January 15, 2009

Equinix, Inc.
(EQIX-NASDAQ) Telecommunications

Rating/Risk: Neutral/Moderate
Price: $52.73
Market Data
Target Price ($): N/A 52-Week Range: $32.72-101.00
Market Cap. (M) $1,961.0
Initiating Coverage with a Neutral Rating
Shares Out. (M): 37.4
Float Shs. (M): 36.6
Investment Conclusion: Data center outsourcing is on the rise within enterprises, creating an
Inst. Ownership: NMF
attractive growth landscape for the market share leader, Equinix Inc. Equinix has expanded Short Interest (M): 8.4
capacity faster than its peers, which has allowed market share gains in this supply constrained Avg. Daily Vol. (Shs.): 1,170,000
industry. Although we expect capacity expansion to slow materially in 2009 and 2010 for the Avg. Daily Vol. (M): $61.7
industry, Equinix has the capital to continue growing and taking market share. International
expansion provides an additional avenue of growth for Equinix and the industry as a whole. We Capitalization
do believe that no company will escape the current economic weakness and are modeling a Book Value / Share: 2.18
moderation of revenue growth in 2009. At 8.5x enterprise value to our 2009 EBITDA estimate
Net Cash / Share: $1.24
the stock is trading at the high end of the colocation universe which we feel leaves little room for
Long-Term Debt / Cap'l: 47.8%
upside. Based on our outlook of some moderation of near term bookings as quantified in our
Dividend Yield: 0.0%
below-consensus 2009 estimates, we are initiating coverage with a Neutral rating.
Fundamental Summary
5-Yr. Rev CAGR: 33.8%
Key Points:
5-Yr. EBITDA CAGR: 236.2%
• Market share leader in a strong growth market. ROE (2007): -0.7%

Description
• Low relative international penetration coupled with recent capacity expansion should create
Equinix is a provider of colocation,
attractive long term growth for Equinix.
interconnect, and managed IT services.
The company operates data centers in six
• The increasing international exposure does come at a cost with the strong dollar having a large of the largest cities in the U.S., four
impact on Equinix revenue. countries in Asia, and eight European
countries, offering over 3.5m square feet
• We are modeling a moderation of near term bookings which we feel has yet to be incorporated of billable space worldwide.
into street models and therefore initiate coverage with below consensus revenue and EBITDA
estimates for the year.

Fundamental & Valuation Data

F2007A --------- F2008E ---------- ----------- F2009E ----------
Current Prior Consensus Current Prior Consensus
Mar ($0.15) $0.15 A $0.40 $0.28
June $0.04 $0.06 A $0.32 $0.34
Sept. $0.12 $0.19 A $0.34 $0.43
Dec ($0.17) $0.30 $0.24 E $0.53
Year ($0.16) $0.70 $0.66 E $1.59 $1.53

Revenue $419.4 $702.6 $705.0 $797.6 $876.5

Adj EBITDA $155.4 $287.7 $287.8 $342.5 $371.9

P/E -326x 75x 33x

EV/Revenue 6.6x 4.2x 3.7x Steve Salberta, CFA
EV/Ebitda 17.7x 10.1x 8.5x 610.832.5212
[email protected]

Kevin Ciabattoni
610.684.5414
[email protected]

PLEASE SEE THE IMPORTANT DISCLOSURE APPENDIX ON PAGES 17 AND 18.

Key Points in Detail

• Market share leader in a strong growth market. Companies are increasingly outsourcing their
data center needs, choosing network neutral service providers to rent space and connections to the internet
backbone. Gartner estimates that companies are organically increasing their data center floor space
requirements by 8% - 10% per year and combining this with a shift to outsourcing, demand is estimated to
grow 15% over the next four years. Data center supply is estimated to grow only 5% annually over the
next two years and could be much lower than that as competitors have put projects on hold as a result of
capital constraints. With $330 million of cash on hand and a relatively low net debt to EBITDA, Equinix
is in an enviable financial position in this economy to build capacity and take additional market share.

• Low relative international penetration coupled with recent capacity expansion should create
attractive long term growth for Equinix. International markets are just beginning to realize the cost
synergies of outsourcing infrastructure requirements, which more than doubles the market opportunity.
Capacity constraints have been the most severe internationally as space is limited which has created a
strong pricing environment, and new capacity coming online over the next 12 months should allow
attractive growth in these markets. Equinix entered the European market in 2007 through their acquisition
of IXEurope and the APAC segment is growing as a mix of revenue. Low interconnect penetration within
the APAC market provides a very high margin growth opportunity for Equinix as customers in that region
buy more cross connects and peering connections.

• The increasing international exposure does come at a cost with the strong dollar having a
large impact on Equinix revenue. Equinix has the highest international exposure of the network neutral
colocation universe which could hurt reported revenue as the dollar appreciates. The largest exposure is to
the Euro and Pound Sterling which represent 13% and 10% of total revenues respectively. The USD/EUR
has appreciated from an average of 1.51 in 3Q08 to an average of 1.31 in 4Q08 and the USD/GBP
exchange rate has appreciated from an average of 1.89 in 3Q08 to an average of 1.58 in 4Q08, and as a
result we estimate a $6.6m negative revenue impact from the appreciating dollar in the quarter.
Furthermore, assuming current rates hold through the year, our 2009 revenue estimates are negatively
impacted by $23.5m. Management incorporated some impact from the strong dollar in their guidance on
the 3Q08 conference call but we don’t believe all of it.

• Initiate coverage with below consensus revenue and EBITDA estimates for 2009 and Neutral
rating. We believe in 2009 colocation demand will slow somewhat and churn will increase however we
do still expect attractive revenue and EBITDA growth of 13.5% and 19% respectively for the year. Our
2009 revenue estimate is $797.6m, below management guidance of $870m to $892m and consensus of
$876m. We believe consensus has yet to incorporate a bookings slowdown and significant appreciation of
the US dollar. Our 2009 EBITDA estimate is $342.5m relative to guidance of $365m – 385m and
consensus of $372.4m. We believe slower revenue growth will translate into less EBITDA margin
expansion than management is guiding to, however the strong dollar has less of an impact on margins as
local currency denominated expenses are proportionate to revenues. Equinix is trading at an EV /
EBITDA multiple of 8.5x our 2009 EBITDA estimates relative to the peer group average of 7x which we
don’t see as excessive given their share gains and growth profile but would like to see the street come
more inline with our estimates before getting more positive.

2
Industry Overview

Colocation

Gartner estimates that the colocation market will grow at a 17% CAGR from 2006 through 2012 with
growth of 19% in 2009. While we suspect the 2009 estimates may be a little high growth is likely to
continue, in our opinion. Tightening corporate IT budgets in addition to the increasing use of applications
are pushing companies to consider outsourcing their data centers. Gartner estimates that large enterprises
are growing their datacenter floor space needs by 8% to 10% per year. Power, cooling, real estate and
security requirements have increased the costs to build a dedicated data center into the tens or hundreds of
millions of dollars of upfront capital. Companies now have the option to outsource all facility, hardware,
application, database, disaster recovery, maintenance, performance monitoring, storage and security needs
to network neutral Infrastructure as a Service vendors.
Gartner North America Colocation Demand

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0
2006 2007 2008E 2009E 2010E 2011E 2012E

Source: Gartner
Although demand has been increasing at a rapid pace, supply has just not kept up with it. Long lead times
to build a new data center and the large amount of capital required to complete the project have kept data
center supply growth in the single digits over the past few years. This has enabled the network neutral
colocation providers to raise prices on customer contracts by 3-5% over the past three years. Today, the
capital markets are tight and companies are cancelling data center projects or putting them on hold. Tier
one estimates that global supply increased 5% in 2007 and is on track to increase 6% in 2008 and remain
in the mid single digits through 2012. Within the last two months alone we have witnessed 450,000
square feet of expansion projects get cancelled in strong demand areas.

3
 Global Internet Data Center Supply & Demand

18.0%

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%
2008E 2009E 2010E 2011E 2012E
Supply Delta 6.0% 5.3% 4.8% 5.5% 6.5%
Demand Delta 14% 13% 15% 16% 17%

Source: Equinix

PEERING

The peering market consists of both cross connects and internet peering connections. These two areas are
often reported in one interconnect revenue segment for the group, or exchange point services as is the
case for Terremark. Cross connects are copper or fiber direct connections which companies use to
exchange IP traffic directly with another company or business partner. They enable faster performance
of applications and the delivery of internet traffic. Peering is the process of connecting a server directly
to the internet backbone in an effort to lower the latency of the website and accelerate performance of
internet traffic to a web server. Customers are billed monthly for the speed of the connection and prices
range from as little as $100 per month for a copper cross connect up to $10,000 per month for a 10
gigabyte fiber connection to the internet backbone. The best indication of the growth in demand for
interconnection is the growth in overall IP traffic. Traffic growth has been on a tear lately as the
popularity of video downloads, social networking and collaboration have soared. Internet video grew
from 12% of all internet traffic in 2006 to 22% in 2007 and is expected to reach 50% by 2012. Even in
this tough economic environment video traffic is showing no signs of slowing and one could make a
strong argument for accelerated internet usage as consumers chose video downloads over buying DVDs
and going to the movies and business can utilize video conferencing and training over increased travel
budgets.

Global IP traffic grew 57% in 2007 and is on track to accelerate to 62% in 2008. The consumer makes
up the majority of total IP traffic comprising over 70% of it. Consumer is outgrowing business traffic by
a wide margin driven primarily internet video to PC and TV which have been more than doubling each
year. Cisco estimates that global IP traffic will grow 50% in 2009 and 48% in 2010.

4
 IP Traffic

50000
45000
40000
Pedabytes per Month

35000
30000
25000
20000
15000
10000
5000
0
2006 2007 2008E 2009E 2010E 2011E 2012E
Year

Total IP Traffic Consumer Internet Video to PC Internet Video to TV

Source: Cisco Systems

IP Traffic Growth
742%
200.0%
180.0%
160.0%
140.0%
Growth Rate

120.0%
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
2006 2007 2008E 2009E 2010E 2011E
Year

IP traffic (PB/Month) Consumer Internet Video to PC Internet Video to TV

Source: Cisco Systems

Company Overview

Equinix was founded in 1998 and is the market leader in the fast growing colocation and peering markets.
Equinix has added significant capacity over the past two years allowing their share gains and serving the
global market in some of the most attractive cities. The company also has the leading market share in the
peering market which has grown considerably in the international arena. Equinix offers no managed
services outside of the Asian market chosing rather to focus on its core opportunities: colocation and

5
interconnection. Having capital to build much needed capacity when capital is tight will likely define
Equinix in the years to come.

Data Centers:

Equinx has some of the newest and highest power per square foot data centers in the industry as they have
expanded their cabinet capacity significantly over the past two years. Organic capacity increased 41% in
2008 in addition to their entry into the European market by acquiring IXEurope which expanded total
capacity 90% in 2008. Equinix operates data centers in six of the largest US cities, 4 Asian and 8
European countries representing over 3.5 million gross square feet of data center space worldwide. With
so much new capacity Equinix has the most high power capacity in the industry and therefore generates a
higher average revenue per square foot relative to its peers. The company owns just over half of the
facilities and leases the rest primarily utilizing operating leases.

Data Centers - Site Locations and Specifications

Silicon Valley (San Jose, Santa Clara, Sunnyvale)

San Jose South (SV1) IBX Center: ~133,500 ft² (12,400 m²)
Santa Clara (SV2) IBX Center: ~160,000 ft² (14,800 m²)
San Jose North (SV3) IBX Center: ~103,000 ft² (9,500 m²)
Sunnyvale (SV4) IBX Center: ~120,000 ft² (11,100 m²)
Los Angeles
Los Angeles 1 (LA1) IBX Center: ~67,000 ft² (6,200 m²)
Los Angeles 2(LA2) IBX Center: ~33,000 ft² (3,000 m²)
El Segundo (LA3) IBX Center: ~107,000 ft² (9,900 m²)
El Segundo 4 (LA4) IBX Center: Opening soon
Chicago (Chicago, Elk Grove)
Chicago 1 (CH1) IBX Center: ~170,000 ft² (15,800 m²)
Chicago 2 (CH2) IBX Center: ~120,000 ft² (11,100 m²)
Chicago Elk Grove (CH3) IBX Center: ~228,000 ft² (21,100 m²)
New York (Newark, New York City, Secaucus)
Newark (NY1) IBX Center: ~46,500 ft² (4,300 m²)
Secaucus (NY2) IBX Center: ~184,000 ft² (17,000 m²)
New York City (NY3) IBX Center: Equinix Exchange services only
Secaucus (NY4) IBX Center: ~340,000 ft² (31,500 m²)
Washington, DC (Ashburn, VA)
Ashburn 1 (DC1) IBX Center: ~43,000 ft² (4,000 m²)
Ashburn 2 (DC2) IBX Center: ~147,600 ft² (13,700 m²)
Ashburn 3 (DC3) IBX Center: ~95,500 ft² (8,800 m²)
Ashburn 4 (DC4) IBX Center: ~100,000 ft² (9,300 m²)
Ashburn 5 (DC5) IBX Center: ~92,000 ft² (8,500 m²)
Dallas
Dallas (DA1) IBX Center: ~61,500 ft² (5,700 m²)
London
London City (LD1) IBX Center: ~8,600 ft² (800 m²)
London West (LD2) IBX Center: ~70,000 ft² (6,500 m²)

6
London Park Royal (LD3) IBX Center: ~42,000 ft² (3,900 m²)
London Slough (LD4) IBX Center: ~145,000 ft² (13,500 m²)
Paris
Paris Roissy (PA1) IBX Center: ~43,000 ft² (4,000 m²)
Paris Saint-Denis (PA2) IBX Center: ~65,500 ft² (6,100 m²)
Tokyo
Tokyo 1 (TY1) IBX Center: ~42,000 ft² (3,900 m²)
Tokyo 2 (TY2) IBX Center: ~73,000 ft² (6,780 m²)
Hong Kong
Hong Kong (HK1) IBX Center: ~75,500 ft² (7,000 m²) including 5,724 ft² BCTR-only area
Singapore
Singapore (SG1) IBX Center: ~156,000 ft² (14,500 m²)
Sydney
Sydney 1 (SY1) IBX Center: ~68,000 ft² (6,315 m²)
Sydney 2 (SY2) IBX Center: Opening soon

Customer Overview:

Equinix has a greater enterprise relative to its peers. Revenue mix dominated by enterprise customers
which account for 41% of total revenue and has moderate exposure to the financial services industry at
16% of total revenue. While management has not seen any weakness yet from their financial customers
we are concerned about spending within this vertical in 2009. Network and content customers are
experiencing the strongest underlying fundamentals right now as IP traffic continues to experience strong
growth and Equinix generates 43% of revenue from these two categories. The company has been growing
internationally which has been increasing exposure overseas in both Europe and APAC. Europe does have
a much larger exposure to the financial services industry at approximately 25% of European revenue while
the APAC segment has a more diversified customer base.

Sales by Segment Sales by Region

16% 12%

41%
17%

26%
62%
26%

Financial Content Network Enterprise US Europe APAC

Source: Company Data
Source: Company Data

Capacity Overview:

Equinix reports capacity and utilization based on sellable cabinets, one of which typically require 30 – 40
square feet within the data center. Each customer must take at least one cabinet with an average
deployment per customer of 19 cabinets. This took a step function upwards after the IXEurope

7
acquisition. Equinix has increased its installed capacity materially over the past 12 months growing
organic cabinet capacity by 41% in 2008. The company also entered the European market in late 2007
through their acquisition of IXEurope which increased total cabinet capacity growth to 90% for 2008. The
relatively young age of EQIX’s data centers indicates a large mix of capacity in the high power range
which commands a premium to older data center space. Revenue yield for this space can be as high as
$85/month per square foot or $2,800/month per cabinet. Management has at least an additional 12%
increase in cabinets or 5,000 cabinets planned to come online in 2009 which still leaves room for them to
either under spend their estimated 2009 capex budget of $325m to $375m or to increase capacity greater
than the 12% already disclosed.

Capacity - Sellable Cabinets

60,000 53,288
50,355
46,027 48,164
50,000

40,000
Cabinets

30,000 23,400 23,947 24,935 25,769

20,000

10,000

0
4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08
Quarter

Source: Company Data

Management has filled capacity just about as fast as they have been able to bring it online which has kept
utilization relatively high. The utilization rate did dip in late 2007 as the company closed the IXEurope
acquisition but quickly recovered as they filled excess capacity. We expect utilization to drop slightly in
the first half of 2009 as a result of a combination of new capacity coming online and a moderation of new
bookings. In fact, the majority of new cabinets for 2009 will come online in the first half:

New Capacity Planned for 2009:

• Los Angeles – 800 Cabinets
• New York – 1,100 Cabinets
• Hong Kong – approx. 400 Cabinets
• Paris – 1,300 Cabinets
• Amsterdam – 600 Cabinets
• Total = 4,200 Cabinets

8
 Utilization

80.0%

78.0%
Utilization

76.0%

74.0%

72.0%
70.0%

68.0%
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08E 1Q09E 2Q09E 3Q09E 4Q09E
Quarter

Source: Company Data, B&S Estimates

Pricing has been strong for Equinix over the past three years through a combination of pricing power,
higher power data centers and increasing penetration of interconnection revenue within the customer base.
The colocation industry has been largely capacity constrained over that time period allowing everyone in
the industry the ability to raise pricing approximately 3% per year in addition to energy price pass through.
This generally occurs at contract renewal and most of the customer base is now renewed at the new higher
contract prices. The mix of capacity to higher power data centers will continue to push average revenue
per cabinet up over time and Equinix’s ability to add capacity in this capital constrained environment will
likely extend the technology lead the company already enjoys. Interconnection revenue is accretive to
average pricing and contributes very high incremental margin to the company. We estimate that
incremental EBITDA margins are up to 80% in this segment. Cross connects have a list price of
$275/connection per month and a connection to a peering switch port generates over $4,000/connection
per month. Strong IP traffic growth will likely drive increasing penetration and a shift to higher speed 10
gigabyte connections within the customer base over time, putting upward pressure on pricing and growth
going forward. APAC interconnection penetration has suffered from a lack of capacity in that market,
however with management adding additional capacity in the region in 2008 and 2009 we expect
penetration to improve. Interconnection revenue penetration in APAC is 10% of recurring revenue in that
region relative to 19% in the US, which creates the opportunity for management to grow APAC
interconnect revenue faster than the company average in 2009. European customers generally buy their
peering and interconnections through a third party non-profit company and therefore are not available to
buy from EQIX which we don’t expect to change in 2009.

Pricing - MRR excluding Europe

1,700
1,650
1,600
1,550
Pricing

1,500
1,450
1,400
1,350
1,300
1,250
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08
Quarter

Source: Company Data

9
 Sales by Service Type-3Q08

4%
13%

77%

Colocation Interconnection Managed Infrastructure

Source: Company Data

Financial Snapshot

Growth Outlook

We believe Equinix has put capacity in place in the right locations and at the right power levels to generate
continued revenue growth in 2009 and beyond. Through their ability to add capacity in a capital
constrained environment they stand to continue their share gains as customers shift their data centers to an
outsourced model. The company has a strong capital position which should allow them to increase
capacity as needed without coming to the market to raise additional capital as some of their competitors
will need to do. Although management has indicated the pipeline remains strong and we have not yet
picked up any widespread weakness in deal closings, we choose to take a cautious approach to our 2009
model. A strong attribute of both Equinix and our colocation universe is the subscription nature of the
model which makes their revenue stream highly visible, evidenced by the fact management will enter
2009 with over 80% of revenue already under contract.

We are, however, taking a conservative approach to our 2009 revenue estimates, modeling low sequential
bookings growth in the US in the first half of the year, and assuming that existing bookings for their new
data centers in New Jersey and Los Angeles will translate into billings. In addition to this we are
assuming pricing will hold flat in 2009. We are also modeling continued growth in US interconnect
revenue as we expect continued IP traffic growth in 2009 and even see the possibility that it could
accelerate through a substitution effect from other forms of media. We are modeling continued mid single
digit sequential bookings growth in APAC as we believe there is pent up demand in those markets which
will be served by additional capacity coming online in late 2008 and early 2009. APAC interconnection
revenues will grow the fastest in our model with penetration closing some of the gap relative the US
market. We are modeling a similar decelerating bookings trend in Europe in addition to a negative
currency impact to revenue of $23.5m for 2009.

We are modeling a moderating pricing trend in the first half of the year for the US and European regions
and continued growth in APAC from the increasing penetration of interconnection revenue. We also
assume the large concentration of capacity additions in the first half of the year will put downward
pressure on both utilization and margins however we expect both to improve in the second half of the year.
Management has already guided to $325 to $375 million of capex for the year which we believe leaves
$50m to $100m of cushion if demand slows materially.

10
Our 4Q08 revenue estimate of $188.6m is at the low end of management’s guidance range of $188m -
$192m. This is attributable to a stronger dollar relative to what management incorporated in their
guidance on October 23, 2008. Our EBITDA estimate for 4Q08 is $79.3m which is in the middle of
guidance and inline with consensus. Foreign currency denominated operating expenses will offset the
currency impact to revenue and be neutral to EBITDA.

We are modeling revenue of $797.6m for 2009 which is 8% below the low end of management’s guidance
range of $870m - $892m for the year. We are also below consensus of $876.5m. We believe consensus
has not incorporated additional strength in the dollar in their 2009 estimates and we are taking a
conservative approach to demand in the first half of the year. We are modeling EBITDA of $342.5m
relative to guidance of $365m - $385m and consensus of $372.4m. Lower revenue growth will translate
into less margin expansion offset by local currency denominated operating expenses for the foreign
operations. We expect management to continue to hire throughout the year but still assume 200 basis
points of EBITDA margin expansion for the year.

Where we are vs. Consensus

($Millions) Dec-08 F2008 Mar-09 Jun-09 Sep-09 Dec-09 F2009
Our Estimates
Revenue 188.6 702.6 190.9 193.3 200.6 212.7 797.6
EBITDA 79.3 287.7 79.8 81.4 85.7 95.6 342.5

Consensus
Revenue 190.9 705.2 201.1 212.3 223.7 235.8 876.5
EBITDA 79.7 287.8 84.8 90.4 96.2 101.5 372.4

Relative
Revenue -1% 0% -5% -9% -10% -10% -9%
EBITDA 0% 0% -6% -10% -11% -6% -8%

Management Guidance
Revenue 188-192 702-706 870-892
EBITDA 78.6-80.6 287-289 365-385

Liquidity

Equinix is in a comfortable financial position to add capacity in 2009 while maintaining enough liquidity
to remain solvent in the event of a bookings slowdown in the industry. Cash on the balance sheet exiting
3Q08 was $330m which includes a $49m investment in the reserve primary money market fund which
“broke the buck” and is in the process of being liquidated (expected by the end of May 2009). We expect
Equinix to exit 2008 with $270m of cash excluding the $49m investment in the reserve primary fund,
which is inline with management guidance of $270m to $280m. We estimate the company will exit 2009
with approximately $203m in cash which also excludes the investment in the reserve primary fund.
Including this, the balance increases to $271m. We would note that it is highly likely that the company
recovers most of the cost basis of the investment in the fund as there were only a small portion of that fund
invested in risky securities. We estimate Equinix will spend $350m in capex in 2009 and would note that

11
this level of investment would allow the company to increase cabinet capacity above the 12% increase we
are modeling for the year. If management expands capacity inline with our model the capex budget is
likely to come in below the low end of guidance of $325m to $375m for the year, thereby increasing the
expected year end cash above our estimated $203m level.

Equinix has $1.19 billion of total debt with a revolving credit and term loan debt maturing in 2009 and
2010 in the amounts of $52m and $51m respectively. They also have a 2.5% convertible debt issue which
is convertible on February 15, 2009. This convert is in the money and management expects it to convert
on the February date into 818,000 shares which we have already incorporated into our model.
Management took an additional $12.9 million from their revolving credit line in October 2008 and this is
included in our 2008 year end cash estimate. There is an additional $27.75m available under existing lines
of credit which management has the ability to draw if needed however we have not included it in our 2009
cash estimate and don’t think the company will need the cash. If we assume management repays the $52m
of revolving credit in 2009 when it matures, our 2009 year end cash estimate declines to $151m from
$203m exiting 2008, excluding the investment in the money market fund. On January 31, 2010 their
$110m Chicago IBX term loan matures however management has the option to extend it for two years to
January 31, 2012 which we expect management to exercise. Outside of this there are no other issues
maturing over the next two years. We feel that this is a comfortable level of cash to continue to expand
capacity and show sufficient liquidity in 2009 and beyond.

We estimate total debt will decline from $1.21 billion in 2008 to $1.13 billion in 2009 through the
conversion of the convertible and the repayment of $52m in revolving credit. Total debt to our 2009
EBITDA estimate is 3.3x which is below the colocation peer group average of 3.5x but above the larger
telecommunications peer group of 3x which we believe is appropriate given the higher growth rate of the
industry. Finally, we estimate 2009 EBITDA to interest expense to be 5.7x which is highest interest
coverage ratio in the colocation peer group.

Valuation

We value the colocation and managed hosting group based on enterprise value / EBITDA and relative to
revenue growth. We believe this is appropriate as the companies in this industry have yet to grow into
their capacity and generate meaningful earnings. We utilize a composite of traditional
telecommunications, wireless and tower companies in our peer group analysis. This group has traded in a
wide band between 2x to 12x trailing EBITDA figures and revenue growth for the group has been all over
the map. The tower companies have traded the richest, in a range of 20x to 50x trailing EBITDA with a
current multiple of 16x. Average revenue growth has been the highest in this group at 10% to 30% over
the same period. The wireless telecomm companies have traded in a band between 6x to 14x trailing
EBITDA with a current multiple of 8x. Revenue growth in this group has averaged in the mid to high
single digits over the same period. Finally, the traditional telecommunications group has traded in a range
of 1.5x to 10x trailing EBITDA with a current multiple of 6x. Average revenue growth in this group has
remained in the low single digits. We believe that the colocation and managed hosting companies should
trade somewhere between the wireless peer group and the tower peer group as the competitive position of
the industry is similar to the wireless companies however the revenue growth is similar to the tower
companies. We would note that expected tower company revenue (consensus estimates) are for growth to

12
drop below 10% in 2009 which is below our expected revenue growth in the colocation and managed
hosting group.

Equinix currently trades at 9x EV to our 2009 EBITDA estimate which is at the high end of the colocation
peer group and the multiple is 70% of our 2009 revenue growth estimate of 13.5%. We feel this is
appropriate given the current economic environment.

EV/EBITDA

80

70

60

50

40
30
20

10

0
05

05

06

06

06

07

07

07

08

08

08

09
5

8
00

00

00

00
20

20

20

20

20

20

20

20

20

20

20

20
/2

/2

/2

/2
1/

1/

1/

1/

1/

1/

1/

1/

1/

1/

1/

1/
/1

/1

/1

/1
4/

7/

1/

4/

7/

1/

4/

7/

1/

4/

7/

1/
10

10

10

10

EV/EBITDA

Source: Stockval

Stock Price

$140

$120

$100

$80

$60

$40

$20

$0
06

07

07

08

08
00

00

00

00

00

00

00

00
20

20

20

20

20
/2

/2

/2

/2

/2

/2

/2

/2
9/

9/

9/

9/

9/
28

29

29

29

29

29

29

29
/2

/2

/2

/2

/2
2/

4/

6/

8/

2/

4/

6/

8/
12

10

12

10

12

Stock Price

Source: Stockval

13
Risk Factors

The realization of any or all of the following risk factors, among others, may adversely affect the
company’s stock price:

Debt loads are high and the ability to grow capacity long term depends on the company’s ability to
raise additional capital. If the company cannot increase data center capacity then they cannot grow
revenue.

Bankruptcy risk within customer base. An increase in bankruptcies within the customer base will
increase churn causing revenues to potentially decline. The costs of repurposing the data center space
would lower profitability and increase the capital needs of the company.

Capacity needs to be built ahead of demand which raises the risk of higher vacancy rates and lower
profitability if the capacity cannot be rented.

Technology risk - As virtualization proliferates it may decrease the amount of cabinets needed by
Equinix’s customers and therefore their data center space requirements.

Pricing risk - Managed hosting and services barriers to entry are low as they are more people intensive
and less capital intensive. Pricing can decline materially in this segment of the industry as new
competitors emerge.

Energy costs represent a material component of cost of goods sold and could reduce profitability if
the company is unable to pass price increases through to the end customer. Energy costs represent 15-
23% of cost of goods sold. While increases have been passed through to the end customer in the past there
is no guarantee that they will be in the future.

Foreign currency risk - The Euro and Pound Sterling denominated revenue represents a material amount
of the company’s overall revenue which will hurt revenue growth as the dollar appreciates.

Risk of obsolescence - As new server technologies require higher power levels per server data centers can
require costly upgrades rendering them obsolete. The majority of the cost of a new data center is in the
power and cooling requirements.

Network neutral colocation providers require access to third party networks for internet
connectivity. Interruptions in service can harm the service level agreements with their customers and
cause an increase in churn or a reduction of revenue through credits to the customer.

Customer concentration – Approximately 10% Equinix’s revenue is generated through a contract

with IBM which expires in 2011. If IBM we to not renew their contract or cancel it before it is up for
renewal revenue could be materially affected. Equinix generates 16% of total revenue and around 25% of
European revenue in the financial services industry. If this segment experiences significant weakness it
could create a difficult situation for revenue growth for the company. Churn could also rise materially.

14
 Equinix, Inc.
Income Statement
December Fiscal Year F2005 F2006 F2007 F2008 F2009
(Millions) Year Mar-06 Jun-06 Sep-06 Dec-06 Year Mar-07 Jun-07 Sep-07 Dec-07 Year Mar-08 Jun-08 Sep-08 Dec-08 Year Mar-09 Jun-09 Sep-09 Dec-09 Year
(E) (E) (E) (E) (E) (E) (E)
Revenues 221.1 64.9 68.5 73.7 79.8 286.9 85.1 91.8 103.8 138.7 419.4 158.2 172.0 183.7 188.6 702.6 # 190.9 193.3 200.6 212.7 797.6
Cost of Revenues (including D&A, exc 158.4 42.6 44.6 48.5 49.5 185.1 51.6 54.6 62.0 91.4 259.6 93.5 100.8 108.6 110.7 413.6 # 112.1 117.5 120.9 121.0 471.5
Gross Profit 62.7 21.5 23.0 24.6 29.4 98.5 32.3 36.2 40.9 46.2 155.7 63.7 70.0 73.9 77.0 284.6 # 78.0 74.8 78.5 90.3 321.7

Expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 # 0.0 0.0 0.0 0.0 0.0
Sales and Marketing (Includes S&M D& 19.0 5.3 6.3 5.9 7.6 25.2 6.2 7.1 7.6 10.6 31.5 13.1 12.5 13.6 14.5 53.7 # 14.8 14.9 15.3 16.1 61.1
General and Administrative (Includes G& 38.4 12.0 11.9 14.0 14.1 52.0 16.0 17.2 17.6 25.6 76.4 25.3 28.4 26.6 27.1 107.4 # 28.9 28.7 29.1 30.5 117.2
Restructuring Charges 33.8 0.0 0.0 1.5 0.0 1.5 0.0 0.4 0.0 0.0 0.4 0.0 0.0 0.8 0.0 0.8 # 0.0 0.0 0.0 0.0 0.0
Gain on Assets Sales 0.0 0.0 0.0 0.0 (9.6) (9.6) 0.0 0.0 0.0 (1.3) (1.3) 0.0 0.0 0.0 0.0 0.0 # 0.0 0.0 0.0 0.0 0.0
Total Operating Expenses 99.5 24.3 26.2 27.7 18.4 96.6 31.5 33.8 34.8 45.5 145.6 49.7 56.7 52.3 50.7 209.5 # 48.2 48.1 50.6 54.3 201.2
Operating Income (36.8) (2.8) (3.2) (3.1) 11.0 1.9 0.8 2.4 6.1 0.8 10.1 14.0 13.3 21.5 26.3 75.2 # 29.8 26.7 27.9 36.0 120.5

EBITDA 70.1 22.8 24.0 24.9 29.1 100.9 32.4 35.3 40.6 47.1 155.4 62.3 69.1 77.0 79.3 287.7 # 79.8 81.4 85.7 95.6 342.5

Interest Expense (8.9) (3.9) (3.6) (3.6) (3.8) (14.6) (3.6) (6.0) (5.7) (12.1) (27.3) (13.6) (12.8) (13.9) (14.2) (54.5) # (14.6) (14.9) (15.3) (15.4) (60.1)
Interest Income 3.6 1.6 1.7 1.7 1.6 6.6 1.9 5.1 3.3 5.1 15.4 3.4 2.4 0.4 0.4 6.7 # 0.6 0.7 0.8 0.9 3.0
Gain/loss on Debt Extinguishment and C 0.0 0.0 0.0 0.0 0.0 0.0 (3.4) 0.0 (2.6) 0.0 (5.9) 0.0 0.0 0.0 0.0 0.0 # 0.0 0.0 0.0 0.0 0.0
Other Income/expense 0.0 0.0 0.0 0.1 (0.1) (0.2) 0.1 (0.1) 3.2 (0.1) 3.0 2.0 (0.9) (0.5) (1.0) (0.4) # 0.0 0.0 0.0 0.0 0.0
Total Other Expenses (5.3) (2.3) (1.8) (1.8) (2.3) (8.2) (4.9) (1.0) (1.7) (7.1) (14.8) (8.1) (11.3) (14.0) (14.8) (48.2) # (14.0) (14.2) (14.5) (14.5) (57.1)

EBT (42.1) (5.1) (5.1) (4.9) 8.7 (6.3) (4.1) 1.4 4.3 (6.4) (4.7) 5.9 2.0 7.6 11.5 27.0 # 15.9 12.6 13.4 21.5 63.4
Provision for Income Tax 0.5 0.4 0.2 0.3 (0.4) 0.4 0.4 0.2 0.2 (0.3) 0.5 0.5 (0.3) 0.2 0.0 0.4 # 0.5 0.4 0.4 0.6 1.9
Cumulative Effect of Accounting Cha 0.0 0.4 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 # 0.0 0.0 0.0 0.0 0.0
Net Income (Loss) (42.6) (5.1) (5.3) (5.2) 9.1 (6.4) (4.5) 1.2 4.1 (6.1) (5.2) 5.4 2.2 7.4 11.5 26.6 # 15.4 12.2 13.0 20.9 61.5

Basic EPS ($1.78) ($0.18) ($0.19) ($0.18) $0.31 ($0.22) ($0.15) $0.04 $0.13 ($0.17) ($0.16) $0.15 $0.06 $0.20 $0.31 $0.72 # $0.41 $0.32 $0.34 $0.54 $1.61
Diluted EPS ($1.78) ($0.18) ($0.19) ($0.18) $0.28 ($0.22) ($0.15) $0.04 $0.12 ($0.17) ($0.16) $0.15 $0.06 $0.19 $0.30 $0.70 # $0.40 $0.32 $0.34 $0.53 $1.59

Weighted Avg. Basic Shares Out. 24.0 27.8 28.5 28.7 29.1 28.6 29.7 31.1 31.7 36.0 32.1 36.3 36.6 37.0 37.1 36.7 # 37.5 38.1 38.3 38.5 38.1
Weighted Avg. Diluted Shares Out. 24.0 27.8 28.5 28.7 32.7 28.6 29.7 32.6 33.1 36.0 32.1 37.3 37.8 37.9 37.9 37.7 # 38.1 38.2 38.4 39.5 38.6

Margin Analysis

Corporate Gross Margin 28.4% 33.2% 33.5% 33.4% 36.9% 34.3% 38.0% 39.4% 39.4% 33.3% 37.1% 40.3% 40.7% 40.2% 40.8% 40.5% # 40.9% 38.7% 39.1% 42.5% 40.3%
Sales and Marketing 8.6% 8.2% 9.3% 8.0% 9.6% 8.8% 7.3% 7.8% 7.3% 7.7% 7.5% 8.2% 7.3% 7.4% 7.7% 7.6% # 7.8% 7.7% 7.6% 7.6% 7.7%
General and Administrative 17.4% 18.5% 17.4% 19.0% 17.6% 18.1% 18.8% 18.7% 17.0% 18.4% 18.2% 16.0% 16.5% 14.5% 14.4% 15.3% # 15.1% 14.8% 14.5% 14.3% 14.7%
Operating Expenses 45.0% 37.5% 38.2% 37.5% 23.1% 33.7% 37.1% 36.8% 33.5% 32.8% 34.7% 31.4% 33.0% 28.5% 26.9% 29.8% # 25.2% 24.9% 25.2% 25.5% 25.2%
Operating Margin (GAAP) -16.6% -4.3% -4.7% -4.2% 13.8% 0.7% 0.9% 2.7% 5.9% 0.6% 2.4% 8.9% 7.7% 11.7% 13.9% 10.7% # 15.6% 13.8% 13.9% 16.9% 15.1%
Operating Margin (Pro Forma) -12.9% 7.6% 8.3% 5.2% 22.9% 11.4% 13.3% 13.6% 16.0% 9.0% 12.6% 16.7% 17.6% 18.6% 19.3% 18.1% # 18.4% 16.7% 17.6% 21.2% 18.5%
Net Margin (GAAP) -19.3% -7.8% -7.7% -7.0% 11.4% -2.2% -5.2% 1.3% 4.0% -4.4% -1.2% 3.4% 1.3% 4.0% 6.1% 3.8% # 8.1% 6.3% 6.5% 9.8% 7.7%
Net Margin (Pro Forma) -15.5% 5.1% 5.8% 2.8% 20.9% 9.2% 8.2% 10.7% 13.6% 3.7% 10.0% 10.6% 12.5% 10.7% 11.4% 11.3% # 11.1% 9.4% 10.4% 14.4% 11.4%
EBITDA margin 31.7% 35.2% 35.1% 33.8% 36.5% 35.2% 38.0% 38.4% 39.2% 33.9% 37.0% 39.4% 40.2% 41.9% 42.1% 40.9% # 41.8% 42.1% 42.7% 45.0% 42.9%
Tax Rate -1.3% -7.6% -4.3% -5.5% -5.0% -6.9% -8.6% 13.9% 5.0% 4.6% -10.0% 8.0% -13.1% 2.5% 0.0% 1.5% # 3.0% 3.0% 3.0% 3.0% 3.0%

Growth Analysis

Organic Revenue, yr/yr 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% # 0.0% 0.0% 0.0% 0.0% 0.0%
Revenue yr/yr 35.1% 33.2% 30.6% 26.9% 29.1% 29.8% 31.2% 34.0% 40.8% 73.9% 46.2% 85.9% 87.3% 77.0% 36.0% 67.5% # 20.7% 12.4% 9.2% 12.8% 13.5%
Revenue Seq'l 0.0% 5.0% 5.7% 7.6% 8.2% 0.0% 6.7% 7.9% 13.0% 33.7% 0.0% 14.1% 8.7% 6.8% 2.7% 272.5% # #DIV/0! 1.3% 3.7% 6.1% 274.9%
Gross Profit, yr/yr 135.0% 82.2% 68.2% 43.5% 46.6% 57.1% 50.3% 57.6% 66.3% 57.1% 58.0% 97.0% 93.3% 80.7% 66.6% 82.8% # 22.4% 6.9% 6.2% 17.3% 13.0%
Sales & Marketing yr/yr 2.4% 21.4% 35.3% 28.3% 42.8% 32.5% 16.7% 12.3% 29.0% 39.2% 25.3% 110.7% 75.8% 79.9% 36.4% 70.4% # 13.4% 18.8% 12.2% 11.0% 13.7%
General & Administrative yr/yr 23.4% 41.6% 32.6% 27.9% 41.5% 35.5% 33.0% 44.3% 25.6% 81.8% 46.7% 58.3% 64.9% 50.9% 6.0% 40.6% # 14.2% 1.2% 9.4% 12.5% 9.2%
Operating Expenses yr/yr 44.6% 58.9% 62.0% 63.6% -63.9% -2.9% 29.6% 28.9% 25.9% 146.6% 50.7% 57.7% 67.9% 50.3% 11.5% 43.9% # -3.1% -15.2% -3.3% 7.1% -4.0%
Operating Income (GAAP), yr/yr -12.6% -19.8% 28.6% -1412.4% -135.5% -105.2% -128.7% -176.0% -297.9% -92.9% 428.3% 1637.6% 443.6% 254.3% 3272.9% 643.2% # 113.0% 101.1% 29.4% 36.9% 60.3%
Net Income (GAAP), yr/yr -37.9% -12.5% 53.6% 560.0% -127.9% -85.0% -12.1% -123.1% -179.8% -166.7% -18.9% -221.7% 83.2% 79.2% -289.7% -611.8% # 183.6% 447.5% 76.1% 81.1% 131.4%
Diluted EPS (GAAP), yr/yr -54.1% -31.2% 28.0% 452.9% -122.3% -87.4% -17.6% -120.1% -169.3% -160.6% -27.9% -197.0% 58.0% 56.4% -280.1% -535.8% # 177.4% 442.3% 74.0% 73.9% 126.5%
EBITDA, yr/yr 97.1% 59.3% 49.7% 39.1% 33.3% 43.8% 41.8% 46.9% 63.0% 61.8% 54.0% 92.3% 95.8% 89.4% 68.5% 85.1% # 28.2% 17.7% 11.3% 20.6% 19.0%

Source: Company Filings/Boenning & Scattergood Estimates

15
 Equinix, Inc.
Balance Sheet
December Fiscal Year F2004 F2005 F2006 F2007 F2008
(Millions) Year Mar-05 Jun-05 Sep-05 Year Mar-06 Jun-06 Sep-06 Year Mar-07 Jun-07 Sep-07 Year Mar-08 Jun-08 Sep-08

Current Assets
Cash and Cash Equivalents 25.9 44.2 67.1 42.6 119.3 81.1 77.3 84.6 82.6 327.7 234.6 343.5 290.6 260.8 151.1 160.7
Short-term Investments 64.5 46.4 41.0 41.2 52.1 62.7 53.5 61.3 48.8 53.8 67.7 64.0 63.3 37.7 65.0 101.9
Accounts Receivables 11.9 14.2 15.7 16.2 17.2 18.5 23.3 24.1 26.9 27.8 28.1 49.2 60.1 59.2 63.1 62.4
Allowance for Doubtful Accounts 0.15 0.16 0.30 0.28 0.27 0.26 0.38 0.39 0.45 0.89 0.79 1.44
% of Accounts Receivables 0.8% 0.9% 1.3% 1.2% 1.0% 0.9% 1.4% 0.8% 0.7% 1.5% 1.3% 2.3%
Prepaid and Other Current Assets 4.7 2.4 2.5 3.3 3.1 4.7 5.6 6.0 8.0 9.6 9.6 26.5 12.7 16.5 14.5 17.7
Current Portion of Restricted Cash 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Current Assets 107.1 107.2 126.3 103.3 191.7 166.9 159.7 176.1 166.3 418.8 340.1 483.1 426.8 374.2 293.7 342.7

Non Current Assets

Property and Equipment, net 343.4 351.0 345.1 371.0 438.8 449.2 471.8 499.9 546.4 593.6 760.2 1069.1 1162.7 1284.4 1331.0 1347.0
Long-term Investments 17.7 27.6 23.9 24.5 17.5 18.4 17.1 20.4 25.1 11.0 21.6 28.9 30.0 27.0 108.6 67.6
Goodwill 22.0 21.8 21.4 21.3 21.7 22.3 22.7 22.7 16.9 17.1 16.9 430.3 442.9 461.3 458.8 411.1
Intangible Assets, Net 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.0 0.0 70.2 67.2 73.1 71.5 62.4
Debt Issuance Costs, Net 3.2 2.7 2.5 2.6 3.1 2.9 2.7 2.7 3.0 12.5 14.6 22.5 21.3 20.3 19.6 18.4
Other Assets 8.5 7.8 7.8 10.6 8.3 9.7 9.2 8.8 13.6 20.8 22.1 26.5 31.0 46.5 47.6 42.9
Restricted Cash, Less Current Portion 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Assets 501.8 518.0 527.0 533.4 681.0 669.4 683.2 730.6 771.8 1073.7 1175.5 2130.6 2181.9 2286.8 2331.0 2291.9

Current Liabilities
Accounts Payable 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Accounts Payable and Accrued Expenses 19.8 20.5 26.5 22.6 22.6 21.2 23.6 23.0 27.3 24.6 35.4 94.3 65.1 70.2 74.7 71.2
Accrued Expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Accrued Interest Payable 0.0 0.4 0.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Accrued Restructuring Charges 2.0 2.0 2.1 2.1 12.4 13.1 13.6 13.8 13.5 13.7 13.7 14.1 0.0 0.0 0.0 0.0
Borrowings from Credit Line 0.0 0.0 0.0 0.0 30.0 0.0 0.0 40.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Current Portion of Senior Secured Credit Facility 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Current Portion of Mortgages Payable 0.0 0.0 0.0 0.0 1.2 1.3 1.3 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Current Portion of Mortgages and Loans Payable 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.2 2.2 2.3 3.2 16.6 28.3 37.1 41.5
Current Portion of Debt Facility and Capital Lease 0.0 1.4 0.9 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Current Portion of Capital Lease and Other Finan 0.7 0.0 0.0 0.0 1.6 1.7 1.8 1.9 2.0 2.1 2.2 3.8 3.8 3.6 4.0 4.0
Other Current Liabilities 6.9 5.8 6.7 8.4 8.0 7.1 7.2 8.5 10.2 10.8 11.9 22.1 29.5 32.6 34.4 33.6
Accrued Property and Equipment 2.9 0.0 0.0 5.2 15.8 18.3 21.9 18.6 23.3 39.8 71.2 60.5 76.5 77.9 53.0 56.5
Current Portion of Convertible Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 32.3 32.3 32.3
Total Current Liabilities 32.2 30.1 37.0 39.2 91.4 62.6 69.4 107.2 78.4 93.3 136.7 198.0 191.5 244.9 235.6 239.1

Non Current Liabilities

Senior Notes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Mortgages and Loans Payable 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 96.7 120.8 164.8 278.9 313.9 353.6 375.3 374.9
Convertible Debt 86.3 86.3 86.3 86.3 86.3 86.3 86.3 86.3 86.3 282.3 282.3 678.2 678.2 646.0 646.0 646.0
Convertible Secured Notes 35.8 1.8 2.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Mortgage Payable, Less Current Portion 0.0 0.0 0.0 0.0 58.8 58.5 58.2 57.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Senior Secured Credit Facility 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Debt Facility and Capital Lease Obligation, Less 0.0 49.2 49.0 48.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Capital Lease and Other Financing Obligations, L 34.5 0.0 0.0 0.0 94.7 94.2 93.7 93.2 92.7 92.1 91.6 94.5 93.6 98.4 97.4 95.1
Deferred Tax Liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 26.0 29.4 24.1 21.8
Preferred Stock Convertible 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Accrued Restructuring Charges, Less Current Po 12.8 12.5 12.2 11.8 37.4 34.7 31.8 30.7 28.1 25.0 22.7 19.7 0.0 0.0 0.0 0.0
Deferred Rents and Other Liabilities 26.5 28.8 29.5 30.3 23.7 26.3 26.7 27.9 34.6 35.1 34.7 46.5 64.3 71.3 74.0 77.9
Total Liabilities 228.1 208.7 215.9 218.3 392.3 362.5 366.0 403.0 416.8 648.6 732.8 1315.9 1367.4 1443.7 1452.3 1454.7

Shareholders' Equity
Common Stock-par Value 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Additional Paid in Capital 776.1 829.3 832.9 836.1 839.5 857.0 872.0 887.3 904.6 978.6 995.6 1356.4 1376.9 1396.5 1425.8 1445.4
Accumulated Deficit (504.4) (510.2) (513.7) (514.4) (547.0) (552.1) (557.4) (562.6) (553.4) (557.9) (556.7) (552.6) (558.6) (553.2) (551.0) (543.6)
Accumulated Other Comprehensive Income (Los 2.3 1.7 1.1 0.8 1.1 1.9 2.5 2.8 3.9 4.4 3.8 10.8 (3.9) (0.2) 3.8 (64.6)
Deferred Stock Based Compensation (0.3) (11.4) (9.3) (7.5) (4.9) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Shareholders Equity 273.7 309.3 311.1 315.1 288.7 306.9 317.1 327.6 355.0 425.1 442.7 814.7 814.4 843.1 878.7 837.3
Total Liabilities & Shareholders Equity 501.8 518.0 527.0 533.4 681.0 669.4 683.2 730.6 771.8 1073.7 1175.5 2130.6 2181.9 2286.8 2331.0 2291.9

LTD-to-Capital 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Current ratio 3.3 3.6 3.4 2.6 2.1 2.7 2.3 1.6 2.1 4.5 2.5 2.4 2.2 1.5 1.2 1.4
Debt to EBITDA (TTM) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Cash & mktble secs per share 1.4 2.0 2.8 1.8 4.6 2.9 2.7 2.9 2.5 11.0 7.2 10.4 8.1 7.0 4.0 4.2
Net Cash per share (2.3) (2.0) (0.9) (2.0) 3.4 1.7 1.5 1.7 1.2 9.5 5.8 8.3 5.5 4.2 1.1 1.3
Net working capital per share 4.0 3.5 3.8 2.7 3.8 3.7 3.2 2.4 2.7 11.0 6.2 8.6 6.5 3.5 1.5 2.7
Tangible book per share 13.4 13.1 12.2 12.2 10.2 10.2 10.3 10.6 10.3 13.7 13.0 9.5 8.5 8.3 9.2 9.6
Book value per share 14.6 14.1 13.1 13.1 11.1 11.0 11.1 11.4 10.9 14.3 13.6 24.6 22.6 22.6 23.2 22.1

A/R Turnover 14.5 13.7 14.0 14.6 14.8 14.0 13.1 12.4 12.5 12.3 13.1 10.7 10.2 10.7 11.3 11.7
A/R DSOs 25.1 26.7 26.0 25.1 24.7 26.0 27.8 29.4 29.2 29.8 27.8 34.0 35.9 34.1 32.4 31.2
A/P Turnover 8.7 9.5 8.9 9.5 11.0 12.2 12.2 12.7 12.7 13.8 12.2 6.4 7.0 9.0 9.5 10.1
Return on sales -50.5% -11.9% -6.5% -1.3% -52.8% -7.8% -7.7% -7.0% 11.4% -5.2% 1.3% 4.0% -4.4% 3.4% 1.3% 4.0%
ROE -8.3% -1.9% -1.1% -0.2% -11.3% -1.7% -1.7% -1.6% 2.6% -1.0% 0.3% 0.5% -0.7% 0.6% 0.3% 0.9%
ROA -4.5% -1.1% -0.7% -0.1% -4.8% -0.8% -0.8% -0.7% 1.2% -0.4% 0.1% 0.2% -0.3% 0.2% 0.1% 0.3%
Source: Company Filings/Boenning & Scattergood Estimates
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Disclosure Appendix

Rating and Price Target History:

Analyst Certification:
The research analysts whose names appears on this research report certify that: (1) all of the views
expressed in this research report accurately reflect their personal views about the subject security or issuer,
and (2) no part of the research analysts’ compensation was, is, or will be directly or indirectly related to the
specific recommendations or views expressed by the research analysts in this research report.

Important Disclosures:
Analyst compensation is based on, in part, Boenning & Scattergood, Inc.’s profitability, which includes
revenues from investment banking. Boenning & Scattergood expects to receive or intends to seek
compensation for investment banking services from the subject company in the next three months.

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 Boenning & Scattergood’s Ratings System:
Our three-tier investment ratings are based on a stock’s return potential relative to a broad market index:

• Outperform (Buy): The security’s total return over the year or longer is expected to exceed the total
return of the S&P 500™ over the identical period.
• Neutral (Hold): The security’s total return over the next year or longer is expected to be roughly
equivalent to the total return of the S&P 500™ over the identical period.
• Underperform (Sell): The security’s total return over the next year or longer is expected to be less
than the total return of the S&P 500™ over the identical period.

Our four-tier risk ratings are based on a mix of price volatility and fundamental factors relative to the
market and peer group.

• Low: The security has higher-than-average fundamental predictability and/or lower-than-average

price volatility.
• Moderate: The security has average fundamental predictability and/or average price volatility.
• High: The security has lower-than-average fundamental predictability and/or higher-than-average
price volatility.
• Speculative: The security has very inconsistent fundamental predictability and/or very high relative
price volatility.

Ratings Distribution (12/31/08):

% of Investment % of
Coverage Universe Universe Banking Clients (a) Rating Group
Outperform (Buy) 56% Outperform (Buy) 7%
Neutral (Hold) 41% Neutral (Hold) 0%
Underperform (Sell) 3% Underperform (Sell) 0%

(a) Related to services provided within the past 12 months.

Additional information on companies in a research report, including financial models, is available on request.
Boenning & Scattergood, Inc. does and seeks to do business with companies covered in its research reports.
As a result, Investors should be aware that they firm may have a conflict of interest that could affect the
objectivity of this report. This report is not a complete analysis of every material fact representing company,
industry or security mentioned herein. The information has been obtained from sources believed reliable, but
is not necessarily complete and is not guaranteed. The reports are prepared for general information only and
do not have regard to the specific investment objectives, financial situation or the particular needs of any
specific person who may receive this report. The information is not to be relied upon in substitution for the
exercise of independent judgment. It is recommended that Investors seek financial advice regarding the
appropriateness of investing in any securities or investment strategies discussed in any report and should
understand that statements regarding future prospects, earnings estimates and forecasts may not be realized.
This communication shall not be deemed to constitute an offer, or solicitation on our part with respect to the
sale or purchase of any securities. Securities and financial instruments mentioned herein may not be qualified
for sale in all states. Opinions are subject to change without notice and reflect the opinion at its original date
of publication. Boenning & Scattergood may have issued a trading opinion that may have identified a short
term trading opportunity that may differ from the analyst’s stock rating which is based on the expected return
over a 12-month period. Boenning & Scattergood may trade for their own accounts as market maker, may
have a long or short position in any securities of this issuer or related investments, and/or may be the opposite
side of public orders. This firm or its officers, directors, stockholders, employees and clients, in the normal
course of business, may have, acquire or sell a position including options, if any, in the securities mentioned.
Boenning & Scattergood may also act as underwriter, placement agent, advisor, or lender to an issuer
mentioned herein.

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 BOENNING & SCATTERGOOD INSTITUTIONAL EQUITY CONTACTS
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„ RESEARCH ANALYSTS
Business Services William Sutherland [email protected] 610.862.5353
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„ RESEARCH ASSOCIATES
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Mid-West Matt Oliver [email protected] 610.684.5420
„ AGENCY TRADING
Mark Dengler [email protected] 610.862.5330
Joe Budash [email protected] 610.862.5330
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Scott Freeze [email protected] 610.832.5335
„ MARKET MAKING
Joseph Morrissey [email protected] 610.862.5360
Sean Clair [email protected] 610.862.5360
Brendan Dwyer [email protected] 610.862.5363
Jeff McMurray [email protected] 610.862.5360
Eric Axelson [email protected] 610.862.5360
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Louis DePaul [email protected] 610.832.5275

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