Shares in data center companies took it on the chin this week after hosting provider Equinix surprised the market by saying its revenues would not meet expectations.
At the closing of trading Wednesday, shares in the Foster City, Calif.-based company were down almost 35% the day after it said it expects third quarter revenue to come in at between $328 million and $330 million, down from an earlier estimate of $335 million to $338 million.
On Thursday morning, the company said its core business was solid and that it wasn’t expecting any big changes in demand, according to the Associated Press. Shares regained some of their losses and were up $4.50 to almost $75 in midday trading.
The stock, which had been trading above $100, closed Wednesday at $70.34 after the company lowered its full-year revenue guidance to $1.22 billion, from its previous forecast of $1.23 billion to $1.24 billion.
“This updated guidance is due to underestimated churn assumptions in Equinix’s forecast models in North American, greater than expected discounting to secure longer term contract renewals and lower than expected revenues attributable to the Switch and Data business acquired in April 2010,” the company said in a statement.
Equinix purchased Switch and Data Facilities Co. for about $683.4 million. Switch and Data operated about 34 data centers in 22 markets in the U.S. and Canada.
Shares of other major data center companies, including Rackspace Hosting, Savvis and Internap were down sharply Wednesday following Equinix’ new guidance, as investors worried whether the sector was due for a correction. Savvis shares were down 10.4 percent at the close of the day’s trading, despite having reaffirmed its guidance.
The sharp drop in share prices was in direct contrast to the recent run-up most data center-related stocks have experienced. Shares in the space were bolstered by a bidding war between Hewlett-Packard and Dell for storage equipment vendor 3PAR and other recent takeovers.
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