By David Gross
Wall Street has spent the last week and a half fretting over "demand trends" in data centers. Meanwhile, one of the largest users of data centers, Google (GOOG), increased its quarterly capex four-fold to $757 million from the same period last year. This represented a 59% sequential increase. To put this in a little more perspective, the company spent $810 million on capex for all of 2009.
In meetings with institutional investors, I've made the point that demand for data centers comes from transactions. And whether they originate specifically through web retailers, options traders, messaging, search engines, or video distribution, it really doesn't matter, what matters is the growing number of businesses that can't exist without low latency transactions, and panicking like Wall Street did last week over Equinix looks remarkably out of context in light of what's happening in this microsecond economy. And Google's numbers reflected this. While it can be argued that Google's capex fluctuates, its overall business fundamentals were remarkably strong, with cost-per-click increasing 3%, and click-through rates going up 16%.
Another thing that helps data centers is active stock trading, and tomorrow could be a busy Friday with Google already trading up 9% after hours.