Foster City, California-based Equinix is the largest North American player by market cap and revenues, not least because it has already extended its operations to Asia. Europe was the major business geography still missing in its offering, so it has moved to address that situation by buying IXEurope, which has its HQ in London and runs 14 data centers across seven cities in four countries (UK, Germany, France and Switzerland).

In presenting the rationale for the acquisition, Equinix CEO Steve Smith cited a study by Tier 1 Research that suggests that, while global demand for data center space in co-lo sites outstrips supply by a factor of three to one, in Europe in particular the figure is six to one.

Of course, that varies by country. The UK in particular has seen a major upswing in pricing, which is now on a par with US levels, and even the laggard markets of France and Germany have begun to pick up, respectively over the last 18 and 12 months, as their overall economies have shown improvement, said IXEurope CEO Guy Willner.

Also symptomatic of the uptick in the European market is the number of announcements of expansion by the region’s co-lo players. Amsterdam-based Interxion announced plans to invest 50m euros ($67m) on data center expansion across the continent during 2007, while the largest player in Europe, TeleCityRedbus, unveiled plans for a new 50m-pound ($100m) facility in London. These announcements follow a hectic 2006 for M&A activity in the sector, which saw, amongst others, IXEurope picking up data centers in Germany and France that were, as Willner put it, distressed assets.

Also on the conference call to announce the deal, Equinix chief business operator Margie Backaus made it clear that the major business opportunity for Equinix in Europe will be in data center and related services per se, rather than the interconnection business that forms a nice chunk of its revenue in North America and Asia. The reasons for this are, in part, structural, in that at least the peering side of interconnect is not a commercial pursuit in Europe, being done instead by non-profit organizations such as LINX in London and AMS-IX in Amsterdam.

She said the company does see some opportunities in the crossconnect side of interconnect, particularly with the financial exchanges who are particularly demanding on higher bandwidths. We’ve already rolled out 10Gb Ethernet to Asia and we will have it over time at IXEurope, she said.

Still, it’s clearly the opportunities for cross-selling between the respective customer bases, and in particular for housing some of its Stateside customers in Europe, where Equinix sees its immediate chances of driving revenue.

Our View

This is not the first time Equinix has cast an eye at Europe. In 2001 there was the announcement of an agreement with Interxion, as well as with Pihana Pacific in Asia/Pacific, to enhance the international Internet operations of global enterprises and Internet businesses. It came at the tail end of the boom, however, and the relationships did not prosper.

Now, on the other hand, Equinix has made a much more serious commitment to the Old Continent, acquiring a company that itself grew 66% last year and adds over 10% to its global footprint of sellable space, which will be around 3m square feet after the acquisition completes. Revenues, meanwhile, will be approaching $1bn.

So will this be a one-off, or are other US players likely to follow? The obvious next candidate would Switch & Data, though that company is a good deal smaller than Equinix and has so far been content to stay in the US.