area of 2.4 million square feet. Equinix's global presence will now scale to 175 data centers across 43 markets which include 17 million square feet of area in the Americas, Europe and Asia-Pacific. The deal will also expand Equinix’s capacity in the existing markets of Atlanta, Denver, Miami, New York, São Paulo, Seattle and Silicon Valley.
Coming to price performance, Equinix has gained 8.96% year to date, outperforming with the Zacks categorized Reit-Eqty Trust Retail Market’s decline of 1.62%.
The outperformance can be attributed to the impressive earnings performance of the company in the last reported third quarter of 2016 wherein both adjusted funds from operations (AFFO) and revenues improved significantly from the year-ago quarter. We believe this is also the primary reason for Equinix’s Zacks Rank #3. You can see Zacks Investment Research
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