Equinix, Inc. has announced that it has added a second Internet Business Exchange(IBX) data center to its Tokyo presence, resulting from the acquisition of a long-term building lease and the purchase of assets from VSNL International. Equinix entered into an agreement to purchase the VSNL International leasehold improvements for $7.5 million and will lease the building from the current landlord. In addition, the company will provide colocation services to VSNL International in this center. This transaction allows Equinix to expand its capacity in a market where it has operated since 2003 in response to strong customer growth. As a result of this acquisition, Equinix will incur incremental costs attributed to this transaction, and given the recent sale of the Honolulu IBX, Equinix has updated guidance for the year ending December 31, 2007.
The data center, located in the Tokyo Metropolitan area, will add approximately 740 sellable cabinets and approximately 73,000 square feet, increasing Equinix's Tokyo footprint to approximately 116,000 square feet. Equinix intends to place new customers in the center during the fourth quarter of 2007.
Once Equinized, the new center will feature a physical infrastructure that is consistent with Equinix's industry-leading standards for high-performance security, environmental control and power availability. The power infrastructure will support blade technologies and other high power density deployments. The center will be interconnected to the existing Tokyo IBX through redundant dark fiber links managed by Equinix. This interconnection fabric will enable occupants in each center to have direct access to each other as if they were in the same location, and will provide immediate access to the more than 15 networks currently operating within Equinix's Tokyo IBX.
VSNL International will continue to operate in the center as a long-term customer of Equinix, providing its standard suite of communications services to its customers in Tokyo, including colocation services. Existing VSNL International customers, several of whom are already operating in other Equinix IBX centers, will remain in the center as VSNL International customers. "We have seen robust growth in customer deployments at our existing Tokyo center, mirroring the increasing demand for Internet and networked services in Japan, said Peter Van Camp, CEO of Equinix.
"We were very fortunate to have the opportunity to acquire this high-quality center, as it will enable us to more than double our original capacity and maintain our momentum, in this important market.
Equinix intends to invest $25.0 to $30.0 million of capital expenditures in 2007 to make additional infrastructure enhancements to this center. The center is expected to generate, at capacity, annual revenues between $20.0 and $25.0 million. Equinix expects long-term cash gross margins from this expansion to be in excess of 65%, consistent with the company's model for previous expansion centers.