Cisco, Microsoft buy stake in Net exchange
company
REUTERS
REDWOOD CITY - Cisco Systems Inc. and Microsoft Corp. are among
investors in a new company that plans to build up to 35 Internet business
exchanges worldwide to interconnect leading Web firms.
The investment group, which also includes Benchmark Capital, has put $12.4
million into Redwood City, Calif.-based Equinix Inc., which plans to open
three U.S. exchanges by the end of 1999, Equinix said in a statement.
The Equinix facilities will act as exchange hubs for companies that provide
Internet services, sell Web content and operate communications networks.
These companies, which in essence form the Internet, will locate hardware in
exchanges as a way to link their networks with those of other companies —
for instance an Internet service outsourcing its e-mail service to another Web
firm.
As independents, the Equinix exchanges would allow Internet companies to
connect with other companies without running traffic through phone company
networks.
Most of the Internet exchanges owned by telecommunications companies
encourage customers to run connections through their networks or those of
other service providers, said Tom Nolle, president of research firm CIMI
Corp.
"We're neutral in the sense we're not in any of these businesses," said Equinix
Chief Executive Officer and founder Al Avery, who together with Equinix
Chief Technology Officer and co-founder Jay Adelson helped set up the
well-known Palo Alto Internet Exchange, or PAIX.
Adelson said Equinix services would cut down the cost of linking networks and
offer badly needed additional capacity for the electronic commerce market.
Unlike PAIX, which AboveNet Communications Inc. agreed to buy from
Compaq Computer Corp. on Monday for about $75 million, Equinix
exchanges will not link companies to the Net, but interconnect companies that
already form the Web.
Equinix will generate revenue by charging for space to locate companies'
network computers and for interconnections like switches and routers that link
those computers.
The first operation to open in the Washington D.C. area will be between
30,000 square feet and 150,000 square feet, depending on demand. The
PAIX exchange is around 10,000 square feet.
Avery declined to name specific companies Equinix had signed up but said the
number of leading ISPs, communications carriers and content providers was
well into double figures.
Equinix plans to build 15 facilities across the United States and start
international expansion, either in Europe or Asia, around mid-year 2000.
Adelson valued the Web business exchange market at between $4 billion and
$6 billion by 2002. He said it could be worth as much as $2 billion in 1999.
Asked if Equinix would consider an initial public offering of stock within 12
months, Avery said the company was not ruling out the possibility but had set
no timeframe for such a process.
In a mid-afternoon rally by technology and Internet issues, shares of Cisco
were up $3.69 at $108.06 while Microsoft was up $1.25 at $77.56.
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