Preview: Equinix Earnings Due Tomorrow

Equinix will be reporting its third quarter 2010 results tomorrow, October 26. After the company lowered its revenue guidance on October 5, the whole data center sector suffered a deep sell off, with several companies losing more than 10 percent of their market cap as investors assumed that Equinix's revenue warning might have implications for all the players in the sector.

It is worth noting that, in spite of missing its own guidance for the first time in several years, Equinix will probably keep growing about 20 percent organically in 2010. But investors have already expressed their concern about two main factors: pricing and growth prospects in the colocation sector.

Equinix has tried to address some of the questions arising from its post-warning conference call through an official filing: “Equinix, Inc. Responses to Questions Pertaining to Business Outlook dated October 7, 2010”.

During its October 26 conference call, Equinix will also give an initial view of its expectations for 2011, something quite unusual for the company after Q3 results. As many analysts suggested, Equinix's management appears to be trying to rebuild investors' confidence after the selloff, as there seem to be no short-term catalyst to reverse the recent trend.

The disappointment in the October 5 guidance revision was quite clear, with the price falling from about $105 to around $70 before stabilizing in the current range around $75 a share. But it's also significant that most institutional investors seem to remain confident in the long-term outlook for the company.

According to the most recent available filings, only Wellington Management, among institutions owning more than 5% of the Company, has cut its holding in half (from 10.18% to 5.12%) after the revenue warning. Most other institutions (Lone Pine Capital, Shumway Capital Partners, Goldman Sachs Asset Management and Bamco) have kept their holdings steady.

There will be several metrics closely watched by the investing community during this conference call, like revenue growth, EBITDA, pricing, churn, cabinet equivalents billing, etc.

We believe it might be useful for DCK readers to get a few of them put together in a spreadsheet, so that you can do your own modeling and follow these key data in their full trend over the last quarters:

Paolo Gorgo writes about the the colocation and CDN sector at Nortia Research and Seeking Alpha.