Eric Mindich’s Eton Park exits position in Equinix


Sep. 24 2014, Updated 9:00 a.m. ET

Eton Park exits positions in 2Q14

Eric Mindich’s Eton Park Capital Management added new positions in Allergan Inc. (AGN), Armstrong World Industries (AWI), B/E Aerospace (BEAV), and AerCap Holdings (AER). Eton Park exited its positions in Equinix (EQIX), Moody’s (MCO), and Mead Johnson Nutrition (MJN) during 2Q14.

Eton Park exited a position in Equinix (EQIX) that accounted for 3.46% of the fund’s first quarter portfolio.

Overview of Equinix

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Equinix is a global interconnection and data center company. It offers premium data center colocation, interconnection, and exchange and outsourced IT infrastructure services via its International Business Exchange (or IBX) data centers in 32 markets around the world. The company’s customer count increased 8% to approximately 6,093 as of June 30, 2014, from approximately 5,647 as of June 30, 2013.

Equinix awaits IRS ruling on REIT conversion

Equinix is awaiting a private letter ruling (or PLR) from the IRS over a conversion to a real estate investment trust (or REIT). In September 2012, Equinix’s board approved the conversion to a REIT that is scheduled to complete in January 2015.

In November of last year, both Equinix and its peer, Iron Mountain Inc. (IRM), said the IRS was evaluating their eligibility. A REIT conversion is expected to benefit the company, since REITs pay lower taxes and higher dividends than other companies. Equinix believes it’s eligible for REIT status “based on both existing legal precedent and the fact that other data center companies currently operate as REITs.”

Shares rose earlier in April after CBS Corp. (CBS) announced a favorable IRS ruling for its REIT application for its advertising company, CBS Outdoor. Lamar Advertising (LAMR) too received IRS approval for a REIT conversion.

Equinix sees revenue growth from data center expansions

Equinix posted net income of $11.3 million, which represents a basic and diluted net income per share of $0.22. Its revenues were $605.2 million for the second quarter, a 4% increase sequentially and a 14% increase over the same quarter last year.

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Equinix’s recurring revenues, consisting primarily of colocation, interconnection, and managed services, were $574.2 million, up 14% year-over-year. The company’s revenue grew across the Americas, Europe, the Middle East, Africa, and Asia Pacific on the back of data center expansions and an increase in orders from existing and new customers.

Gross margins improved to 52%, from 50% for the previous quarter and 49% for the corresponding quarter last year. Adjusted EBITDA was $275.3 million, a 6% increase over the previous quarter and an 11% increase over the same quarter last year.

In July, Equinix acquired the remaining 47% stake of ALOG Data Centers of Brazil from Riverwood Capital in an all cash transaction of $225 million. The acquisition aims to expand the company’s presence in Brazil and meet the growing demand for data center services in Latin America. ALOG is the only provider to offer data center services in both Sao Paulo and Rio de Janiero, the largest markets in Brazil.

Equinix aims to capitalize on cloud computing opportunities

For 2014, a significant part of Equinix’s strategy and innovation investment aims at capturing the longer-term opportunity in cloud computing. In April, Equinix launched the Equinix Cloud Exchange, an advanced interconnection solution for direct access to multiple clouds and multiple networks across the globe.

The exchange provides enterprises with simple, scalable, direct access to the multiple cloud services they need to build highly flexible hybrid cloud solutions inside Equinix IBX data centers. With Equinix Cloud Exchange, enterprises can connect directly to Amazon Web Services and Microsoft Azure, the top public cloud services.

The next part of this series discusses Eton Park’s 2Q14 exit from Moody’s Corp (MCO) during 2Q14.



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