According to a report by TechNavio, the global data center market is projected to grow 11% annually over the next three year period. The growth is attributed to rising digitization and cloud computing among organizations, which is driving the need for higher computational power. Switch is a technology infrastructure company powering the sustainable growth of the connected world and the Internet of Everything.
Las Vegas-based Switch was founded in 2000 by Founder and CEO Rob Roy who has developed over 350 issued and pending patent claims covering data center designs. He used these patent designs to build Switch’s data centers and their technology solution ecosystems. It offers data centers that exceed industry averages with efficient cooling, while being powered by 100% renewable energy. Two of its data centers are the only carrier-neutral colocation facilities in the world to be certified Tier IV Design, Tier IV Facility, and Tier IV Gold in Operational Excellence. These certifications are the highest classifications available in the industry.
Its facilities are built using Switch Modularly Optimized Designs, or Switch MODs, that allow it to rapidly deploy or replace infrastructure to meet its customers’ current and future data storage and compute requirements. Switch’s offerings have helped it attract over 800 customers worldwide. eBay is its biggest customer and accounts for nearly 10% of its annual revenues. Other customers include names like Amazon Web Services, DreamWorks, Intuit, Box, eHarmony, Cisco, and EMC, to name a few.
Currently, Switch operates three primary campus locations, called Primes, which cover ten colocation facilities. The Primes are present in The Core Campus in Las Vegas, Nevada; The Citadel Campus near Reno, Nevada; and The Pyramid Campus in Grand Rapids, Michigan. It is now expanding into a fourth location in Atlanta, Georgia. It is also building its facilities in Italy and Thailand.
Switch has grown rapidly in the last few years. Revenues have grown 20% from 2015 to 2016, to $318.4 million. It is profitable, but its margins have reduced due to investment in expansions. Profits fell more than 50% from $73.5 million to $31.4 million. Revenues in the first half of the current year have grown 17% to $181.3 million.
Switch has been privately held so far. Its funding details are not disclosed. It has been relying on long term loans as well. Its financial statements reveal that it had long-term loan obligations of more than $825 million as of June this year.
The company believes that the market opportunity for the data center market is much bigger driven by a 68% projected growth rate of connected “smart” devices; a 42% growth rate for connected sensors used by smart cities and the continued adoption of autonomous vehicles. These devices will continue to add to the Big Data phenomenon, thus driving the need for smarter data centers.
It recently filed its S-1 and plans to raise $100 million through the listing on the New York Stock Exchange under the symbol SWCH. The company will use the proceeds to buy out investors in Switch Ltd. and take control of the company through the recently incorporated Switch Inc. A multi-class share structure will allow founder and Chief Executive Rob Roy to maintain control, as his shares will have 10 times the voting rights of common shares.
Switch’s valuation is not yet known. Global Switch, a privately-held player in the segment, which owns and operates large-scale, multi-tenanted carrier neutral data centers had last reported revenues of $445 million in 2014 and a valuation of $6 billion. It remains to be seen how the market values it when it goes public.
This segment is a part in the series : 2017 IPO Prospects