By David Gross
Led by Equinix (EQIX), data center stocks lost more than 10% of their value today, with the 13 stocks we track in our services index ending up with $26.5 billion of market cap, after starting the today with $29.7 billion. Of the $3.2 billion of lost value, $1.6 billion came out of Equinix.
Equinix lost almost exactly a third of its value, closing at 70.34. Rackspace and Savvis, which were big winners last quarter, were down over 10%. The three data center REITs - Digital Realty (DLR), DuPont Fabros (DFT), and CoreSite (COR) were all down around 5%.
As I mentioned in an earlier post, Equinix executives were hardly convincing on yesterday's call, and were pointing fingers in all sorts of odd directions, including credit memo forecasting and churn modeling. But a 2% downward revision in revenue is not worth a 33% selloff. The dramatic Wall Street overreaction extended to Akamai (AKAM), which was down 7%, even though Equinix cited competition in the media industry as one challenge. CDNs have always presented a unique problem to the co-lo provider, so Wall Street pounded Akamai for being a strong competitor to Equinix.
The absurdity extended to the networking suppliers, where last quarter's 50%+ gainers in layer 4-7 networking - F5 (FFIV), Riverbed (RVBD), and Radware (RDWR) - all took hits between 8 and 12%. Citrix (CTXS), also up 50%+ last quarter, was down 14% in Equinix's wake. These four stocks alone lsot another $3 billion in market cap today not included in the $3.2 billion mentioned above. Meanwhile, the broader markets were essentially flat, with the rest of NASDAQ holding up fine.
Many of these stocks have been richly valued, and this was just an excuse to sell. But a very odd excuse nonetheless. Is Citrix really worth 14% less because Equinix guided revenue down 2%?