Server Farming

Oct 6 2010   5:40PM GMT

Data center services stocks take it on the chin

badarrow Barbara Darrow Profile: badarrow

Comments from Equinix and Savvis spooked Wall Street late Tuesday and this morning, body-slamming those stocks as well as shares of companies selling similar services.

On Tuesday, Equinix cut its third quarter revenue projections to the range of $328 million to $330 million. It had expected revenue in at about $335 million to $338 million. The company cited difficulty in signing longer-term contracts even with discounted services. And on that note, analysts and stock sellers were off to the races.

Shares of Akamai, which makes technology that speeds delivery of content over the Web, also suffered as did that of Rackspace, Terramark and Internap. At one point Equinix shares were off 35% to $69 per share, down from yesterday’s close of $105.09.

While Wall Street tends to overreact to earnings comments, there has been long-simmering worry that companies may find it easier to keep their IT running in house vs. doling it out to colocation companies and other service providers. When that happens enough, the huge data centers, many of which were built to run cloud infrastructure, could have trouble paying their bills, as Chuck Goolsbee wrote for two years ago.

Still, others cautioned not to read too much into this selling frenzy. For one thing, Equinix runs a couple dozen cloud providers in its facilities. One of them–Amazon Web Services, in fact–has seen its overall usage double in a year. Not too shabby.

Let us know what you think about this post; email Barbara Darrow, Senior News Director at or follow us on twitter.

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