form10q09302008.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission File Number 000-31293

EQUINIX, INC.

(Exact name of registrant as specified in its charter)

Delaware		77-0487526
(State of incorporation)		(I.R.S. Employer Identification No.)

301 Velocity Way, Fifth Floor, Foster City, California 94404

(Address of principal executive offices, including ZIP code)

(650) 513-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) Yes x No o and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares outstanding of the registrant’s Common Stock as of September 30, 2008 was 37,349,752.

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EQUINIX, INC.

INDEX

		Page No.

Part I - Financial Information

Item 1.	Condensed Consolidated Financial Statements (unaudited):

	Condensed Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007		3

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2008 and 2007		4

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007		5

	Notes to Condensed Consolidated Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		46

Item 4.	Controls and Procedures		48

Part II - Other Information

Item 1.	Legal Proceedings		48

Item 1A.	Risk Factors		50

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		66

Item 3.	Defaults Upon Senior Securities		66

Item 4.	Submission of Matters to a Vote of Security Holders		66

Item 5.	Other Information		66

Item 6.	Exhibits		67

Signatures			71

Index to Exhibits			72

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PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

EQUINIX, INC.

Condensed Consolidated Balance Sheets

(in thousands)

	September 30, 2008			December 31, 2007
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	160,685		$	290,633
Short-term investments		101,892			63,301
Accounts receivable, net		62,376			60,089
Prepaids and other current assets		17,701			12,738
Total current assets		342,654			426,761
Long-term investments		67,622			29,966
Property and equipment, net		1,346,982			1,162,720
Goodwill		411,108			442,926
Intangible assets, net		62,351			67,207
Debt issuance costs, net		18,363			21,333
Other assets		42,855			30,955
Total assets	$	2,291,935		$	2,181,868
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	71,234		$	65,096
Accrued property and equipment		56,537			76,504
Current portion of capital lease and other financing obligations		3,986			3,808
Current portion of mortgage and loans payable		41,486			16,581
Current portion of convertible debt		32,250			—
Other current liabilities		33,583			29,473
Total current liabilities		239,076			191,462
Capital lease and other financing obligations, less current portion		95,095			93,604
Mortgage and loans payable, less current portion		374,872			313,915
Convertible debt, less current portion		645,986			678,236
Deferred tax liabilities		21,785			25,955
Deferred rent and other liabilities		77,871			64,264
Total liabilities		1,454,685			1,367,436

Stockholders’ equity:
Common stock		37			37
Additional paid-in capital		1,445,363			1,376,915
Accumulated other comprehensive loss		(64,557	)		(3,888	)
Accumulated deficit		(543,593	)		(558,632	)
Total stockholders’ equity		837,250			814,432
Total liabilities and stockholders’ equity	$	2,291,935		$	2,181,868

See accompanying notes to condensed consolidated financial statements

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EQUINIX, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

	Three months ended September 30,						Nine months ended September 30,
	2008			2007			2008			2007
	(unaudited)

Revenues	$	183,735		$	103,782		$	513,997		$	280,728
Costs and operating expenses:
Cost of revenues		109,863			62,891			306,357			171,265
Sales and marketing		16,009			9,630			46,650			27,602
General and administrative		35,529			25,182			111,350			72,122
Restructuring charges		799			―			799			407
Total costs and operating expenses		162,200			97,703			465,156			271,396
Income from operations		21,535			6,079			48,841			9,332
Interest income		441			3,309			6,293			10,340
Interest expense		(13,880	)		(5,662	)		(40,297	)		(15,240	)
Other income (expense)		(520	)		3,167			602			3,168
Loss on conversion and extinguishment of debt		―			(2,554	)		―			(5,949	)
Income before income taxes		7,576			4,339			15,439			1,651
Income taxes		(187	)		(215	)		(400	)		(766	)
Net income	$	7,389		$	4,124		$	15,039		$	885
Basic net income per share:
Net income per share	$	0.20		$	0.13		$	0.41		$	0.03
Weighted-average shares		36,972			31,683			36,608			30,845
Diluted net income per share:
Net income per share	$	0.19		$	0.12		$	0.40		$	0.03
Weighted-average shares		37,932			33,112			37,731			32,339

See accompanying notes to condensed consolidated financial statements

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EQUINIX, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

	Nine months ended September 30,

	2008			2007
	(unaudited)
Cash flows from operating activities:
Net income	$	15,039		$	885
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		110,110			64,495
Stock-based compensation		41,951			31,032
Amortization of intangible assets		5,236			689
Amortization of debt issuance costs		3,753			1,985
Accretion of asset retirement obligation and accrued restructuring charges		1,245			2,373
Restructuring charges		799			407
Gain on foreign currency hedge		—			(1,494	)
Other items		285			(1,152	)
Changes in operating assets and liabilities:
Accounts receivable		(3,783	)		(7,068	)
Prepaids and other assets		(2,018	)		(1,825	)
Accounts payable and accrued expenses		5,015			23,079
Accrued restructuring charges		(2,034	)		(10,100	)
Other liabilities		15,665			2,833
Net cash provided by operating activities		191,263			106,139
Cash flows from investing activities:
Purchases of investments		(240,556	)		(89,476	)
Sales of investments		71,141			100
Maturities of investments		93,268			71,421
Purchase of San Jose IBX property		—			(71,471	)
Purchase of Los Angeles IBX property		—			(49,059	)
Purchase of IXEurope, net of cash acquired		—			(541,729	)
Purchase of Virtu, net of cash acquired		(23,241	)		—
Purchases of other property and equipment		(305,546	)		(295,809	)
Change in accrued property and equipment		(16,015	)		23,940
Purchase of restricted cash		(14,234	)		(598	)
Release of restricted cash		333			—
Other investing activities		—			1,475
Net cash used in investing activities		(434,850	)		(951,206	)
Cash flows from financing activities:
Proceeds from employee equity awards		26,087			27,568
Proceeds from issuance of common stock		—			339,946
Proceeds from convertible debt		—			645,986
Proceeds from loans payable		102,101			118,754
Repayment of capital lease and other financing obligations		(2,874	)		(1,445	)
Repayment of mortgage and loans payable		(11,456	)		(1,573	)
Debt issuance costs		(908	)		(22,224	)
Net cash provided by financing activities		112,950			1,107,012
Effect of foreign currency exchange rates on cash and cash equivalents		689			(1,056	)
Net increase (decrease) in cash and cash equivalents		(129,948	)		260,889
Cash and cash equivalents at beginning of period		290,633			82,563
Cash and cash equivalents at end of period	$	160,685		$	343,452

Supplemental cash flow information:
Cash paid for taxes	$	405		$	240
Cash paid for interest	$	35,486		$	16,130

See accompanying notes to condensed consolidated financial statements

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements have been prepared by Equinix, Inc. (‘‘Equinix’’ or the ‘‘Company’’) and reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly state the financial position and the results of operations for the interim periods presented. The balance sheet at December 31, 2007 has been derived from audited financial statements at that date. The financial statements have been prepared in accordance with the regulations of the Securities and Exchange Commission (‘‘SEC’’), but omit certain information and footnote disclosure necessary to present the statements in accordance with generally accepted accounting principles. For further information, refer to the Consolidated Financial Statements and Notes thereto included in Equinix’s Form 10-K as filed with the SEC on February 27, 2008. Results for the interim periods are not necessarily indicative of results for the entire fiscal year.

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Certain amounts in the accompanying condensed consolidated financial statements have been reclassified to conform to the condensed consolidated financial statement presentation as of and for the three and nine months ended September 30, 2008.

Consolidation and Foreign Currency Transactions

The accompanying unaudited condensed consolidated financial statements include the accounts of Equinix and its subsidiaries, including the operations of IXEurope from September 14, 2007 and Virtu from February 5, 2008 (see Note 2). All significant intercompany accounts and transactions have been eliminated in consolidation. Foreign exchange gains or losses resulting from foreign currency transactions, including intercompany foreign currency transactions that are anticipated to be repaid within the foreseeable future, are reported within other income (expense) on the Company’s accompanying statements of operations.

Revenue Recognition and Allowance for Doubtful Accounts

Equinix derives more than 90% of its revenues from recurring revenue streams, consisting primarily of (1) colocation services, such as the licensing of cabinet space and power; (2) interconnection services, such as cross connects and Equinix Exchange ports; (3) managed infrastructure services, such as Equinix Direct and bandwidth and (4) other services consisting of rent. The remainder of the Company’s revenues are from non-recurring revenue streams, such as from the recognized portion of deferred installation revenues, professional services, contract settlements and equipment sales. Revenues from recurring revenue streams are generally billed monthly and recognized ratably over the term of the contract, generally one to three years for Internet Business Exchange (“IBX”) space customers. Non-recurring installation fees, although generally paid in a lump sum upon installation, are deferred and recognized ratably over the longer of the term of the related contract or expected life of the installation. Professional service fees are recognized in the period in which the services were provided and represent the culmination of a separate earnings process as long as they meet the criteria for separate recognition under EITF No. 00-21, “Revenue Arrangements with Multiple Deliverables.” Revenue from bandwidth and equipment sales is recognized on a gross basis in accordance with EITF No. 99-19, “Recording Revenue as a Principal versus Net as an Agent”, primarily because the Company acts as the principal in the transaction, takes title to products and services and bears inventory and credit risk. To the extent the Company does not meet the criteria for gross basis accounting for bandwidth and equipment revenue, the Company records the revenue on a net basis. Revenue from contract settlements, when a customer wishes to terminate their contract early, is generally recognized on a cash basis, when no remaining performance obligations exist, to the extent that the revenue has not previously been recognized.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company occasionally guarantees certain service levels, such as uptime, as outlined in individual customer contracts. To the extent that these service levels are not achieved, the Company reduces revenue for any credits given to the customer as a result. The Company generally has the ability to determine such service level credits prior to the associated revenue being recognized, and historically, these credits have generally not been significant. There were no significant service level credits issued during the three and nine months ended September 30, 2008 and 2007.

Revenue is recognized only when the service has been provided and when there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the receivable is reasonably assured. It is customary business practice to obtain a signed master sales agreement and sales order prior to recognizing revenue in an arrangement. Taxes collected from customers and remitted to governmental authorities are reported on a net basis and are excluded from revenue.

The Company assesses collection based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. The Company generally does not request collateral from its customers although in certain cases the Company obtains a security interest in a customer’s equipment placed in its IBX centers or obtains a deposit. If the Company determines that collection of a fee is not reasonably assured, the fee is deferred and revenue is recognized at the time collection becomes reasonably assured, which is generally upon receipt of cash. In addition, the Company also maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments for which the Company had expected to collect the revenues. If the financial condition of the Company’s customers were to deteriorate or if they became insolvent, resulting in an impairment of their ability to make payments, greater allowances for doubtful accounts may be required. Management specifically analyzes accounts receivable and current economic news and trends, historical bad debts, customer concentrations, customer credit-worthiness and changes in customer payment terms when evaluating revenue recognition and the adequacy of the Company’s reserves. A specific bad debt reserve of up to the full amount of a particular invoice value is provided for certain problematic customer balances. An additional reserve is established for all other accounts based on the age of the invoices and an analysis of historical credits issued. Delinquent account balances are written-off after management has determined that the likelihood of collection is not probable.

Net Income per Share

The Company computes net income per share in accordance with SFAS No. 128, “Earnings per Share;” SEC Staff Accounting Bulletin (“SAB”) No. 98; EITF Issue 03-6, “Participating Securities and the Two-Class Method Under FASB 128;” EITF Issue 04-8 “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share” and SFAS No. 123(R), “Share-Based Payment.” Basic net income (loss) per share is computed using net income (loss) and the weighted-average number of common shares outstanding. Diluted net income per share is computed using net income, adjusted for interest expense as a result of the assumed conversion of the Company’s Convertible Subordinated Debentures, 2.50% Convertible Subordinated Notes and 3.00% Convertible Subordinated Notes, if dilutive, and the weighted-average number of common shares outstanding plus any dilutive potential common shares outstanding. Dilutive potential common shares include the assumed exercise, vesting and issuance activity of employee equity awards using the treasury stock method, as well as warrants and shares issuable upon the conversion of the Convertible Subordinated Debentures, 2.50% Convertible Subordinated Notes and 3.00% Convertible Subordinated Notes.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table sets forth the computation of basic and diluted net income per share for the periods presented (in thousands, except per share amounts):

	Three months ended September 30,						Nine months ended September 30,
	2008			2007			2008			2007
Numerator:
Numerator for basic net income per share	$	7,389		$	4,124		$	15,039		$	885
Effect of assumed conversion of convertible subordinated debentures and notes:
Interest expense, net of tax		—			—			—			—
Numerator for diluted net income per share	$	7, 389		$	4,124		$	15, 039		$	885
Denominator:
Weighted-average shares		37,268			32,142			36,975			31,305
Weighted-average unvested restricted shares issued subject to forfeiture		(296	)		(459	)		(367	)		(460	)
Denominator for basic net income per share		36,972			31,683			36,608			30,845
Effect of dilutive securities:
Convertible subordinated debentures		—			—			—			—
2.50% convertible subordinated notes		—			—			—			—
3.00% convertible subordinated notes		—			—			—			—
Employee equity awards		960			1,429			1,123			1,494
Warrants		—			—			—			—
Total dilutive potential shares		960			1,429			1,123			1,494
Denominator for diluted net income per share		37,932			33,112			37,731			32,339
Net income per share:
Basic	$	0.20		$	0.13		$	0.41		$	0.03
Diluted	$	0.19		$	0.12		$	0.40		$	0.03

The following table sets forth potential shares of common stock that are not included in the diluted net income per share calculation above because to do so would be anti-dilutive for the periods indicated (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2008		2007		2008		2007

Shares reserved for conversion of convertible subordinated debentures		816		816		816		816
Shares reserved for conversion of 2.50% convertible subordinated notes		2,232		2,232		2,232		2,232
Shares reserved for conversion of 3.00% convertible subordinated notes		2,945		2,945		2,945		2,945
Common stock warrants		1		1		1		1
Common stock related to employee equity awards		1,447		1,065		1,520		1,093
		7,441		7,059		7,514		7,087

Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are expected more likely than not to be realized in the future.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company recorded an additional deferred tax liability totaling $1,372,000 with an increase to goodwill as a result of the Virtu Acquisition. The deferred tax liability recognized is primarily attributable to the identifiable intangible assets that were recorded for the purchase.

The Company will continue to provide a valuation allowance for the net deferred tax assets, other than the deferred tax assets associated with its Singapore and Swiss subsidiaries, until it becomes more likely than not that the net deferred tax assets will be realizable. For the three and nine months ended September 30, 2008, the Company recorded $187,000 and $400,000, respectively, of tax expense. The tax benefit and expense recorded during the periods ended September 30, 2008 were primarily attributable to the Company’s foreign operations. For the three and nine months ended September 30, 2007, the Company recorded a tax provision of $215,000 and $766,000, respectively. The tax provision recorded in the periods ended September 30, 2007 was primarily attributable to the Company’s foreign operations. The tax provision for the nine months ended September 30, 2008 includes a tax benefit of $185,000 the Company recorded due to a tax settlement with a state in which it operated. The Company did not record any excess tax benefits associated with the stock options exercised by employees during the three and nine months ended September 30, 2008 and 2007.

In January 2007, the Company adopted the provisions of FIN 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which clarifies the accounting for uncertainty in income taxes recognized in the condensed consolidated financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The adoption of FIN 48 resulted in no cumulative effect of a change in accounting principle being recorded on the Company’s condensed consolidated financial statements during the three months ended March 31, 2007. Prior to the adoption of FIN 48, the Company recorded liabilities related to uncertain income tax position based upon SFAS No. 5, “Accounting for Contingencies.”

During the three months ended March 31, 2008, the Company reached a final agreement with a state in which it operated to close an appeal filed by the Company in that state’s tax court. The Company filed the appeal in 2006 to contest the decision made by the state auditor disallowing the refundable research and capital goods credits. The executed closing settlement specified that the state would credit the Company $357,000 plus interest, which was received. As a result of the settlement, the total unrecognized tax benefits decreased by $1,373,000 in the nine months ended September 30, 2008. A majority of the unrecognized tax benefits, if subsequently recognized, will affect the Company’s effective tax rate at the time of recognition. The Company will continue to classify the interest and penalties recognized in accordance with paragraphs 15 and 16, respectively, of FIN 48 in the financial statements as income tax. The Company’s income tax returns for all tax years remain open to examination by federal and various state taxing authorities due to the Company’s Net Operating Loss (“NOL”) carry-forward. In addition, the Company’s tax years of 2001 through 2007 also remain open and subject to examination by local tax authorities in the foreign jurisdictions in which the Company has major operations.

Construction in Progress

Construction in progress includes direct and indirect expenditures for the construction and expansion of IBX centers and is stated at original cost. The Company has contracted out substantially all of the construction and expansion efforts of its IBX centers to independent contractors under construction contracts. Construction in progress includes certain costs incurred under a construction contract including project management services, engineering and schematic design services, design development, construction services and other construction-related fees and services. In addition, the Company has capitalized certain interest costs during the construction phase. Once an IBX center or expansion project becomes operational, these capitalized costs are allocated to certain property and equipment categories and are depreciated at the appropriate rates consistent with the estimated useful life of the underlying assets.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Interest incurred is capitalized in accordance with SFAS No. 34, “Capitalization of Interest Costs.” The following table sets forth total interest cost incurred and total interest cost capitalized (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2008		2007		2008		2007

Interest expense	$	13,880	$	5,662	$	40,297	$	15,240
Interest capitalized		1,490		2,974		4,684		6,120
Interest charges incurred	$	15,370	$	8,636	$	44,981	$	21,360

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with SFAS No. 123(R), “Share-Based Payment,” and related pronouncements (“SFAS 123(R)”). Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date for all stock-based awards made to employees and directors based on the fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period. SFAS 123(R) supersedes the Company’s previous accounting under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB 25”) for periods beginning in fiscal year 2006. Commencing in March 2008, the Company began granting restricted stock units to its employees in lieu of stock options.

In January 2008, the Compensation Committee of the Board of Directors approved the issuance of an aggregate of 123,000 shares of restricted stock units to executive officers pursuant to the 2000 Equity Incentive Plan. In addition, in February 2008, the Stock Award Committee of the Board of Directors approved the issuance of 308,267 restricted stock units to certain employees, excluding executive officers, as part of the Company’s annual refresh program. All awards are subject to vesting provisions. All such equity awards described in this paragraph had a total fair value as of the date of grants, net of estimated forfeitures, of $28,565,000, which is expected to be amortized over a weighted-average period of 3.23 years.

During the three months ended June 30, 2008, the Company entered into compromise agreements with its two senior officers in Europe in connection with their resignations and modified their outstanding stock awards. As a result, the Company recorded an incremental stock-based compensation charge of $3,098,000 during the nine months ended September 30, 2008, which is included in general and administrative expenses in the Company’s condensed consolidated statements of operations.

The following table presents, by operating expense, the Company’s stock-based compensation expense recognized in the Company’s condensed consolidated statement of operations (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2008		2007		2008		2007

Cost of revenues	$	1,257	$	878	$	3,435	$	3,019
Sales and marketing		2,367		2,049		7,421		6,440
General and administrative		8,938		7,562		31,095		21,573
	$	12,562	$	10,489	$	41,951	$	31,032

Goodwill and Other Intangible Assets

Equinix currently operates in one reportable segment, but has determined that it operates in a number of reporting units for the purposes of SFAS No. 142, which consists of the Company’s geographic operations in 1) the United States, 2) Asia-Pacific and 3) Europe. As of September 30, 2008, the Company

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

had goodwill attributable to the Asia-Pacific reporting unit and the Europe reporting unit. The Company performed its annual impairment review of the Europe reporting unit as of August 31, 2008. The Company concluded that its goodwill attributed to the Company’s Europe reporting unit was not impaired as the fair value of its Europe reporting unit exceeded the carrying value of this reporting unit, including goodwill. The recent market declines have not had an impact on this determination. The primary methods used to determine the fair values for SFAS No. 142 impairment purposes were the discounted cash flow and market methods. The assumptions supporting the discounted cash flow method, including the discount rate, which was assumed to be 9.5%, were determined using the Company's best estimates as of the date of the impairment review. Impairment assessment inherently involves judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact the Company’s assumptions as to prices, costs, growth rates or other factors that may result in changes in the Company’s estimates of future cash flows. Although the Company believes the assumptions it used in testing for impairment are reasonable, significant changes in any one of the Company’s assumptions could produce a significantly different result. The Company performs its annual impairment review of the Asia-Pacific reporting unit in the fourth quarter; however, the Company has noted no indications of impairment as of September 30, 2008.

Goodwill and other intangible assets, net, consisted of the following (in thousands):

	September 30, 2008			December 31, 2007

Goodwill:
Asia-Pacific	$	18,088		$	18,010
Europe		393,020			424,916
		411,108			442,926
Other intangibles:
Intangible asset – customer contracts		69,084			69,209
Intangible asset – leases		5,035			5,254
Intangible asset – tradename		419			361
Intangible asset – workforce		160			160
Intangible asset – lease expenses		111			111
Intangible asset – non-compete		65			―
		74,874			75,095
Accumulated amortization		(12,523	)		(7,888	)
		62,351			67,207
	$	473,459		$	510,133

As a result of the Virtu Acquisition, the Company recorded goodwill of $16,973,000 and intangible assets, comprised primarily of customer contracts, of $7,195,000. The customer contracts intangible asset is being amortized over an estimated useful life of 12 years. The Company’s goodwill and intangible assets in Europe are assets denominated in British pounds and Euros and goodwill in Asia-Pacific is denominated in Singapore dollars and are subject to foreign currency fluctuations. The Company’s foreign currency translation gains and losses, including goodwill and other intangibles, are a component of other comprehensive income and loss.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

For the three and nine months ended September 30, 2008, the Company recorded amortization expense of $1,690,000 and $5,236,000, respectively. For the three and nine months ended September 30, 2007, the Company recorded amortization expense of $423,000 and $689,000, respectively. The Company expects to record the following amortization expense during the remainder of 2008 and beyond (in thousands):

Year ending:
2008 (three months remaining)	$	1,726
2009		6,223
2010		6,188
2011		6,089
2012		6,071
2013 and thereafter		36,054
Total	$	62,351

Derivatives and Hedging Activities

The Company follows SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS 133”), which requires the Company to recognize all derivatives on the consolidated balance sheet at fair value. The accounting for changes in the value of a derivative depends on whether the contract is for trading purposes or has been designated and qualifies for hedge accounting. In order to qualify for hedge accounting, a derivative must be considered highly effective at reducing the risk associated with the exposure being hedged. In order for a derivative to be designated as a hedge, there must be documentation of the risk management objective and strategy, including identification of the hedging instrument, the hedged item and the risk exposure, and how effectiveness is to be assessed prospectively and retrospectively.

To assess effectiveness, the Company uses a regression analysis. The extent to which a hedging instrument has been and is expected to continue to be effective at achieving offsetting changes in cash flows is assessed and documented at least quarterly. Any ineffectiveness is reported in current-period earnings. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued. For qualifying cash flow hedges, the effective portion of the change in the fair value of the derivative is recorded in other comprehensive income (loss) and recognized in the condensed consolidated statements of operations when the hedged cash flows affect earnings. The ineffective portions of cash flow hedges are immediately recognized in earnings. If the hedge relationship is terminated, then the change in fair value of the derivative recorded in other comprehensive income (loss) is recognized when the cash flows that were hedged occur, consistent with the original hedge strategy. For hedge relationships discontinued because the forecasted transaction is not expected to occur according to the original strategy, any related derivative amounts recorded in other comprehensive income (loss) are immediately recognized in earnings.

Cash Flow Hedges – Interest Rate Swaps

The Company has variable-rate debt financing. These obligations expose the Company to variability in interest payments and therefore fluctuations in interest expense due to changes in interest rates. Interest rate swap contracts are used in the Company's risk management activities in order to minimize significant fluctuations in earnings that are caused by interest rate volatility. Interest rate swaps involve the exchange of variable-rate interest payments for fixed-rate interest payments based on the contractual underlying notional amount. Gains and losses on the interest rate swaps that are linked to the debt being hedged are expected to substantially offset this variability in earnings.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In May 2008, the Company entered into several interest rate swaps in order to minimize variability related to its variable-rate Chicago IBX Financing and European Financing (see Note 12 – Debt Facilities and Other Financing Obligations). The Company also designated two existing interest rate swaps acquired in the IXEurope Acquisition as effective cash flow hedge relationships with the European Financing. Each of these hedge relationships were highly effective at achieving offsetting changes in cash flows as of September 30, 2008 with an insignificant amount of ineffectiveness recorded in interest expense on the accompanying condensed consolidated statements of operations. As of September 30, 2008, the Company had the following interest rate swaps in place (in thousands):

	As of September 30, 2008
	Notional Amount		Fair Value1)			Loss (2)
Liabilities:
European Financing interest rate swaps	$	113,710	$	(1,602	)	$	(1,832	)
Chicago IBX Financing interest rate swap		105,000		(513	)		(513	)
	$	218,710	$	(2,115	)	$	(2,345	)

________________________

(1)	Included in the condensed consolidated balance sheets within prepaids and other current assets or deferred rent and other liabilities.

(2)	Included in the condensed consolidated balance sheets within other comprehensive income (loss).

Other Derivatives – Foreign Currency Forward Contracts

The Company uses foreign currency forward contracts to manage the foreign exchange risk associated with certain foreign currency-denominated assets and liabilities. As a result of foreign currency fluctuations, the U.S. dollar equivalent values of the foreign currency-denominated assets and liabilities change. Foreign currency forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon price on an agreed-upon settlement date.

The Company has not designated the foreign currency forward contracts as hedging instruments under SFAS 133. Gains and losses on these contracts are included in other income (expense), net, along with those gains and losses of the related hedged items. The Company entered into various foreign currency forward contracts during the three months ended September 30, 2008. As of September 30, 2008, the Company recorded a net asset of $2,944,000 representing the fair values of these foreign currency forward contracts, which is recorded within prepaids and other current assets in the accompanying condensed consolidated balance sheet.

Fair Value Measurements

Effective January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). This standard establishes a framework for measuring fair value and expands disclosure about fair value measurements. The Company did not elect to adopt fair value accounting for any assets or liabilities allowed by SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). The adoption of SFAS 157 did not have a material impact on the Company’s financial position, results of operations or operating cash flow.

To increase consistency and comparability in fair value measurements, SFAS 157 establishes a fair value hierarchy to prioritize the inputs used in valuation techniques. There are three broad levels to the fair value hierarchy of inputs to fair value (Level 1 being the highest priority and Level 3 being the lowest priority) as follows:

·	Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

·	Level 3: Unobservable inputs reflecting the Company's own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

The Company measures and reports certain financial assets and liabilities at fair value on a recurring basis, including its investments in money market funds and available-for-sale debt investments in other public companies, governmental units and other agencies and derivatives.

The Company’s assets and liabilities measured at fair value at September 30, 2008 were as follows (in thousands):

	Fair value at September 30, 2008			Fair value measurement using
	Fair value at September 30, 2008			Level 1		Level 2			Level 3
Assets:
Money market	$	41,538		$	41,538	$	―		$	―
Reserve fund at cost		49,422			―		―			49,422
Commercial paper		24,329			―		24,329			―
U.S. government and agency obligations		123,625			―		123,625			―
Corporate bonds		43,179			―		43,179			―
Asset-backed securities		32,904			―		32,904			―
Certificates of deposits		13,976			―		13,976			―
Other securities		1,226			―		1,226			―
Derivative assets (1)		3,004			―		3,004			―
	$	333,203		$	41,538	$	242,243		$	49,422
Liabilities:
Derivative liabilities (2)		(2,174	)		―		(2,174	)		―
	$	(2,174	)	$	―	$	(2,174	)	$	―

________________________

(1)	Included in the condensed consolidated balance sheets within prepaids and other current assets and other assets.

(2)	Included in the condensed consolidated balance sheets within other current liabilities and deferred rent and other liabilities.

The fair value of the Company's investments in available-for-sale money market funds approximates their face value. Such instruments are included in cash equivalents. These securities include available-for-sale debt investments related to the Company's investments in the securities of other public companies, governmental units and other agencies. The fair value of these investments is based on the quoted market price of the underlying shares. However, money market funds held by The Reserve Primary Fund (the “Reserve”), whose carrying value of $50,949,000 was in excess of fair value, accordingly an other-than-temporary impairment charge of $1,527,000 was recorded in September 2008 to reflect the adjusted cost of $49,422,000 (see Note 5). The money market funds held in the Reserve, normally classified as Level 1 securities, were re-designated as Level 3 securities in September 2008. The impairment charge of $1,527,000 related to the Reserve is reflected in interest income on the accompanying condensed consolidated statements of operations.

Valuation Methods

Fair value estimates are made as of a specific point in time based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are affected by the assumptions used and the judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company’s money market fund instruments are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices for identical instruments in active markets. However, the Reserve experienced a decline in its fair value as a result of its exposure to investments held in Lehman Brothers Holdings, Inc. (“Lehman Brothers”) which filed for Chapter 11 bankruptcy protection. The Company recorded a loss on its investments in the Reserve and each of the individual securities which comprise the holdings in the Reserve were further evaluated. The Company has re-designated its investment in the Reserve from cash and cash equivalents to short-term investments at adjusted cost (for further information, refer to Note 5). This re-designation is included in purchases of investments in investing activities in the Company’s accompanying condensed consolidated statements of cash flows. The Company conducted its fair value assessment of the Reserve using Level 2 and Level 3 inputs. Management has reviewed the Reserve's underlying securities portfolio which is substantially comprised of discount notes, certificates of deposit and commercial paper issued by highly-rated institutions. The Company has used a pricing service to assist in its review of fair value of the underlying portfolio, which estimates fair value of some instruments using proprietary models based on assumptions as to term, maturity dates, rates, credit risk, etc. Normally, the Company would classify such an investment within Level 2 of the fair value hierarchy. However, management also evaluated the fair value of its unit interest in the Reserve itself, considering risk of collection, timing and other factors. These assumptions are inherently subjective and involve significant management judgment. As a result, the Company has classified its holdings in the Reserve within Level 3 of the fair value hierarchy.

The Company considers each category of investments held to be an asset group. The asset groups held at September 30, 2008 were U.S. government and agency securities, corporate notes, commercial paper and asset backed securities. The Company’s fair value assessment includes an evaluation by each of these asset groups, all of which continue to be classified within Level 2 of the fair value hierarchy.

The types of instruments valued based on other observable inputs include available-for-sale debt investments in other public companies, governmental units and other agencies. Such instruments are generally classified within Level 2 of the fair value hierarchy.

Short-Term and Long-Term Investments. The Company uses the specific identification method in computing realized gains or losses. Except for the Reserve, which is carried at its adjusted cost, short-term and long-term investments are classified as “available-for-sale” and are carried at fair value based on quoted market prices with unrealized gains and losses reported in stockholders’ equity as a component of other comprehensive income or loss. The Company reviews its investment portfolio quarterly to determine if any securities may be other-than-temporarily impaired due to increased credit risk, changes in industry or sector of a certain instrument or ratings downgrades over an extended period of time. The Company determined that these quoted market prices qualify as Level 1 and Level 2.

Derivative Assets and Liabilities. In determining the fair value of the Company’s interest rate swap derivatives, the Company uses the present value of expected cash flows based on observable market interest rate curves and volatilities commensurate with the term of each instrument and the credit valuation adjustments to appropriately reflect both the Company’s own nonperformance risk and the counterparty’s nonperformance risk. For foreign currency derivatives, the Company’s approach is to use forward contract and option valuation models employing market observable inputs, such as spot currency rates, time value and option volatilities and adjust for the credit default swap market. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit risk valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2008, the Company had assessed the significance of the impact of the credit risk valuation adjustments on the overall valuation of its derivative positions and had determined that the credit risk valuation adjustments were not significant to the overall valuation of its derivatives.

2. Virtu Acquisition

On February 5, 2008, a wholly-owned subsidiary of the Company acquired all of the issued and outstanding share capital of Virtu Secure Webservices B.V. (“Virtu”), a provider of network-neutral data center services in the Netherlands, for a cash payment of $23,345,000, including closing costs (the “Virtu Acquisition”). Under the terms of the Virtu Acquisition, the Company may also pay additional future contingent consideration, which will be payable in the form of up to 20,000 shares of the Company’s common stock and cash of up to 1,500,000 Euros, contingent upon meeting certain pre-determined future annual operating targets from 2008 to 2011. Such contingent consideration, if paid, will be recorded as additional goodwill. Virtu, a similar business to that of the Company, operates data centers in the Netherlands, supplementing the Company’s existing European operations. The combined company predominantly operates under the Equinix name. The results of operations for Virtu are insignificant; therefore, the Company does not present pro forma combined results of operations.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

3. IBX Acquisitions and Expansions

Paris IBX Expansion Project

In September 2008, the Company entered into a long-term lease for a new building located adjacent to one of its existing Paris IBX centers. The lease, which is an operating lease, commenced on October 1, 2008. Cumulative minimum monthly payments under the lease total 44,568,000 Euros, or approximately $62,805,000. Monthly payments under the lease commence in April 2009 and are payable through September 2020.

Sydney IBX Expansion Project

In January 2008, the Company entered into a long-term lease for a new building located adjacent to its existing Sydney IBX center and at the same time terminated the existing lease for the Company’s original Sydney IBX center by incorporating it into the new lease. The Company extended the original lease term for an additional seven years in a single, revised lease agreement for both buildings (collectively, the “Building"). Cumulative minimum payments under this lease total 18,260,000 Australian dollars, or approximately $14,500,000, of which 12,202,000 Australian dollars, or approximately $9,700,000, is incremental to the previous lease. Payments are due monthly and commenced in January 2008. As a result of the Company significantly altering the Building’s footprint in order to meet the Company’s IBX center needs, the Company followed the accounting provisions of EITF 97-10, “The Effect of Lessee Involvement in Asset Construction” (“EITF 97-10”). Pursuant to EITF 97-10, the Building is considered a financed asset (the "Sydney IBX Building Financing") and subject to a ground lease for the underlying land, which is considered an operating lease. Pursuant to the Sydney IBX Building Financing, the Company recorded the Building asset and a corresponding financing obligation liability totaling 5,805,000 Australian dollars (or approximately $4,600,000) in January 2008. Monthly payments under the Sydney IBX Building Financing, which commenced in January 2008, are payable through December 2022, at an effective interest rate of approximately 7.90% per annum.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

IBX Expansion Project Summary

The following table sets forth approximate balances of total cumulative capital expenditures, excluding cost of acquisition of land and building, if any, incurred on the Company’s significant expansion projects which were underway as of either of the following dates (in thousands):

	September 30, 2008		December 31, 2007
U.S. Expansion Projects:
Washington, D.C. Metro Area Fifth IBX Center Expansion Project (DC5)	$	77,637	$	20,000
Silicon Valley Metro Area IBX Expansion Project (SV2 Phase II)		38,931		25,283
Los Angeles Metro Area IBX Expansion Project (LA4 Phase I)		23,424		4,321
New York Metro Area IBX Expansion Project (NY4 Phase II))		18,526		―
		158,518		49,604
Asia-Pacific Expansion Projects:
Tokyo IBX Expansion Project (TY2)		26,894		16,600
Singapore IBX Expansion Project (SG1 Expansion Phase II and III)		29,404		15,500
Sydney IBX Expansion Project (SY2)		17,985		―
Hong Kong IBX Expansion Project (HK1 Phase II)		16,469		―
		90,752		32,100
Europe Expansion Projects:
Paris IBX Expansion Project (PA2 Phase II and III)		25,457		8,513
Frankfurt IBX Expansion Project (FR2 Phase II(a) and II(b))		29,302		4,177
London IBX Expansion Project (LD4 Phase II)		28,102		5,529
Amsterdam IBX Expansion Project (AM1 Phase I)		9,453		―
		92,314		18,219
	$	341,584	$	99,923

The Company’s planned capital expenditures during the remainder of 2008 in connection with the expansion efforts described above are substantial. For further information, refer to “Other Purchase Commitments” in Note 13.

4. Related Party Transactions

The Company has several significant stockholders, and other related parties, that are also customers and/or vendors. For the three and nine months ended September 30, 2008, revenues recognized with these related parties were $6,662,000 and $14,266,000, respectively. For the three and nine months ended September 30, 2007, revenues recognized with these related parties were $2,345,000 and $6,322,000, respectively. As of September 30, 2008 and 2007, accounts receivable with these related parties were $5,386,000 and $1,952,000, respectively. For the three and nine months ended September 30, 2008, costs and services procured with these related parties were $735,000 and $2,250,000, respectively. For the three and nine months ended September 30, 2007, costs and services procured with these related parties were $284,000 and $921,000, respectively. As of September 30, 2008 and 2007, accounts payable with these related parties were $87,000 and $144,000, respectively.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

5. Cash, Cash Equivalents and Short-Term and Long-Term Investments

Cash, cash equivalents and short-term and long-term investments consisted of the following (in thousands):

	September 30, 2008			December 31, 2007

Money market	$	41,538		$	272,099
Reserve fund at cost		49,422			―
Commercial paper		24,329			24,218
U.S. government and agency obligations		123,625			32,801
Corporate bonds		43,179			36,604
Asset-backed securities		32,904			16,578
Certificates of deposits		13,976			1,600
Other securities		1,226			―
Total available-for-sale securities		330,199			383,900
Less amounts classified as cash and cash equivalents		(160,685	)		(290,633	)
Total securities classified as investments		169,514			93,267
Less amounts classified as short-term investments		(101,892	)		(63,301	)
Total market value of long-term investments	$	67,622		$	29,966

As of September 30, 2008 and December 31, 2007, cash equivalents included investments which were readily convertible to cash and had maturity dates of 90 days or less. The maturities of securities classified as short-term investments were one year or less as of September 30, 2008 and December 31, 2007. The maturities of securities classified as long-term investments were greater than one year and less than three years as of September 30, 2008 and December 31, 2007.

In the period ended September 30, 2008, the Company recorded a $1,527,000 realized loss resulting from its investments in the Reserve, a prime obligations money market fund that suffered a decline in its Net Asset Value (“NAV”) of below $1 per share when the Reserve valued its exposure to investments in Lehman Brothers at zero value. The Reserve held investments in commercial paper and short term-notes issued by Lehman Brothers, which filed for Chapter 11 bankruptcy protection in September 2008. This realized loss is included in interest income in the Company’s accompanying condensed consolidated statements of operations. The Company has issued a redemption notice to redeem in full all of its holdings with the Reserve. As of September 30, 2008, the fair value of the funds held by the Reserve totaled $49,422,000.

The Company expects that distributions from the Reserve will occur over the remaining 12 months as the investments held in the fund mature. The Reserve has announced that this fund is in liquidation and they are currently working with their auditors to determine an accurate distribution of their account holdings. As of September 30, 2008, the Company has classified its investment in the Reserve as a short-term investment on its condensed consolidated balance sheet. This classification is based on the Company’s internal assessment of each of the individual securities which make-up the underlying portfolio holdings in the Reserve, which primarily consisted of commercial paper and discount notes having maturity dates within the next 12 months. While the Company expects to receive substantially all of its current holdings in the Reserve within the next 12 months, it is possible the Company may encounter difficulties in receiving distributions given the current credit market conditions. If market conditions were to deteriorate even further such that the current fair value were not achievable, or if the Reserve is delayed in its ability to accurately complete their account reconciliations, the Company could realize additional losses in its holdings with the Reserve and distributions could be further delayed.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

As of September 30, 2008, the Company’s net unrealized gains (losses) on its available-for-sale securities were comprised of the following (in thousands):

	Unrealized gains		Unrealized losses			Net unrealized losses

Cash and cash equivalents	$	—	$	(30	)	$	(30	)
Short-term investments		11		(336	)		(325	)
Long-term investments		69		(486	)		(418	)
	$	80	$	(852	)	$	(773	)

The following table summarizes the fair value and gross unrealized losses related to 119 available-for-sale securities with an aggregate cost basis of $193,111,000, aggregated by type of investment and length of time that individual securities have been in continuous unrealized loss position, as of September 30, 2008 (in thousands):

	Securities in a loss position for less than 12 months					Securities in a loss position for 12 months or more
	Fair value		Gross unrealized loss			Fair value		Gross unrealized loss

U.S. government & agency obligations	$	96,429	$	(120	)	$	—	$	—
Commercial paper		24,329		(25	)		—		—
Corporate bonds		29,931		(439	)		—		—
Asset-backed securities		27,594		(240	)		—		—
Certificates of deposit		13,976		(28	)		—		—
	$	192,259	$	(852	)	$	—	$	—

While the Company does not believe it holds investments that are other-than-temporarily impaired, as of September 30, 2008, the Company’s investments are subject to the currently adverse market conditions, which include constraints related to liquidity. If market conditions continue to deteriorate and liquidity constraints become even more pronounced, the Company could sustain further other-than-temporary impairments to its investment portfolio which could result in additional realized losses being recorded against net interest income or securities markets could become inactive which could affect the liquidity of the Company’s investments. As securities mature, the Company has reinvested the proceeds in U.S. government securities, such as Treasury bills and Treasury notes, of a short-term duration and lower yield. As a result, the Company expects to recognize lower interest income in future periods.

6. Accounts Receivable

Accounts receivables, net, consisted of the following (in thousands):

	September 30, 2008			December 31, 2007

Accounts receivable	$	112,610		$	98,141
Unearned revenue		(48,797	)		(37,606	)
Allowance for doubtful accounts		(1,437	)		(446	)
	$	62,376		$	60,089

Trade accounts receivable are recorded at the invoiced amount and generally do not bear interest. Unearned revenue consists of pre-billing for services that have not yet been provided, but which have been billed to customers ahead of time in accordance with the terms of their contract. Accordingly, the Company invoices its customers at the end of a calendar month for services to be provided the following month.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

7. Prepaids and Other Current Assets

Prepaids and other current assets consisted of the following (in thousands):

	September 30, 2008		December 31, 2007

Prepaid expenses	$	10,229	$	6,979
Foreign exchange forward contract receivables		2,944		—
Taxes receivable		2,295		3,437
Interest rate swap receivables		60		—
Other current assets		2,173		2,322
	$	17,701	$	12,738

8. Property and Equipment

Property and equipment consisted of the following (in thousands):

	September 30, 2008			December 31, 2007

IBX plant and machinery	$	629,825		$	503,755
Leasehold improvements		539,079			481,409
Buildings		156,510			153,692
Site improvements		149,061			96,041
IBX equipment		138,306			128,423
Computer equipment and software		69,429			60,881
Land		50,139			50,979
Furniture and fixtures		8,128			5,698
Construction in progress		170,174			133,501
		1,910,651			1,614,379
Less accumulated depreciation		(563,669	)		(451,659	)
	$	1,346,982		$	1,162,720

Leasehold improvements, IBX plant and machinery, computer equipment and software and buildings recorded under capital leases aggregated $40,807,000 and $40,486,000 at September 30, 2008 and December 31, 2007, respectively. Amortization on the assets recorded under capital leases is included in depreciation expense and accumulated depreciation on such assets totaled $10,407,000 and $7,539,000 as of September 30, 2008 and December 31, 2007, respectively.

As of September 30, 2008 and December 31, 2007, the Company had accrued property and equipment expenditures of $56,537,000 and $76,504,000, respectively. The Company’s planned capital expenditures during the remainder of 2008 in connection with recently acquired IBX properties and expansion efforts are substantial. For further information, refer to “Other Purchase Commitments” in Note 13.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

9. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following (in thousands):

	September 30, 2008		December 31, 2007

Accounts payable	$	11,797	$	14,816
Accrued compensation and benefits		20,143		18,875
Accrued utility and security		12,447		8,709
Accrued interest		10,220		6,461
Accrued taxes		7,643		6,925
Accrued professional fees		2,024		2,094
Accrued other		6,960		7,216
	$	71,234	$	65,096

10. Other Current Liabilities

Other current liabilities consisted of the following (in thousands):

	September 30, 2008		December 31, 2007

Deferred installation revenue	$	20,432	$	16,295
Customer deposits		5,609		4,643
Deferred recurring revenue		3,483		3,811
Accrued restructuring charges		3,172		3,973
Deferred rent		409		400
Other current liabilities		478		351
	$	33,583	$	29,473

11. Deferred Rent and Other Liabilities

Deferred rent and other liabilities consisted of the following (in thousands):

	September 30, 2008		December 31, 2007

Deferred rent, non-current	$	29,490	$	26,512
Deferred installation revenue, non-current		14,526		10,241
Asset retirement obligations		11,280		8,759
Accrued restructuring charges, non-current		8,296		8,167
Customer deposits, non-current		6,077		4,201
Deferred recurring revenue, non-current		5,467		5,745
Interest rate swap payables		2,174		—
Other liabilities		561		639
	$	77,871	$	64,264

The Company currently leases the majority of its IBX centers and certain equipment under non-cancelable operating lease agreements expiring through 2027. The centers’ lease agreements typically provide for base rental rates that increase at defined intervals during the term of the lease. In addition, the Company has negotiated rent expense abatement periods for certain properties to better match the phased build-out of its centers. The Company accounts for such abatements and increasing base rentals using the straight-line method over the life of the lease. The difference between the straight-line expense and the cash payment is recorded as deferred rent.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

12. Debt Facilities and Other Financing Obligations

Chicago IBX Financing

During the nine months ended September 30, 2008, the Company received additional advances under the Chicago IBX Financing totaling $4,379,000, bringing the cumulative and final loan payable to $109,991,000. The loan payable under the Chicago IBX Financing bears interest at a floating rate. As of September 30, 2008, the loan payable carried an approximate interest rate of 5.25% per annum.

The loan payable under the Chicago IBX Financing has a maturity date of January 31, 2010, with options to extend for up to an additional two years, in one-year increments, upon satisfaction of certain extension conditions. The Chicago IBX Financing is collateralized by the assets of one of the Company’s Chicago IBX centers.

In May 2008, the Company entered into an interest rate swap agreement with one counterparty to hedge the interest payments on a $105,000,000 notional amount of the Chicago IBX Financing, which will mature in February 2011. Under the terms of the interest rate swap transaction, the Company receives interest payments based on rolling one-month LIBOR terms and pays interest at the fixed rate of 6.34%. The Company’s disclosures on derivatives and fair value are contained in Note 1 – Derivative and Hedging Activities and Fair Value Measurements.

Asia-Pacific Financing

In January 2008, the Asia-Pacific Financing was amended to enable the Company’s subsidiary in Australia to borrow up to 32,000,000 Australian dollars, or approximately $25,357,000, under the same general terms, amending the Asia-Pacific Financing into an approximately $69,017,000 multi-currency credit facility agreement. In June 2008, the Asia-Pacific Financing was further amended to enable the Company’s subsidiary in Hong Kong to borrow up to 156,000,000 Hong Kong dollars, or approximately $20,093,000, under the same general terms, amending the Asia-Pacific Financing into an approximately $89,110,000 multi-currency credit facility agreement. Loans payable under the Asia-Pacific Financing bear interest at floating rates.

Loans payable under the Asia-Pacific Financing have a final maturity date of June 2012. The Asia-Pacific Financing is guaranteed by the parent, Equinix, Inc., is secured by the assets of the Company’s subsidiaries in Japan, Singapore, Hong Kong and Australia, including a pledge of their shares, and has several financial covenants, with which the Company must comply quarterly. As of September 30, 2008, the Company was in compliance with all financial covenants associated with the Asia-Pacific Financing.

As of September 30, 2008, the Company had borrowed 23,000,000 Singapore dollars, or approximately $16,024,000, at an approximate interest rate per annum of 3.04%; 2,932,500,000 Japanese yen, or approximately $27,636,000, at an approximate interest rate per annum of 2.70%; 13,210,000 Australian dollars, or approximately $10,468,000, at an approximate interest rate per annum of 9.06%; and 87,776,000 Hong Kong dollars, or approximately $11,305,000, at an approximate interest rate per annum of 5.51%. Collectively, the total amount borrowed was approximately equal to $65,433,000, leaving approximately $23,677,000 available to borrow under the Asia-Pacific Financing.

European Financing

During the nine months ended September 30, 2008, the Company received additional advances totaling approximately 29,351,000 British pounds, or approximately $57,089,000, under the European Financing, leaving the amount available to borrow under the European Financing totaling approximately 9,627,000 British pounds, or approximately $17,141,000. As of September 30, 2008, a total of approximately 71,822,000 British pounds, or approximately $127,879,000, was outstanding under the European Financing with an approximate blended interest rate of 7.78% per annum. Loans payable under the European Financing bear interest at floating rates. The European Financing is available to fund certain of the Company’s expansion projects in France, Germany, Switzerland and the United Kingdom.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Loans payable under the European Financing have a final maturity date of June 2014. The European Financing is collateralized by certain of the Company’s assets in Europe and contains several financial covenants with which the Company must comply quarterly. As of September 30, 2008, the Company was in compliance with all financial covenants associated with the European Financing.

In May 2008, the Company entered into three interest rate swap agreements and re-designated two older ineffective interest rate swap agreements with a total of two counterparties to hedge the interest payments on the equivalent of $113,710,000 notional amount of the European Financing, which will mature in August 2009 and May 2011. Under the terms of the interest rate swap transactions, the Company receives interest payments based on rolling one-month EURIBOR and LIBOR terms and pays fixed interest rates ranging from 5.97% to 8.16%. The Company’s disclosures on derivatives and fair value are contained in Note 1 – Derivative and Hedging Activities and Fair Value Measurements.

Netherlands Financing

In February 2008, as a result of the Virtu Acquisition, a wholly-owned subsidiary of the Company assumed senior credit facilities totaling approximately 5,500,000 Euros (the "Netherlands Financing"), which are callable by the lender and bear interest at a floating rate (three month EURIBOR plus 1.25%). As of September 30, 2008, a total of 4,319,000 Euros, or approximately $6,087,000, was outstanding under the Netherlands Financing with an approximate blended interest rate of 6.53% per annum. The Netherlands Financing is collateralized by substantially all of the Company’s operations in the Netherlands. The Netherlands Financing contains several financial covenants, which must be complied with on an annual basis. The Company's wholly-owned subsidiary in the Netherlands was not in compliance with the December 31, 2007 financial covenants; however, in April 2008, the Company obtained a waiver from the lender for such non-compliance. Although the Netherlands Financing has a payment schedule with a final payment date in January 2016, as of September 30, 2008, the Company had reflected the total amount outstanding under the Netherlands Financing as a current liability within the current portion of mortgage and loans payable on the accompanying balance sheet as it is not currently a committed facility.

Silicon Valley Bank Credit Line

In February 2008, the Company terminated the Silicon Valley Bank Credit Line. As a result, all letters of credit previously issued under the Silicon Valley Bank Credit Line, totaling $12,144,000, were cash collateralized. The Company reports such restricted cash within other assets on the accompanying balance sheets. As of the termination date, the Company had no borrowings outstanding under the Silicon Valley Bank Credit Line and no termination penalties were incurred.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Maturities

Combined aggregate maturities for the Company’s various debt facilities and other financing obligations as of September 30, 2008 were as follows (in thousands):

	Convertible debt (1)			Mortgage and loans payable (1)			Capital lease and other financing obligations (2)			Total

2008 (three months remaining)	$	―		$	13,784		$	2,943		$	16,727
2009		32,250			40,484			11,879			84,613
2010		―			149,378	(3)		11,930			161,308
2011		―			37,854			12,039			49,893
2012		250,000			25,380			11,729			287,109
2013 and thereafter		395,986			149,478			111,717			657,181
		678,236			416,358			162,237			1,256,831
Less amount representing interest		―			―			(73,516	)		(73,516	)
Plus amount representing residual property value		―			―			10,360			10,360
		678,236			416,358			99,081			1,193,675
Less current portion of principal		(32,250	)		(41,486	)		(3,986	)		(77,722	)
	$	645,986		$	374,872		$	95,095		$	1,115,953

__________________________

(1)	Represents principal only.

(2)	Represents principal and interest in accordance with minimum lease payments.

(3)	The loan payable under the Chicago IBX Financing has a maturity date of January 31, 2010, with options to extend for up to an additional two years, in one-year increments, upon satisfaction of certain extension conditions.

13. Commitments and Contingencies

Legal Matters

On July 30, 2001 and August 8, 2001, putative shareholder class action lawsuits were filed against the Company, certain of its officers and directors (the “Individual Defendants”), and several investment banks that were underwriters of the Company’s initial public offering (the “Underwriter Defendants”). The cases were filed in the United States District Court for the Southern District of New York. Similar lawsuits were filed against approximately 300 other issuers and related parties. The purported class action alleges violations of Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b), Rule 10b-5 and 20(a) of the Securities Exchange Act of 1934 against the Company and the Individual Defendants. The plaintiffs have since dismissed the Individual Defendants without prejudice. The suits allege that the Underwriter Defendants agreed to allocate stock in the Company’s initial public offering to certain investors in exchange for excessive and undisclosed commissions and agreements by those investors to make additional purchases in the aftermarket at pre-determined prices. The plaintiffs allege that the prospectus for the Company’s initial public offering was false and misleading and in violation of the securities laws because it did not disclose these arrangements. The action seeks damages in an unspecified amount. On February 19, 2003, the Court dismissed the Section 10(b) claim against the Company, but denied the motion to dismiss the Section 11 claim. On December 5, 2006, the Second Circuit vacated a decision by the district court granting class certification in six “focus” cases, which are intended to serve as test cases. Plaintiffs selected these six cases, which do not include Equinix. On April 6, 2007, the Second Circuit denied a petition for rehearing filed by plaintiffs, but noted that plaintiffs could ask the district court to certify more narrow classes than those that were rejected. On August 14, 2007, plaintiffs filed amended complaints in the six focus cases. On September 27, 2007, plaintiffs moved to certify a class in the six focus cases. On November 14, 2007, the issuers and the underwriters named as defendants in the six focus cases moved to dismiss the amended complaints against them. On March 26, 2008, the district court dismissed the Section 11 claims of those members of the putative classes in the focus cases who sold their securities for a price in excess of the initial offering price and those who purchased outside the previously certified class period. With respect to all other claims, the motions to dismiss were denied. On October 10, 2008, at the request of the plaintiffs, plaintiffs’ motion for class certification was withdrawn, without prejudice.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

On June 29, 2006 and September 18, 2006, shareholder derivative actions were filed in the Superior Court of the State of California, County of San Mateo, naming Equinix as a nominal defendant and several of Equinix’s current and former officers and directors as individual defendants. These actions were consolidated, and the consolidated complaint was filed in January 2007. In March 2007, the state court stayed this action in deference to a federal shareholder derivative action filed in the United States District Court for the Northern District of California in October 2006. The federal action named Equinix as a nominal defendant and several current and former officers and directors as individual defendants. This complaint alleged that the individual defendants breached their fiduciary duties and violated California and federal securities laws as a result of purported backdating of stock options, insider trading and the dissemination of false statements. On April 12, 2007, the federal action was voluntarily dismissed without prejudice pursuant to a joint stipulation entered as an order by the court. On May 3, 2007, the state court lifted the stay on proceedings in the state court action. On March 3, 2008, the state court plaintiff filed a second amended consolidated complaint after the court granted two motions to dismiss prior complaints with leave to amend. The second amended consolidated complaint alleged that the individual defendants breached their fiduciary duties and violated California securities law as a result of purported backdating of stock option grants, insider trading and the dissemination of false financial statements. The second amended consolidated complaint sought to recover, on behalf of Equinix, unspecified monetary damages, corporate governance changes, equitable and injunctive relief, restitution and fees and costs. On July 8, 2008, the state court granted the Company’s motion to dismiss the second amended consolidated complaint without leave to amend and entered a final judgment dismissing the action and all claims asserted therein in their entirety without leave to amend. The time for the state court plaintiff to appeal the judgment expired on September 9, 2008.

On August 22, 2008, a complaint was filed against the Company, certain former officers and directors of Pihana Pacific, Inc. (“Pihana”), certain investors in Pihana, and others. The lawsuit was filed in the First Circuit Court of the State of Hawaii, and arises out of December 2002 agreements pursuant to which the Company merged Pihana and i-STT (a subsidiary of Singapore Technologies Telemedia Pte Ltd) into the internet exchange services business of the Company. Plaintiffs, who were allegedly holders of Pihana common stock, allege that their rights as shareholders were violated, and the transaction was effectuated improperly, by Pihana's majority shareholders, officers and directors, with the alleged assistance of the Company and others. Among other things, plaintiffs contend that they effectively had a right to block the transaction, that this supposed right was disregarded, and that they improperly received no consideration when the deal was completed. The complaint seeks to recover unspecified punitive damages, equitable relief, fees and costs, and compensatory damages in an amount that plaintiffs allegedly “believe may be all or a substantial portion of the approximately $725,000,000 value of the Company held by Defendants” (a group that includes more than 30 individuals and entities). An amended complaint, which adds new plaintiffs (other alleged holders of Pihana common stock) but is otherwise substantially similar to the original pleading, was filed on September 29, 2008. On October 13, 2008, a complaint was filed by another purported holder of Pihana common stock, naming the same defendants and asserting substantially similar allegations as the August 22, 2008 and September 29, 2008 pleadings. The Company believes that plaintiffs’ claims and alleged damages are without merit and it intends to defend the litigation vigorously.

Due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of the matter. The Company is unable at this time to determine whether the outcome of the litigation would have a material impact on its results of operations, financial condition or cash flows.

The Company believes that while an unfavorable outcome to these litigations is reasonably possible, a range of potential loss cannot be determined at this time. As a result, the Company has not accrued for any amounts in connection with these legal matters as of September 30, 2008. The Company and its officers and directors intend to continue to defend the actions vigorously.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Other Purchase Commitments

Primarily as a result of the Company’s various IBX expansion projects, as of September 30, 2008, the Company was contractually committed for $156,625,000 of unaccrued capital expenditures, primarily for IBX equipment not yet delivered and labor not yet provided, in connection with the work necessary to open these IBX centers and make them available to customers for installation. In addition, the Company had numerous other, non-capital purchase commitments in place as of September 30, 2008, such as commitments to purchase power in select locations, primarily in the U.S., Australia, Germany, Singapore and the United Kingdom, through the remainder of 2008 and thereafter, and other open purchase orders for goods or services to be delivered or provided during the remainder of 2008 and thereafter. Such other miscellaneous purchase commitments totaled $73,154,000 as of September 30, 2008.

14. Other Comprehensive Income and Loss

The components of other comprehensive income and loss are as follows (in thousands):

	Three months ended September 30,					Nine months ended September 30,
	2008			2007		2008			2007

Net income	$	7,389		$	4,124	$	15,039		$	885
Unrealized gain (loss) on available for sale securities		(717	)		271		(964	)		269
Unrealized loss on interest rate swaps		(3,584	)		—		(2,345	)		—
Foreign currency translation gain (loss)		(64,097	)		6,732		(57,361	)		6,634
Comprehensive income (loss)	$	(61,009	)	$	11,127	$	(45,631	)	$	7,788

During the three months ended September 30, 2008, the U.S. dollar strengthened relative to certain of the currencies of the foreign countries in which the Company operates. This has significantly impacted the Company’s consolidated financial position (as evidenced above in the Company’s foreign currency translation losses), as well as its consolidated results of operations as amounts in foreign currencies are generally translating into less U.S. dollars. To the extent the U.S. dollar strengthens further, this will continue to have a significant impact to the Company’s consolidated financial position and results of operations including the amount of revenue that the Company reports in future periods.

There were no significant tax effects on comprehensive income for the three and nine months ended September 30, 2008 and 2007.

15. Segment Information

The Company and its subsidiaries are principally engaged in a single reporting segment: the design, build-out and operation of network neutral IBX centers. Virtually all revenues result from the operation of these IBX centers. However, the Company operates in three distinct geographic regions, comprised of the U.S., Asia-Pacific and Europe. The Company’s chief operating decision-maker evaluates performance, makes operating decisions and allocates resources based on financial data consistent with the presentation in the accompanying condensed consolidated financial statements and based on these three geographic regions. The Company has evaluated the criteria for aggregation of its geographic regions under SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”, and believes it meets each of the respective criteria set forth therein. The Company’s geographic regions have similar long-term economic characteristics and maintain similar sales forces, each of which offers all of the Company’s services due to the similar nature of such services. In addition, the geographic regions utilize similar means for delivering the Company’s services and have similarity in the types of customers.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

While the Company believes it operates in one reporting segment, the Company nonetheless provides the following geographic disclosures (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2008		2007				2008			2007
Total revenues:
United States	$	114,859	$	83,685			$	321,302		$	234,461
Asia-Pacific		21,579		14,643				60,356			40,813
Europe		47,297		5,454				132,339			5,454
	$	183,735	$	103,782			$	513,997		$	280,728

Total depreciation and amortization:
United States	$	26,898	$	19,426			$	73,987		$	57,868
Asia-Pacific		4,355		2,521				12,298			5,812
Europe		10,340		1,311				29,061			1,311
	$	41,593	$	23,258			$	115,346		$	64,991

Income (loss) from operations:
United States	$	16,252	$	6,386			$	44,840		$	8,000
Asia-Pacific		2,119		312				3,932			1,951
Europe		3,164		(619	)			69			(619	)
	$	21,535	$	6,079			$	48,841		$	9,332

Capital expenditures:
United States	$	36,971	$	141,749			$	129,852		$	378,272
Asia-Pacific		33,021		9,445				75,232			35,350
Europe		25,453		544,446		(1)		123,703	(2)		544,446		(1)
	$	95,445	$	695,640			$	328,787		$	958,068

__________________________

(1)	Includes the purchase price for IXEurope Acquisition, net of cash acquired, totaling $541,792,000.

(2)	Includes the purchase price for Virtu Acquisition, net of cash acquired, totaling $23,241,000.

The Company’s long-lived assets are located in the following geographic areas (in thousands):

	September 30, 2008		December 31, 2007

United States	$	1,062,568	$	959,637
Asia-Pacific		155,128		91,478
Europe		731,585		703,992
	$	1,949,281	$	1,755,107

For information on the Company’s goodwill, refer to “Goodwill and Other Intangible Assets” in Note 1.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Revenue information on a services basis is as follows (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2008		2007		2008		2007

Colocation	$	141,938	$	75,282	$	396,261	$	200,682
Interconnection		24,357		18,798		69,897		53,171
Managed infrastructure		6,968		4,830		20,301		13,214
Rental		254		378		812		1,011
Recurring revenues		173,517		99,288		487,271		268,078
Non-recurring revenues		10,218		4,494		26,726		12,650
	$	183,735	$	103,782	$	513,997	$	280,728

No single customer accounted for 10% or greater of the Company’s revenues for the three and nine months ended September 30, 2008 and 2007. No single customer accounted for 10% or greater of the Company’s gross accounts receivable as of September 30, 2008 and December 31, 2007.

16. Restructuring Charges

In December 2004, in light of the availability of fully built-out data centers in select markets at costs significantly below those costs the Company would incur in building out new space, the Company made the decision to exit leases for excess space adjacent to one of the Company’s New York metro area IBXs, as well as space on the floor above its original Los Angeles IBX. As a result of the Company’s decision to exit these spaces, the Company recorded restructuring charges totaling $17,685,000, which represents the present value of the Company’s estimated future cash payments, net of any estimated subrental income and expense, through the remainder of these lease terms, as well as the write-off of all remaining property and equipment attributed to the partial build-out of the excess space on the floor above its Los Angeles IBX as outlined below.

The Company estimated the future cash payments required to exit these two leased spaces, net of any estimated subrental income and expense, through the remainder of these lease terms and then calculated the present value of such future cash flows in order to determine the appropriate restructuring charge to record. The Company records accretion expense to accrete its accrued restructuring liability up to an amount equal to the total estimated future cash payments necessary to complete the exit of these leases. Should the actual lease exit costs differ from the Company’s estimates, the Company may need to adjust its restructuring charges associated with the excess lease spaces, which would impact net income in the period such determination was made.

A summary of the movement in the 2004 accrued restructuring charges from December 31, 2007 to September 30, 2008 is outlined as follows (in thousands):

	Accrued restructuring charge as of December 31, 2007			Accretion expense		Restructuring charge adjustment		Cash payments			Accrued restructuring charge as of September 30, 2008

Estimated lease exit costs	$	12,140		$	563	$	799	$	(2,034	)	$	11,468
		12,140		$	563	$	799	$	(2,034	)		11,468
Less current portion		(3,973	)									(3,172	)
	$	8,167									$	8,296

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company recorded an additional restructuring charge of $799,000 as a result of revised sublease assumptions on one of these two excess space leases as new information became available during the three months ended September 30, 2008. As the Company currently has no plans to enter into lease terminations with either of the landlords associated with these two excess space leases, the Company has reflected its accrued restructuring liability as both a current and non-current liability. The Company reports accrued restructuring charges within other current liabilities and deferred rent and other liabilities on the accompanying condensed consolidated balance sheets as of September 30, 2008 and December 31, 2007. The Company is contractually committed to these two excess space leases through 2015.

17. Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) replaces SFAS 141, “Business Combinations.” SFAS 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired or a gain from a bargain purchase. SFAS 141R also determines disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of a fiscal year that begins on or after December 15, 2008 and there are also implications for acquisitions that occur prior to this date. The Company is currently evaluating the impact that the adoption of SFAS No. 141 (R) will have on its financial statements.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS 160”). SFAS 160 amends ARB 51, Consolidated Financial Statements, and requires all entities to report non-controlling (minority) interests in subsidiaries within equity in the consolidated financial statements, but separate from the parent shareholders’ equity. SFAS 160 also requires any acquisitions or dispositions of non-controlling interests that do not result in a change of control to be accounted for as equity transactions. Further, SFAS 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. As of September 30, 2008, all of the Company’s subsidiaries were wholly-owned. As a result, SFAS 160 is not presently expected to impact the Company.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities and, thereby, improves the transparency of financial reporting. SFAS 161 is effective for fiscal years beginning on or after November 15, 2008. The Company is currently evaluating the impact that the adoption of SFAS 161 will have on its financial statement disclosures.

In April 2008, the FASB issued FASB Staff Position No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life or recognized intangible assets under SFAS 142, “Goodwill and Other Intangible Assets.” FSP FAS 142-3 applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP FAS 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early adoption is prohibited. The Company is currently evaluating the impact that the adoption of FSP FAS 142-3 will have on its financial statements.

In May 2008, the FASB issued FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion” (“FSP APB 14-1”). FSP APB 14-1 specifies that issuers of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the impact that the adoption of FSP APB 14-1 will have on its financial statements. The Company believes that FSP APB 14-1 will have a significant impact to the amount of interest expense the Company records commencing with the first quarter of 2009.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

18. Subsequent Events

In October 2008, the Company received additional advances totaling approximately 3,200,000 British pounds, or approximately $5,600,000, under the European Financing with an approximate blended interest rate of 6.97% per annum. As a result, the remaining amount available to borrow under the European Financing totals approximately 6,400,000 British pounds or approximately $11,400,000.

In October 2008, the Company received additional advances totaling approximately 56,550,000 Hong Kong dollars, or approximately $7,300,000, under the Asia-Pacific Financing with an approximate interest rate of 5.48% per annum. As a result, the remaining amount available to borrow under the Asia-Pacific Financing totals approximately $16,350,000.

In October 2008, an indirect wholly-owned subsidiary of the Company entered into an agreement for lease for property and a warehouse building located in a suburb of London, England (the “Agreement for Lease”). The Agreement for Lease provides for the completion of certain works within a specified time frame and the entry into a definitive lease (the “Lease”) upon the completion of those works. The Lease will have a term of 20 years, with an option to terminate on the part of the tenant after 15 years upon six months’ prior notice, and a total cumulative rent obligation of approximately $41,607,000 over the first 15 years of the Lease. On the fifteenth anniversary of the Lease, the rent can be reviewed and adjusted to market rents, as set out in the Lease.

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Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words ‘‘believes,’’ ‘‘anticipates,’’ ‘‘plans,’’ ‘‘expects,’’ ‘‘intends’’ and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a discrepancy include, but are not limited to, those discussed in “Liquidity and Capital Resources’’ below and ‘‘Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q. All forward-looking statements in this document are based on information available to us as of the date of this Report and we assume no obligation to update any such forward-looking statements.

Overview

Equinix provides network neutral colocation, interconnection and managed services to enterprises, content companies, systems integrators and the world’s largest network providers. On September 14, 2007, we completed the acquisition of IXEurope Plc, or IXEurope, headquartered in London, U.K., whereby IXEurope became our wholly-owned subsidiary. We refer to this transaction as the IXEurope acquisition. On February 5, 2008, we completed the acquisition of Virtu Secure Webservices B.V., or Virtu, based in the Netherlands, whereby Virtu became our wholly-owned subsidiary. We refer to this transaction as the Virtu acquisition. Virtu, a similar business to ours, operated network neutral data centers in the Netherlands, and the Virtu acquisition supplements our existing European operations. As of September 30, 2008, we operate IBX centers in the Chicago, Dallas, Los Angeles, New York, Silicon Valley and Washington, D.C. metro areas in the United States, Australia, Hong Kong, Japan and Singapore in the Asia-Pacific region, and France, Germany, the Netherlands, Switzerland and the United Kingdom in the Europe region.

Direct interconnection to our aggregation of networks, which serve more than 90% of the world’s Internet routes, allows our customers to increase performance while significantly reducing costs. Based on our network neutral model and the quality of our IBX centers, we believe we have established a critical mass of customers. As more customers locate in our IBX centers, it benefits their suppliers and business partners to do so as well to gain the full economic and performance benefits of direct interconnection. These partners, in turn, pull in their business partners, creating a “network effect” of customer adoption. Our interconnection services enable scalable, reliable and cost-effective interconnection and traffic exchange thus lowering overall cost and increasing flexibility. Our focused business model is based on our critical mass of customers and the resulting network effect. This critical mass and the resulting network effect, combined with our strong financial position, continue to drive new customer growth and bookings.

Historically, our market has been served by large telecommunications carriers who have bundled their telecommunications products and services with their colocation offerings. Each of these colocation providers own and operate a network. We do not own or operate a network, yet have greater than 300 networks operating out of our IBX centers. As a result, we are able to offer our customers a substantial choice of networks given our network neutrality thereby allowing our customers to choose from numerous network service providers. We believe this is a distinct and sustainable competitive advantage.

On a consolidated basis, and excluding customers acquired in the Virtu acquisition, our customer count increased to 2,203 as of September 30, 2008 versus 1,881 as of December 30, 2007, an increase of 17%. Our utilization rate represents the percentage of our cabinet space billing versus net sellable cabinet space available taking into account power limitations. Excluding the impact of the IXEurope and the Virtu acquisitions, our utilization rate increased to 78% as of September 30, 2008 versus 73% as of December 31, 2007; however, further excluding the impact of our IBX center expansion projects that have opened during the last 12 months, our utilization rate would have been 89% as of September 30, 2008. Our utilization rate varies from market to market among our IBX centers in our markets across the U.S., Asia-Pacific and Europe. We continue to monitor the available capacity in each of our selected markets. To the extent we have limited capacity available in a given market it may limit our ability for growth in that market. We perform demand studies on an ongoing basis to determine if future expansion is warranted in a market. In addition, power and cooling requirements for most customers are growing on a per unit basis. As a result, customers are consuming an increasing amount of power per cabinet. Although we generally do not control the amount of draw our customers take from installed circuits, we have negotiated power consumption limitations with certain of our high power demand customers. This increased power consumption has driven the requirement to build out our new IBX centers to support power and cooling needs twice that of previous IBX centers. We could face power limitations in our centers even though we may have additional physical cabinet capacity available within a specific IBX center. This could have a negative impact on the available utilization capacity of a given center, which could have a negative impact on our ability to grow revenues, affecting our financial performance, operating results and cash flows.

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Strategically, we will continue to look at attractive opportunities to grow our market share and selectively improve our footprint and service offerings. As was the case with our recent expansions and acquisitions, our expansion criteria will be dependent on a number of factors such as demand from new and existing customers, quality of the design, power capacity, access to networks, capacity availability in current market location, amount of incremental investment required by us in the targeted property, lead-time to break-even and in-place customers. Like our recent expansions and acquisitions, the right combination of these factors may be attractive to us. Dependent on the particular deal, these transactions may require upfront cash payments and additional capital expenditures or may be funded through long-term financing arrangements in order to bring these properties up to Equinix standards. Property expansion may be in the form of purchases of real property, long-term leasing arrangements or acquisitions. Future purchases, construction or acquisitions may be completed by us or with partners or potential customers to minimize the outlay of cash, which can be significant.

Our business is based on a recurring revenue model comprised of colocation, interconnection and managed infrastructure services. We consider these services recurring as our customers are generally billed on a fixed and recurring basis each month for the duration of their contract, which is generally one to three years in length. Our recurring revenues are a significant component of our total revenues, comprising greater than 90% of our total revenues. Over the past few years, greater than half of our then existing customers order new services in any given quarter representing greater than half of the new orders received in each quarter.

Our non-recurring revenues are primarily comprised of installation services related to a customer’s initial deployment and professional services that we perform. These services are considered to be non-recurring as they are billed typically once and only upon completion of the installation or professional services work performed. The majority of these non-recurring revenues are typically billed on the first invoice distributed to the customer in connection with their initial installation. As a percentage of total revenues, we expect non-recurring revenues to represent less than 10% of total revenues for the foreseeable future.

Our U.S. revenues are derived primarily from colocation and interconnection services while our Asia-Pacific and Europe revenues are derived primarily from colocation and managed infrastructure services.

The largest cost components of our cost of revenues are depreciation, rental payments related to our leased IBX centers, utility costs, including electricity and bandwidth, IBX employees’ salaries and benefits, including stock-based compensation, repairs and maintenance, supplies and equipment and security services. A substantial majority of our cost of revenues is fixed in nature and should not vary significantly from period to period, unless we add or open new IBX centers. However, there are certain costs which are considered more variable in nature, including utilities and supplies that are directly related to growth in our existing and new customer base. We expect the cost of our utilities, specifically electricity, will increase in the future on a per-unit or fixed basis in addition to the variable increase related to the growth of consumption by the customer. In addition, the cost of electricity is generally higher in the summer months as compared to other times of the year.

Sales and marketing expenses consist primarily of compensation and related costs for sales and marketing personnel, including stock-based compensation, sales commissions, marketing programs, public relations, promotional materials and travel, as well as bad debt expense and amortization of customer contract intangible assets.

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General and administrative expenses consist primarily of salaries and related expenses, including stock-based compensation, accounting, legal and other professional service fees, and other general corporate expenses such as our corporate headquarters office lease and some depreciation expense.

Due to our recurring revenue model and a cost structure which has a large base that is fixed in nature and does not grow in proportion to revenue growth, we expect our cost of revenues, sales and marketing expenses and general and administrative expenses to decline as a percentage of revenue over time, although we expect each of them to grow in absolute dollars in connection to our growth. This is evident in the trends noted below in our discussion on our results of operations.

Critical Accounting Policies and Estimates

Equinix's financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are affected by management's application of accounting policies. On an on-going basis, management evaluates its estimates and judgments. Critical accounting policies for Equinix that affect our more significant judgment and estimates used in the preparation of our condensed consolidated financial statements include accounting for business combinations, accounting for stock-based compensation, accounting for income taxes and accounting for restructuring charges, which are discussed in more detail under the caption "Critical Accounting Policies and Estimates" in our 2007 Annual Report on Form 10-K.

Results of Operations

Our results of operations for the three and nine months ended September 30, 2007 include the operations of IXEurope from September 14 to September 30, 2007, but do not include the operations of Virtu, as the Virtu acquisition closed on February 5, 2008. Our results of operations for the nine months ended September 30, 2008 include the operations of Virtu from February 5, 2008 to September 30, 2008.

Three Months Ended September 30, 2008 and 2007

Revenues. Our revenues for the three months ended September 30, 2008 and 2007 were split between the following revenue classifications and geographic regions (dollars in thousands):

	Three months ended September 30,								Change
	2008		%		2007		%		$		%
U.S:
Recurring revenues	$	109,422	60	%	$	80,583	78	%	$	28,839	36	%
Non-recurring revenues		5,437	3	%		3,102	3	%		2,335	75	%
		114,859	63	%		83,685	81	%		31,174	37	%
Asia-Pacific:
Recurring revenues		19,921	11	%		13,525	13	%		6,396	47	%
Non-recurring revenues		1,658	1	%		1,118	1	%		540	48	%
		21,579	12	%		14,643	14	%		6,936	47	%
Europe:
Recurring revenues		44,174	24	%		5,180	5	%		38,994	753	%
Non-recurring revenues		3,123	1	%		274	0	%		2,849	1040	%
		47,297	25	%		5,454	5	%		41,843	767	%
Total:
Recurring revenues		173,517	95	%		99,288	96	%		74,229	75	%
Non-recurring revenues		10,218	5	%		4,494	4	%		5,724	127	%
	$	183,735	100	%	$	103,782	100	%	$	79,953	77	%

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U.S. Revenues. The period over period growth in recurring revenues was primarily the result of an increase in orders from both our existing customers and new customers acquired during the period as reflected in the growth in our customer count and utilization rate, as discussed above, in both our new and existing IBX centers, as well as selective price increases in each of our IBX markets. During the three months ended September 30, 2008, we recorded $10.1 million of incremental revenues not generated during the same period of last year associated with our newly opened IBX centers or IBX center expansions in the Chicago, New York, and Washington, D.C. metro areas and with additional expansion activity currently taking place in the Los Angeles and New York metro areas. We expect our U.S. recurring revenues, particularly from colocation and interconnection services, to remain our most significant source of revenue for the foreseeable future.

Asia-Pacific Revenues. Our revenues from Singapore, the largest revenue contributor in this region, represented approximately 38% of the regional revenues for both the three months ended September 30, 2008 and 2007. As in the U.S., Asia-Pacific revenue growth was due to an increase in orders from both our existing customers and new customers acquired during the period as reflected in the growth in our customer count and utilization rate, as discussed above, in both our new and existing IBX centers, as well as selective price increases in each of our IBX markets. During the three months ended September 30, 2008, we recorded $3.7 million of incremental revenues not generated during the same period of last year associated with our new IBX center in Tokyo, which we acquired in December 2006, and from our IBX center expansions in Hong Kong and Singapore. We expect that our Asia-Pacific revenues will continue to grow in future periods as a result of our recently-opened IBX center expansions in the Hong Kong, Singapore and Tokyo metro areas and additional expansion activity currently taking place in the Singapore and Sydney metro areas.

Europe Revenues. Our revenues from the United Kingdom, the largest revenue contributor in this region, represented approximately 37% of the regional revenues for the three months ended September 30, 2008. We expect our Europe revenues to grow in future periods, as a result of our recently-opened IBX center expansions in the Amsterdam, Frankfurt, London and Paris metro areas and additional expansion activity currently taking place in the Amsterdam, London and Paris metro areas.

Cost of Revenues. Our cost of revenues for the three months ended September 30, 2008 and 2007 were split between the following geographic regions (dollars in thousands):

	Three months ended September 30,								Change
	2008		%		2007		%		$		%

U.S.	$	63,790	58	%	$	49,695	79	%	$	14,095	28	%
Asia-Pacific		13,346	12	%		9,165	15	%		4,181	46	%
Europe		32,727	30	%		4,031	6	%		28,696	712	%
Total	$	109,863	100	%	$	62,891	100	%	$	46,972	75	%

	Three months ended September 30,
	2008		2007
Cost of revenues as a percentage of revenues:
U.S.	56	%	59	%
Asia-Pacific	62	%	63	%
Europe	69	%	74	%
Total	60	%	61	%

U.S. Cost of Revenues. U.S. cost of revenues for the three months ended September 30, 2008 and 2007 included $24.9 million and $17.5 million, respectively, of depreciation expense. Growth in depreciation expense was due to our IBX center expansion activity. Excluding depreciation expense, the increase in U.S. cost of revenues was primarily due to overall growth related to our revenue growth and costs associated with our expansion projects, including higher compensation costs and an increase in utility costs in line with increasing customer installations. We anticipate that our U.S. cost of revenues will continue to increase in the foreseeable future to the extent that the occupancy levels in our U.S. IBX centers increase and as our newly-opened IBX centers or IBX center expansions in the Chicago, New York, Silicon Valley and Washington, D.C. metro areas commence operations more fully during the remainder of 2008 and from our additional expansion activity currently taking place in the Los Angeles and New York metro areas. We expect U.S. cost of revenues to increase as we continue to grow our business; however, as a percentage of revenues, we expect it to decrease although this trend may periodically be impacted when a large expansion project opens and before it starts generating any meaningful revenue.

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Asia-Pacific Cost of Revenues. Asia-Pacific cost of revenues for the three months ended September 30, 2008 and 2007 included $4.2 million and $2.5 million, respectively, of depreciation expense. Growth in depreciation expense was due to our IBX center expansion activity. Excluding depreciation expense, the increase in Asia-Pacific cost of revenues was primarily the result of costs associated with our expansion projects and overall growth in connection with revenue growth, such as increasing utility and bandwidth costs in line with increasing customer installations and revenues attributed to customer growth, as well as additional rent expense associated with new leases in connection with the Hong Kong and Singapore expansion projects. We anticipate that our Asia-Pacific cost of revenues will increase in the foreseeable future in connection with overall revenue growth and from our additional expansion activity currently taking place in the Singapore and Sydney metro areas. We expect Asia-Pacific cost of revenues to increase as we continue to grow our business; however, as a percentage of revenues, we expect it to decrease although this trend may periodically be impacted when a large expansion project opens and before it starts generating any meaningful revenue.

Europe Cost of Revenues. Europe cost of revenues for the three months ended September 30, 2008 and 2007 included $8.3 million and $981,000, respectively, of depreciation expense. We anticipate our Europe cost of revenues will increase in future periods, both as we sell out the available space in our existing data centers and as our newly-opened IBX centers or IBX center expansions in the Amsterdam, Frankfurt, London and Paris metro areas commence operations more fully during the remainder of 2008 and from our additional expansion activity currently taking place in the Amsterdam, London and Paris metro area markets. We expect Europe cost of revenues to increase as we continue to grow our business; however, as a percentage of revenues, we expect it to decrease although this trend may periodically be impacted when a large expansion project opens and before it starts generating any meaningful revenue.

Sales and Marketing Expenses. Our sales and marketing expenses for the three months ended September 30, 2008 and 2007 were split between the following geographic regions (dollars in thousands):

	Three months ended September 30,								Change
	2008		%		2007		%		$		%

U.S.	$	9,628	60	%	$	7,454	77	%	$	2,174	29	%
Asia-Pacific		2,200	14	%		1,478	15	%		722	49	%
Europe		4,181	26	%		698	8	%		3,483	499	%
Total	$	16,009	100	%	$	9,630	100	%	$	6,379	66	%

	Three months ended September 30,
	2008		2007
Sales and marketing expenses as a percentage of revenues:
U.S.	8	%	9	%
Asia-Pacific	10	%	10	%
Europe	9	%	13	%
Total	9	%	9	%

U.S. Sales and Marketing Expenses. The increase in U.S. sales and marketing expenses was primarily due to increased sales compensation as a result of revenue growth and expenditures related to our branding initiatives. We expect U.S. sales and marketing expenses to increase as we continue to grow our business and invest further in various branding initiatives; however, as a percentage of revenues, we expect them to decrease.

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Asia-Pacific Sales and Marketing Expenses. The increase in Asia-Pacific sales and marketing expenses was primarily due to sales compensation, including stock-based compensation, as a result of revenue growth. We expect Asia-Pacific sales and marketing expenses to increase as we continue to grow our business; however, as a percentage of revenues, we expect them to decrease.

Europe Sales and Marketing Expenses. We expect Europe sales and marketing expenses to increase as we continue to grow our business; however, as a percentage of revenues, we expect them to decrease.

General and Administrative Expenses. Our general and administrative expenses for the three months ended September 30, 2008 and 2007 were split between the following geographic regions (dollars in thousands):

	Three months ended September 30,										Change
	2008			%		2007			%		$			%

U.S.		$	24,390	69	%		$	20,150	80	%		$	4,240	21	%
Asia-Pacific			3,914	11	%			3,688	15	%			226	6	%
Europe			7,225	20	%			1,344	5	%			5,881	438	%
Total		$	35,529	100	%		$	25,182	100	%		$	10,347	41	%

	Three months ended September 30,
	2008		2007
General and administrative expenses as a percentage of revenues:
U.S.	21	%	24	%
Asia-Pacific	18	%	25	%
Europe	15	%	25	%
Total	19	%	24	%

U.S. General and Administrative Expenses. The increase in U.S. general and administrative expenses was primarily due to higher compensation costs, including stock-based compensation, and headcount growth (254 U.S. general and administrative employees as of September 30, 2008 versus 218 as of September 30, 2007), and an increase in professional fees related to various consulting projects to support our growth. Going forward, we expect U.S. general and administrative expenses to increase as we continue to scale our operations to support our growth; however, as a percentage of revenues, we expect them to decrease.

Asia-Pacific General and Administrative Expenses. Our Asia-Pacific general and administrative expenses were relatively flat period over period. However, going forward, we expect Asia-Pacific general and administrative expenses to increase as we continue to scale our operations to support our growth; however, as a percentage of revenues, we expect them to decrease.

Europe General and Administrative Expenses. Our Europe general and administrative expenses are expected to increase in future periods as we continue to scale our operations to support our growth and in connection with various integration initiatives related to investments in systems and internal control compliance; however, as a percentage of revenues, we expect them to decrease.

Restructuring Charges. During the three months ended September 30, 2008, we recorded a restructuring charge adjustment of $799,000 from revised sublease assumptions for our excess space lease in the Los Angeles metro area as a result of new information becoming available in the quarter. The original restructuring charge for this lease, along with one other lease in the New York metro area, was recorded in the fourth quarter of 2004 and totaled $17.7 million. We are contractually committed to these two excess space leases through 2015. During the three months ended September 30, 2007 no restructuring charges were recorded.

Interest Income. Interest income decreased to $441,000 for the three months ended September 30, 2008 from $3.3 million for the three months ended September 30, 2007. Interest income decreased primarily due to realized losses from our investment portfolio including a $1.5 million loss on one of our money market accounts as more fully described in Note 5 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q, as well as from lower yields on invested balances. The average yield for the three months ended September 30, 2008 was 2.23% versus 5.22% for the three months ended September 30, 2007. We expect our interest income to decrease for the foreseeable future due primarily to lower yields on our investment portfolio.

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Interest Expense. Interest expense increased to $13.9 million for the three months ended September 30, 2008 from $5.7 million for the three months ended September 30, 2007. The increase in interest expense was primarily due to new financings entered into during 2007 and 2008 consisting of (i) our $110.0 million Chicago IBX financing, which was drawn down during the construction period of the Chicago metro area IBX expansion project, with an approximate interest rate of 5.25% per annum; (ii) our approximately $89.1 million Asia-Pacific financing, of which approximately $65.4 million was outstanding as of September 30, 2008 with an approximate blended interest rate of 4.28% per annum; (iii) our $396.0 million 3.00% convertible subordinated notes offering in September 2007; (iv) our approximately $163.0 million European financing, of which approximately $127.9 million was outstanding as of September 30, 2008 with an approximate blended interest rate of 7.78% per annum and (v) our Netherlands financing of approximately $6.1 million, acquired as a result of the Virtu acquisition, with an approximate blended interest rate of 6.53% per annum. During the three months ended September 30, 2008 and 2007, we capitalized $1.4 million and $3.0 million, respectively, of interest expense to construction in progress. Going forward, we expect to incur higher interest expense as we fully utilize or recognize the full impact of our existing financings to fund our expansion efforts and as we complete expansion efforts and cease to capitalize interest expense.

Other Income (Expense). For the three months ended September 30, 2008, we recorded $520,000 of other expense, primarily attributable to foreign currency exchange losses during the period. For the three months ended September 30, 2007, we recorded $3.2 million of other income, primarily due to foreign currency exchange gains including a foreign exchange gain of $1.5 million as a result of hedging a portion of the IXEurope acquisition purchase price with forward contracts.

Income Taxes. For the three months ended September 30, 2008 and 2007, we recorded $187,000 and $215,000, respectively, of income tax expense. The tax expense recorded in both the three months ended September 30, 2008 and 2007 was primarily attributable to our foreign operations. We have not incurred any significant cash income tax expense since inception and we do not expect to incur any significant cash income tax expense during the remainder of 2008.

Nine Months Ended September 30, 2008 and 2007

Revenues. Our revenues for the nine months ended September 30, 2008 and 2007 were split between the following revenue classifications and geographic regions (dollars in thousands):

	Nine months ended September 30,								Change
	2008		%		2007		%		$		%
U.S:
Recurring revenues	$	308,319	60	%	$	225,379	80	%	$	82,940	37	%
Non-recurring revenues		12,983	3	%		9,082	4	%		3,901	43	%
		321,302	63	%		234,461	84	%		86,841	37	%
Asia-Pacific:
Recurring revenues		55,587	11	%		37,519	13	%		18,068	48	%
Non-recurring revenues		4,769	1	%		3,294	1	%		1,475	45	%
		60,356	12	%		40,813	14	%		19,543	48	%
Europe:
Recurring revenues		123,365	24	%		5,180	2	%		118,185	2282	%
Non-recurring revenues		8,974	1	%		274	0	%		8,700	3175	%
		132,339	25	%		5,454	2	%		126,885	2326	%
Total:
Recurring revenues		487,271	95	%		268,078	95	%		219,193	82	%
Non-recurring revenues		26,726	5	%		12,650	5	%		14,076	111	%
	$	513,997	100	%	$	280,728	100	%	$	233,269	83	%

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U.S. Revenues. The period over period growth in recurring revenues was primarily the result of an increase in orders from both our existing customers and new customers acquired during the period as reflected in the growth in our customer count and utilization rate, as discussed above, in both our new and existing IBX centers, as well as selective price increases in each of our IBX markets. During the nine months ended September 30, 2008, we recorded $26.3 million of incremental revenues not generated during the same period of last year associated with our newly opened IBX centers or IBX center expansions in the Chicago, New York, Silicon Valley and Washington, D.C. metro areas and with additional expansion activity currently taking place in the Los Angeles and New York metro areas. We expect our U.S. recurring revenues, particularly from colocation and interconnection services, to remain our most significant source of revenue for the foreseeable future.

Asia-Pacific Revenues. Our revenues from Singapore, the largest revenue contributor in this region, represented approximately 36% of the regional revenues for both the nine months ended September 30, 2008 and 2007. As in the U.S., Asia-Pacific revenue growth was due to an increase in orders from both our existing customers and new customers acquired during the period as reflected in the growth in our customer count and utilization rate, as discussed above, in both our new and existing IBX centers, as well as selective price increases in each of our IBX markets. During the nine months ended September 30, 2008, we recorded $9.0 million of incremental revenues not generated during the same period of last year associated with our new IBX center in Tokyo, which we acquired in December 2006, and from our IBX center expansions in Hong Kong and Singapore. We expect that our Asia-Pacific revenues will continue to grow in future periods as a result of our recently-opened IBX center expansions in the Hong Kong, Singapore and Tokyo metro areas and additional expansion activity currently taking place in the Singapore and Sydney metro areas.

Europe Revenues. Our revenues from the United Kingdom, the largest revenue contributor in this region, represented approximately 39% of the regional revenues for the nine months ended September 30, 2008. We expect our Europe revenues to grow in future periods, as a result of our recently-opened IBX center expansions in the Amsterdam, Frankfurt, London and Paris metro areas and additional expansion activity currently taking place in the Amsterdam, London and Paris metro areas.

Cost of Revenues. Our cost of revenues for nine months ended September 30, 2008 and 2007 were split between the following geographic regions (dollars in thousands):

	Nine months ended September 30,								Change
	2008		%		2007		%		$		%

U.S.	$	175,625	57	%	$	143,123	84	%	$	32,502	23	%
Asia-Pacific		38,124	12	%		24,111	14	%		14,013	58	%
Europe		92,608	31	%		4,031	2	%		88,577	2197	%
Total	$	306,357	100	%	$	171,265	100	%	$	135,092	79	%

	Nine months ended September 30,
	2008		2007
Cost of revenues as a percentage of revenues:
U.S.	55	%	61	%
Asia-Pacific	63	%	59	%
Europe	70	%	74	%
Total	60	%	61	%

U.S. Cost of Revenues. U.S. cost of revenues for the nine months ended September 30, 2008 included $67.6 million of depreciation expense and $2.6 million of stock-based compensation expense. U.S. cost of revenues for the nine months ended September 30, 2007 included $53.0 million of depreciation expense and $2.6 million of stock-based compensation expense. Growth in depreciation expense was due to our IBX center expansion activity. Excluding depreciation expense, the increase in U.S. cost of revenues was primarily due to overall growth related to our revenue growth and costs associated with our expansion projects, including higher compensation costs and an increase in utility costs in line with increasing customer installations. We anticipate that our U.S. cost of revenues will continue to increase in the foreseeable future to the extent that the occupancy levels in our U.S. IBX centers increase and as our newly-opened IBX centers or IBX center expansions in the Chicago, New York, Silicon Valley and Washington, D.C. metro areas commence operations more fully during the remainder of 2008 and from our additional expansion activity currently taking place in the Los Angeles and New York metro areas. We expect U.S. cost of revenues to increase as we continue to grow our business; however, as a percentage of revenues, we expect it to decrease although this trend may periodically be impacted when a large expansion project opens and before it starts generating any meaningful revenue.

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Asia-Pacific Cost of Revenues. Asia-Pacific cost of revenues for the nine months ended September 30, 2008 and 2007 included $11.9 million and $5.7 million, respectively, of depreciation expense. Growth in depreciation expense was due to our IBX center expansion activity. Excluding depreciation expense, the increase in Asia-Pacific cost of revenues was primarily the result of costs associated with our expansion projects and overall growth in connection with revenue growth, such as increasing utility and bandwidth costs in line with increasing customer installations and revenues attributed to customer growth, as well as additional rent expense associated with new leases in connection with the Hong Kong and Singapore expansion projects. We anticipate that our Asia-Pacific cost of revenues will increase in the foreseeable future in connection with overall revenue growth and our additional expansion activity currently taking place in the Singapore and Sydney metro areas. We expect Asia-Pacific cost of revenues to increase as we continue to grow our business; however, as a percentage of revenues, we expect it to decrease although this trend may periodically be impacted when a large expansion project opens and before it starts generating any meaningful revenue.

Europe Cost of Revenues. Europe cost of revenues for the nine months ended September 30, 2008 included $23.1 million of depreciation expense. We anticipate our Europe cost of revenues will increase in future periods, as we sell out the available space in our existing data centers, as our newly-opened IBX centers or IBX center expansions in the Amsterdam, Frankfurt, London and Paris metro areas commence operations more fully during the remainder of 2008 and from our additional expansion activity currently taking place in the Amsterdam, London and Paris metro area markets. We expect Europe cost of revenues to increase as we continue to grow our business; however, as a percentage of revenues, we expect it to decrease although this trend may periodically be impacted when a large expansion project opens and before it starts generating any meaningful revenue.

Sales and Marketing Expenses. Our sales and marketing expenses for the nine months ended September 30, 2008 and 2007 were split between the following geographic regions (dollars in thousands):

	Nine months ended September 30,								Change
	2008		%		2007		%		$		%

U.S.	$	26,799	57	%	$	22,434	81	%	$	4,365	19	%
Asia-Pacific		6,490	14	%		4,470	16	%		2,020	45	%
Europe		13,361	29	%		698	3	%		12,663	1814	%
Total	$	46,650	100	%	$	27,602	100	%	$	19,048	69	%

	Nine months ended September 30,
	2008		2007
Sales and marketing expenses as a percentage of revenues:
U.S.	8	%	10	%
Asia-Pacific	11	%	11	%
Europe	10	%	13	%
Total	9	%	10	%

U.S. Sales and Marketing Expenses. The increase in U.S. sales and marketing expenses was primarily due to increased sales compensation costs as a result of revenue growth and expenditures related to our branding initiatives. We expect U.S. sales and marketing expenses to increase as we continue to grow our business and invest further in various branding initiatives; however, as a percentage of revenues, we expect them to decrease.

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Asia-Pacific Sales and Marketing Expenses. The increase in Asia-Pacific sales and marketing expenses was primarily due to an increase in sales compensation over the prior period associated with the overall growth in this region. We expect Asia-Pacific sales and marketing expenses to increase as we continue to grow our business; however, as a percentage of revenues, we expect them to decrease.

Europe Sales and Marketing Expenses. We expect Europe sales and marketing expenses to increase as we continue to grow our business; however, as a percentage of revenues, we expect them to decrease.

General and Administrative Expenses. Our general and administrative expenses for the nine months ended September 30, 2008 and 2007 were split between the following geographic regions (dollars in thousands):

	Nine months ended September 30,								Change
	2008		%		2007		%		$		%

U.S.	$	73,239	66	%	$	60,497	84	%	$	12,742	21	%
Asia-Pacific		11,810	11	%		10,281	14	%		1,529	15	%
Europe		26,301	23	%		1,344	2	%		24,957	1857	%
Total	$	111,350	100	%	$	72,122	100	%	$	39,228	54	%

	Nine months ended September 30,
	2008		2007
General and administrative expenses as a percentage of revenues:
U.S.	23	%	26	%
Asia-Pacific	20	%	25	%
Europe	20	%	25	%
Total	22	%	26	%

U.S. General and Administrative Expenses. Excluding depreciation expense, the increase in U.S. general and administrative expenses was primarily due to higher compensation costs, including general salary increases, benefits, stock-based compensation and headcount growth (254 U.S. general and administrative employees as of September 30, 2008 versus 218 as of September 30, 2007), an increase in depreciation as a result of our investment in systems and an increase in professional fees related to various consulting projects to support our growth. Going forward, we expect U.S. general and administrative expenses to increase as we continue to scale our operations to support our growth; however, as a percentage of revenues, we expect them to decrease.

Asia-Pacific General and Administrative Expenses. The increase in Asia-Pacific general and administrative expenses was primarily due to higher compensation costs, including general salary increases and bonuses. Going forward, we expect Asia-Pacific general and administrative expenses to increase as we continue to scale our operations to support our growth; however, as a percentage of revenues, we expect them to decrease.

Restructuring Charges. During the nine months ended September 30, 2008 and 2007, we recorded a restructuring charge adjustment of $799,000 and $407,000, respectively, from revised sublease assumptions for our excess space lease in the Los Angeles metro area as a result of new information becoming available in the quarter. The original restructuring charge for this lease, along with one other lease in the New York metro area, was recorded in the fourth quarter of 2004 and totaled $17.7 million. We are contractually committed to these two excess space leases through 2015.

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Interest Income. Interest income decreased to $6.3 million for the nine months ended September 30, 2008 from $10.3 million for the nine months ended September 30, 2007. Interest income decreased primarily due to realized losses from our investment portfolio including a $1.5 million loss on one of our money market accounts as more fully described in Note 5 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q, as well as from lower yields on invested balances. The average yield for the nine months ended September 30, 2008 was 3.0% versus 5.22% for the nine months ended September 30, 2007. We expect our interest income to decrease for the foreseeable future due primarily to lower yields on our investment portfolio.

Interest Expense. Interest expense increased to $40.3 million for the nine months ended September 30, 2008 from $15.2 million for the nine months ended September 30, 2007. The increase in interest expense was primarily due to new financings entered into during 2007 and 2008 consisting of (i) our $110.0 million Chicago IBX financing, which was drawn down during the construction period of the Chicago metro area IBX expansion project, with an approximate interest rate of 5.25% per annum; (ii) our $250.0 million 2.50% convertible subordinated notes offering in March 2007; (iii) our approximately $89.1 million Asia-Pacific financing, of which approximately $65.4 million was outstanding as of September 30, 2008 with an approximate blended interest rate of 4.28% per annum; (iv) our $396.0 million 3.00% convertible subordinated notes offering in September 2007; (v) our approximately $163.0 million European financing, of which approximately $127.9 million was outstanding as of September 30, 2008 with an approximate blended interest rate of 7.78% per annum and (vi) our Netherlands financing of approximately $6.1 million, acquired as a result of the Virtu acquisition, with an approximate blended interest rate of 6.53% per annum. During the nine months ended September 30, 2008 and 2007, we capitalized $4.6 million and $6.1 million, respectively, of interest expense to construction in progress. Going forward, we expect to incur higher interest expense as we fully utilize or recognize the full impact of our existing financings to fund our expansion efforts and as we complete expansion efforts and cease to capitalize interest expense.

Other Income. For the nine months ended September 30, 2008, we recorded $602,000 of other income, primarily attributable to foreign currency exchange gains during the period. For the nine months ended September 30, 2007, we recorded $3.2 million of other income, primarily due to foreign currency exchange gains including a foreign exchange gain of $1.5 million as a result of hedging a portion of the IXEurope acquisition purchase price with forward contracts.

Loss on Conversion and Extinguishment of Debt. During the three months ended March 31, 2007, we retired $54.0 million of our convertible subordinated debentures in exchange for approximately 1.4 million newly issued shares of our common stock. As a result, we recorded a $3.4 million loss on debt conversion in accordance with FASB No. 84, “Induced Conversions of Convertible Debt,” due to the inducement fee. In addition, in September 2007, a senior bridge loan was terminated unused and, as a result, we recorded a $2.5 million loss on debt extinguishment reflecting the immediate write-off of debt issuance costs previously capitalized to secure the senior bridge loan. Therefore, during the nine months ended September 30, 2007, we recognized a total of $5.9 million of loss on debt conversion and extinguishment. During the nine months ended September 30, 2008 there were no similar transactions.

Income Taxes. For the nine months ended September 30, 2008 and 2007, we recorded $400,000 and $766,000, respectively, of income tax expense. The tax provision recorded in both the nine months ended September 30, 2008 and 2007 was primarily attributable to our foreign operations. We have not incurred any significant cash income tax expense since inception and we do not expect to incur any significant cash income tax expense during the remainder of 2008.

Liquidity and Capital Resources

As of September 30, 2008, our total indebtedness was comprised of (i) convertible debt totaling $678.2 million from our convertible subordinated debentures, our 2.50% convertible subordinated notes and our 3.00% convertible subordinated notes and (ii) non-convertible debt and financing obligations totaling $515.5 million from our Washington D.C. metro area IBX capital lease, San Jose IBX equipment and fiber financing, Chicago IBX equipment financing, Los Angeles IBX financing, Ashburn campus mortgage payable, Chicago IBX financing, Asia-Pacific financing, European financing, Netherlands financing and other financing obligations.

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We believe we have sufficient cash, coupled with anticipated cash generated from operating activities, to meet our operating requirements and complete our publicly announced expansion projects for at least the next 12 months. As of September 30, 2008, we had $330.2 million of cash, cash equivalents and short-term and long-term investments (which is net of a $1.5 million impairment loss we realized in September 2008 on our $50.9 million investment in The Reserve Primary Fund, which is referred to as the Reserve, as more fully described in Note 5 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q). If the current market conditions continue to deteriorate, we may suffer further losses on our investment portfolio, which could have a material adverse effect on our liquidity. Besides our investment portfolio and any financing activities we may pursue, customer collections are our primary source of cash. While we believe we have a well diversified customer base with no concentration of credit risk with any single customer, we have a number of large customers in the financial services sector. While we believe we have a strong customer base and have experienced strong collections in the past, if the current market conditions continue to deteriorate we may experience increased churn in our customer base, including reductions in their commitments to us, which could also have a material adverse effect on our liquidity.

As of September 30, 2008, we had a total of $40.8 million of additional liquidity available to us, comprised of $23.7 million under the Asia-Pacific financing, for expansion projects in Hong Kong and Sydney, and $17.1 million under the European financing for general working capital and expansion projects in France, Germany, Switzerland and the United Kingdom, which, given the state of the current credit market, we believe we will be able to fully utilize. Regarding our indebtedness as of September 30, 2008, as noted above, $515.5 million was non-convertible senior debt, of which $254.7 million of this amount is with a single lender. Although these are committed facilities, most of which are fully drawn or advanced for which we are amortizing debt repayments of either principal and/or interest only, and we are in full compliance with all covenants related to them, deteriorating market and liquidity conditions may give rise to issues which may impact the lenders' ability to hold these debt commitments to their full term.

While we believe we have sufficient liquidity and capital resources to meet our current operating requirements and to complete our publicly-announced IBX expansion plans, we may pursue additional expansion opportunities, primarily the build-out of new IBX centers, in certain of our existing markets which are at or near capacity within the next year. While we will be able to fund some of these expansion plans with our existing resources, to pursue certain of these additional expansion plans additional financing, either debt or equity, may be required. However, if current market conditions continue to persist, or deteriorate further, we would be unable to secure additional financing or any such additional financing may be available to us on unfavorable terms. An inability to pursue additional expansion opportunities will have a material adverse effect on our ability to maintain our desired level of revenue growth in future periods.

Sources and Uses of Cash

	Nine months ended September 30,
	2008			2007
	(in thousands)
Net cash provided by operating activities	$	191,263		$	106,139
Net cash used in investing activities		(434,850	)		(951,206	)
Net cash provided by financing activities		112,950			1,107,012

Operating Activities. The increase in net cash provided by operating activities was primarily due to improved operating results as discussed above, strong collections of accounts receivable, management of vendor payments and growth in customer installations, which increases deferred installation revenue, a liability account. We expect that we will continue to generate cash from our operating activities throughout the remainder of 2008 and beyond.

Investing Activities. Net cash used in investing activities for the nine months ended September 30, 2008 was primarily the result of $305.5 million of capital expenditures required to bring our recently announced and current IBX expansion projects to Equinix standards and to support our growing customer base, as well as the Virtu acquisition of $23.2 million, and the net purchase of our short-term and long-term investments. Net cash used in investing activities for the nine months ended September 30, 2007 was primarily the result of the IXEurope acquisition for $541.7 million, the purchase of one of our San Jose IBX properties and an adjacent piece of land totaling $71.5 million, the purchase of our Los Angeles IBX property for $49.1 million and $295.8 million of other capital expenditures required to bring our recently announced and current IBX expansion projects to Equinix standards and to support our growing customer base, partially offset by net maturities of our short-term and long-term investments.

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Financing Activities. Net cash provided by financing activities for the nine months ended September 30, 2008, was primarily the result of $102.1 million in gross proceeds from our loans payable in connection with our European financing, Asia-Pacific financing and Chicago IBX financing, partially offset by debt issuance costs and principal payments for our capital leases and other financing obligations and our mortgage and loans payable. Net cash provided by financing activities for the nine months ended September 30, 2007, was primarily the result of $646.0 million in gross proceeds from our convertible subordinated debt offerings, $339.9 million in net proceeds from our common stock offering, $118.8 million in gross proceeds from our loans payable in connection with the Chicago IBX financing and the Asia-Pacific financing and $27.6 million in proceeds from our various employee stock plans, partially offset by debt issuance costs and principal payments for our capital leases and other financing obligations and the Ashburn campus mortgage payable.

Debt Obligations

Chicago IBX Financing. During the nine months ended September 30, 2008, we received additional advances totaling $4.4 million, bringing the cumulative and final loan payable to approximately $110.0 million. As of September 30, 2008, the loan payable carried an approximate interest rate of 5.25% per annum. The loan payable under the Chicago IBX financing bears interest at a floating rate. The loan payable under the Chicago IBX financing has a maturity date of January 31, 2010, with options to extend for up to an additional two years, in one-year increments, upon satisfaction of certain extension conditions. The Chicago IBX financing is collateralized by the assets of one of our Chicago IBX centers.

In May 2008, we entered into an interest rate swap agreement with one counterparty to hedge the interest payments on a $105.0 million notional amount of the Chicago IBX financing, which will mature in February 2011. Under the terms of the interest rate swap transaction, we receive interest payments based on rolling one-month LIBOR terms and pay interest at the fixed rate of 6.34%.

Asia-Pacific Financing. In January 2008, the Asia-Pacific financing was amended to enable our subsidiary in Australia to borrow up to 32.0 million Australian dollars, or approximately $25.4 million, under the same general terms, amending the Asia-Pacific financing into an approximately $69.0 million multi-currency credit facility agreement. In June 2008, the Asia-Pacific financing was further amended to enable our subsidiary in Hong Kong to borrow up to 156.0 million Hong Kong dollars, or approximately $20.1 million, under the same general terms, amending the Asia-Pacific financing into an approximately $89.1 million multi-currency credit facility agreement. Loans payable under the Asia-Pacific financing bear interest at floating rates. Loans payable under the Asia-Pacific financing have a final maturity date of June 2012. The Asia-Pacific financing is guaranteed by the parent, Equinix, Inc., is secured by the assets of our subsidiaries in Japan, Singapore, Hong Kong and Australia, including a pledge of their shares, and has several financial covenants, with which we must comply quarterly. As of September 30, 2008, we were in compliance with all financial covenants associated with the Asia-Pacific financing. As of September 30, 2008, we had borrowed 23.0 million Singapore dollars, or approximately $16.0 million, at an approximate interest rate per annum of 3.04%; 2.9 billion Japanese yen, or approximately $27.6 million, at an approximate interest rate per annum of 2.70%; 13.2 million Australian dollars, or approximately $10.5 million, at an approximate interest rate per annum of 9.06% and 87.8 million Hong Kong dollars, or approximately $11.2 million, at an approximate interest rate per annum of 5.51%. Collectively, the total amount borrowed was approximately equal to $65.4 million, leaving approximately $23.7 million of available balance to borrow under the Asia-Pacific financing. In October 2008, we received an additional advance of 56.6 million Hong Kong dollars, or approximately $7.3 million, at an approximate interest rate per annum of 5.48% under the Asia-Pacific financing. Collectively, the total amount borrowed under the Asia-Pacific financing was approximately $72.7 million, leaving approximately $16.4 million available to borrow.

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European Financing. During the nine months ended September 30, 2008, we received additional advances totaling approximately 29.4 million British pounds, or approximately $57.1 million, under the European financing, leaving the amount available to borrow totaling approximately 9.6 million British pounds, or approximately $17.1 million. As of September 30, 2008, a total of approximately 71.8 million British pounds, or approximately $127.9 million, was outstanding under the European financing with an approximate blended interest rate of 7.78% per annum. Loans payable under the European financing bear interest at floating rates. The European financing is available to fund certain of our expansion projects in France, Germany, Switzerland and the United Kingdom. Loans payable under the European financing have a final maturity date of June 2014. The European financing is collateralized by certain of our assets in Europe and contains several financial covenants with which we must comply quarterly. As of September 30, 2008, we were in compliance with all financial covenants associated with the European financing. In October 2008, we received additional advances totaling approximately 3.2 million British pounds, or approximately $5.6 million, under the European financing with an approximate blended interest rate of 6.97% per annum. As a result, the amount available to borrow under the European financing totals approximately 6.4 million British pounds or approximately $11.4 million.

In May 2008, we entered into three interest rate swap agreements and re-designated two older ineffective interest rate swap agreements with a total of two counterparties to hedge the interest payments on the equivalent of $113.7 million notional amount of the European financing, which will mature in August 2009 and May 2011. Under the terms of the interest rate swap transactions, we receive interest payments based on rolling one-month EURIBOR and LIBOR terms and pay fixed interest rates ranging from 5.97% to 8.16%.

Netherlands Financing. In February 2008, as a result of the Virtu acquisition, our wholly-owned subsidiary assumed senior credit facilities totaling 5.5 million Euros bearing interest at a floating rate (three month EURIBOR plus 1.25%). As of September 30, 2008, a total of approximately 4.3 million Euros, or approximately $6.1 million, was outstanding under the Netherlands financing with an approximate blended interest rate of 6.53% per annum. The Netherlands financing is collateralized by substantially all of our operations in the Netherlands. The Netherlands financing contains several financial covenants, which must be complied with on an annual basis. Our wholly-owned subsidiary in the Netherlands was not in compliance with the December 31, 2007 financial covenants; however, in April 2008, we obtained a waiver from the lender for such non-compliance. Although the Netherlands financing has a payment schedule with a final payment date in January 2016, as of September 30, 2008, we had reflected the total amount outstanding under the Netherlands financing as a current liability within the current portion of mortgage and loans payable on the accompanying balance sheet as it is not currently a committed facility.

$75.0 Million Silicon Valley Bank Revolving Credit Line. In February 2008, we terminated the $75.0 million Silicon Valley Bank revolving credit line. As a result, all letters of credit issued and outstanding under the $75.0 million Silicon Valley Bank revolving credit line, totaling $12.1 million, were cash collateralized. As of the termination date, we had no borrowings outstanding under the Silicon Valley Bank revolving credit line and no termination penalties were incurred.

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Debt Maturities, Financings, Leases and Other Contractual Commitments

We lease a majority of our IBX centers and certain equipment under non-cancelable lease agreements expiring through 2027. The following represents our debt maturities, financings, leases and other contractual commitments as of September 30, 2008 (in thousands):

	2008 (3 months)		2009		2010			2011		2012		2013 and thereafter		Total

Convertible debt (1)	$	―	$	32,250	$	―		$	―	$	250,000	$	395,986	$	678,236
Chicago IBX financing (1)		―		―		109,991	(5)		―		―		―		109,991
Asia-Pacific financing (1)		3,638		19,054		21,811			18,173		2,757		―		65,433
European financing (1)		934		9,342		14,750			16,618		19,322		66,913		127,879
Netherlands financing (1)		6,087		―		―			―		―		―		6,087
Interest (2)		9,569		36,037		28,895			26,308		19,524		27,654		147,987
Mortgage payable (3)		2,541		10,164		10,164			10,164		10,165		133,503		176,701
Other note payable (3)		2,500		10,000		―			―		―		―		12,500
Capital lease and other financing obligations (3)		2,943		11,880		11,930			12,039		11,729		111,717		162,238
Operating leases under accrued restructuring charges (3)		495		3,935		4,002			4,128		4,374		11,274		28,208
Operating leases (4)		13,964		57,005		54,331			50,322		49,338		284,819		509,779
Other contractual commitments (4)		77,896		132,991		15,717			3,175		―		―		229,779
	$	120,567	$	322,658	$	271,591		$	140,927	$	367,209	$	1,031,866	$	2,254,818

_________________________

(1)	Represents principal only.

(2)	Represents interest on convertible debt, Chicago IBX financing, Asia-Pacific financing, European financing and Netherlands financing based on their approximate interest rates as of September 30, 2008.

(3)	Represents principal and interest.

(4)	Represents off-balance sheet arrangements. Other contractual commitments are described below.

(5)

The loan payable under the Chicago IBX financing has a maturity date of January 31, 2010, with options to extend for up to an additional two years, in one-year increments, upon satisfaction of certain extension conditions. Given the current market climate, we intend to extend the maturity of the loan payable under the Chicago IBX financing.

Primarily as a result of our various IBX expansion projects, as of September 30, 2008, we were contractually committed for $156.6 million of unaccrued capital expenditures, primarily for IBX equipment not yet delivered and labor not yet provided, in connection with the work necessary to complete construction and open these IBX centers prior to making them available to customers for installation. This amount, which is expected to be paid during the remainder of 2008 and 2009, is reflected in the table above as “other contractual commitments.”

We have other non-capital purchase commitments in place as of September 30, 2008, such as commitments to purchase power in select locations, primarily in the U.S., Australia, Germany, Singapore and the United Kingdom, through the remainder of 2008 and thereafter, and other open purchase orders, which contractually bind us for goods or services to be delivered or provided during the remainder of 2008 and beyond. Such other purchase commitments as of September 30, 2008, which total $73.2 million, are also reflected in the table above as “other contractual commitments.”

In addition, although we are not contractually obligated to do so, we expect to incur additional capital expenditures of approximately $100.0 million to $150.0 million, in addition to the $156.6 million in contractual commitments as discussed above as of September 30, 2008, in our various IBX expansion projects during the remainder of 2008 and 2009 in order to complete the work needed to open these IBX centers. These non-contractual capital expenditures are not reflected in the table above. If the current economic environment persists, we could delay these non-contractual capital expenditure commitments to preserve liquidity.

Recent Accounting Pronouncements

See Note 16 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market Risk

The following discussion about market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. We may be exposed to market risks related to impairments of our investment portfolio, changes in interest rates and foreign currency exchange rates and fluctuations in the prices of certain commodities, primarily electricity.

We currently employ interest rate swaps and foreign currency forward exchange contracts for the purpose of hedging certain specifically identified exposures. The use of these financial instruments is intended to mitigate some of the risks associated with either fluctuations in interest rates or currency exchange rates, but does not eliminate such risks. We do not use financial instruments for trading or speculative purposes.

Investment Portfolio Risk

All of our cash equivalents and marketable securities are designated as available-for-sale and are therefore recorded at fair market value on our condensed consolidated balance sheets with the unrealized gains or losses reported as a separate component of other comprehensive income or loss. We consider various factors in determining whether we should recognize an impairment charge for our securities, including the length of time and extent to which the fair value has been less than our cost basis and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. As more fully described in Note 5 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q, in September 2008, we incurred a realized loss from our investment portfolio (consisting of a single money market account) totaling $1.5 million. If market conditions continue to deteriorate and liquidity constraints become even more pronounced, we could sustain more losses from our investment portfolio. As our securities mature, we have been increasing our holdings in U.S. government securities, such as Treasury bills and Treasury notes of a short-term duration and lower yield. As a result, we expect our interest income to decrease in future periods.

As of September 30, 2008, our investment portfolio of cash equivalents and marketable securities consisted of money market fund investments, commercial paper, corporate notes, asset backed securities, certificates of deposit and U.S government and agency obligations. Excluding the U.S. government holdings which carry a lower risk and lower return in comparison to other securities in the portfolio, the invested amount in our investment portfolio most susceptible to market risk totaled $206.6 million.

Interest Rate Risk

Our exposure to market risk resulting from changes in interest rates relates primarily to our investment portfolio and variable-rate financings in place in the U.S., Asia-Pacific and Europe. The fair market value of our marketable securities could be adversely impacted due to a rise in interest rates, but we do not believe such impact would be material. Securities with longer maturities are subject to a greater interest rate risk than those with shorter maturities and as of September 30, 2008 our portfolio maturity was relatively short. If current interest rates were to increase or decrease by 10% from their position as of September 30, 2008, the fair market value of our investment portfolio could increase or decrease by approximately $155,000.

An immediate 10% increase or decrease in current interest rates from their position as of September 30, 2008 would furthermore not have a material impact on our debt obligations due to the fixed nature of the majority of our debt obligations. However, the interest expense associated with our Chicago IBX financing, Asia-Pacific financing, European financing and Netherlands financing, which bear interest at variable rates tied to local cost of funds or LIBOR/SIBOR/EURIBOR, could be affected. For every 100 basis point change in interest rates, our annual interest expense could increase or decrease by a total of $3.1 million based on the total balance of our borrowings under the Chicago IBX financing, Asia-Pacific financing, European financing and Netherlands financing as of September 30, 2008. To mitigate the risk of fluctuations in floating rates, we utilize interest rate swaps (receive floating/ pay fixed). As of September 30, 2008, we had entered into a total of six swap agreements with maturity dates of less than three years, comprised of five swap agreements for the European financing with an aggregate notional amount of 38.3 million British pounds and 32.3 million Euros, or approximately $113.7 million, and one swap agreement for the Chicago IBX financing with an aggregate notional amount of $105.0 million. Under the five swap agreements for the European financing, we pay fixed rates of interest ranging from 5.97% to 8.16% on the notional amount and the counterparty pays us rates of interest on the notional amount based on LIBOR/EURIBOR. Under the swap agreement for the Chicago IBX financing, we pay a fixed rate of 6.34% on the notional amount and the counterparty pays us rates of interest on the notional amount based on one-month LIBOR. The fair values or changes in fair value of these swaps are recorded on our consolidated balance sheets in other comprehensive income or loss.

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The fair market value of our long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. These interest rate changes may affect the fair market value of the fixed interest rate debt but do not impact our earnings or cash flows. The fair market value of our convertible subordinated debentures and convertible subordinated notes is based on quoted market prices. The estimated fair value of our convertible subordinated debentures at September 30, 2008 was approximately $56.9 million. The estimated fair value of our 2.50% convertible subordinated notes at September 30, 2008 was approximately $200.0 million. The estimated fair value of our 3.00% convertible subordinated notes at September 30, 2008 was approximately $328.9 million.

We may enter into additional interest rate hedging agreements in the future to mitigate our exposure to interest rate risk.

Foreign Currency Risk

The majority of our recognized revenue is denominated in U.S. dollars, generated mostly from customers in the U.S. However, approximately 37% of our revenues and 41% of our operating costs are in the Europe and Asia-Pacific regions and a large portion of those revenues and costs are denominated in a currency other than the U.S. dollar, primarily the British pound, Euro, Swiss franc, Singapore dollar, Japanese yen and Hong Kong and Australian dollars. As a result, our operating results and cash flows are impacted by currency fluctuations relative to the U.S. dollar. To protect against certain reductions in value caused by changes in currency exchange rates, we have established a risk management program to offset some of the risk of carrying assets and liabilities denominated in foreign currency. Our risk management program reduces, but does not entirely eliminate, the impact of currency exchange rate movements and its impact to the statements of operations and does not currently address balance sheet exposure. As of September 30, 2008, the outstanding foreign currency contracts had maturities of 180 days or less.

For the foreseeable future, we anticipate that approximately 35-40% of our revenues and operating costs will continue to be generated and incurred outside of the U.S. in currencies other than the U.S. dollar. While we hedge certain of our balance sheet foreign currency assets and liabilities, we do not hedge revenue. During fiscal 2007 and the first half of 2008, the U.S. dollar had been generally weaker relative to the currencies of the foreign countries in which we operate. This overall weakness of the U.S. dollar had a positive impact on our consolidated results of operations because the foreign denominations translated into more U.S. dollars. However, during the past several months, the U.S. dollar has strengthened relative to certain of the currencies of the foreign countries in which we operate. This has significantly impacted our consolidated financial position and results of operations as amounts in foreign currencies are generally translating into less U.S. dollars. To the extent the U.S. dollar strengthens further, this will continue to have a significant impact to our consolidated financial position and results of operations including the amount of revenue that we report in future periods.

We may enter into significant hedging activities in the future to mitigate our exposure to foreign currency risk as our exposure to foreign currency risk continues to increase due to our growing foreign operations; however, we do not currently intend to eliminate all foreign currency transaction exposure.

Commodity Price Risk

Certain operating costs incurred by us are subject to price fluctuations caused by the volatility of underlying commodity prices. The commodities most likely to have an impact on our results of operations in the event of price changes are electricity, supplies and equipment used in our IBX centers. We are closely monitoring the cost of electricity at all of our locations. We have entered into several power contracts to purchase power at fixed prices during 2008 and beyond in certain locations in the U.S., as well as Australia, Germany, Singapore and the United Kingdom.

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In addition, as we are building new, “greenfield” IBX centers, we are subject to commodity price risk for building materials related to the construction of these IBX centers, such as steel and copper. In addition, the lead-time to procure certain pieces of equipment, such as generators, is substantial. Any delays in procuring the necessary pieces of equipment for the construction of our IBX centers could delay the anticipated openings of these new IBX centers and, as a result, increase the cost of these projects.

We do not currently employ forward contracts or other financial instruments to address commodity price risk other than the power contracts discussed above.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and our Chief Financial Officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this quarterly report, have concluded that our disclosure controls and procedures are effective based on their evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

(b) Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On July 30, 2001 and August 8, 2001, putative shareholder class action lawsuits were filed against us, certain of our officers and directors (the “Individual Defendants”), and several investment banks that were underwriters of our initial public offering (the “Underwriter Defendants”). The cases were filed in the United States District Court for the Southern District of New York. Similar lawsuits were filed against approximately 300 other issuers and related parties. The purported class action alleges violations of Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b), Rule 10b-5 and 20(a) of the Securities Exchange Act of 1934 against us and the Individual Defendants. The plaintiffs have since dismissed the Individual Defendants without prejudice. The suits allege that the Underwriter Defendants agreed to allocate stock in our initial public offering to certain investors in exchange for excessive and undisclosed commissions and agreements by those investors to make additional purchases in the aftermarket at pre-determined prices. The plaintiffs allege that the prospectus for our initial public offering was false and misleading and in violation of the securities laws because it did not disclose these arrangements. The action seeks damages in an unspecified amount. On February 19, 2003, the Court dismissed the Section 10(b) claim against us, but denied the motion to dismiss the Section 11 claim. On December 5, 2006, the Second Circuit vacated a decision by the district court granting class certification in six “focus” cases, which are intended to serve as test cases. Plaintiffs selected these six cases, which do not include Equinix. On April 6, 2007, the Second Circuit denied a petition for rehearing filed by plaintiffs, but noted that plaintiffs could ask the district court to certify more narrow classes than those that were rejected. On August 14, 2007, plaintiffs filed amended complaints in the six focus cases. On September 27, 2007, plaintiffs moved to certify a class in the six focus cases. On November 14, 2007, the issuers and the underwriters named as defendants in the six focus cases moved to dismiss the amended complaints against them. On March 26, 2008, the district court dismissed the Section 11 claims of those members of the putative classes in the focus cases who sold their securities for a price in excess of the initial offering price and those who purchased outside the previously certified class period. With respect to all other claims, the motions to dismiss were denied. On October 10, 2008, at the request of the plaintiffs, plaintiffs’ motion for class certification was withdrawn, without prejudice.

Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of the matter. We are unable at this time to determine whether the outcome of the litigation would have a material impact on our results of operations, financial condition or cash flows. We intend to continue to defend the action vigorously.

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On June 29, 2006 and September 18, 2006, shareholder derivative actions were filed in the Superior Court of the State of California, County of San Mateo, naming Equinix as a nominal defendant and several of Equinix’s current and former officers and directors as individual defendants. These actions were consolidated, and the consolidated complaint was filed in January 2007. In March 2007, the state court stayed this action in deference to a federal shareholder derivative action filed in the United States District Court for the Northern District of California in October 2006. The federal action named Equinix as a nominal defendant and several current and former officers and directors as individual defendants. This complaint alleged that the individual defendants breached their fiduciary duties and violated California and federal securities laws as a result of purported backdating of stock options, insider trading and the dissemination of false statements. On April 12, 2007, the federal action was voluntarily dismissed without prejudice pursuant to a joint stipulation entered as an order by the court. On May 3, 2007, the state court lifted the stay on proceedings in the state court action. On March 3, 2008, the state court plaintiff filed a second amended consolidated complaint after the court granted two motions to dismiss prior complaints with leave to amend. The second amended consolidated complaint alleged that the individual defendants breached their fiduciary duties and violated California securities law as a result of purported backdating of stock option grants, insider trading and the dissemination of false financial statements. The second amended consolidated complaint sought to recover, on behalf of Equinix, unspecified monetary damages, corporate governance changes, equitable and injunctive relief, restitution and fees and costs. On July 8, 2008, the state court granted our motion to dismiss the second amended consolidated complaint without leave to amend and entered a final judgment dismissing the action and all claims asserted therein in their entirety without leave to amend. The time for the state court plaintiff to appeal the judgment expired on September 9, 2008.

Responding to, investigating and/or defending against civil litigations and government inquiries regarding our stock option grants and practices would present a substantial cost to us in both cash and the attention of certain management and may have a negative impact on our operations. In addition, in the event of any negative finding or assertion by a court of law or any third-party claim related to our stock option granting practices, we may be liable for damages, fines or other civil or criminal remedies, or be required to restate our prior period financial statements or adjust our current period financial statements. Any such adverse action could have a material adverse effect on our business and current market value.

On August 22, 2008, a complaint was filed against Equinix, certain former officers and directors of Pihana Pacific, Inc. (“Pihana”), certain investors in Pihana, and others. The lawsuit was filed in the First Circuit Court of the State of Hawaii, and arises out of December 2002 agreements pursuant to which Equinix merged Pihana and i-STT (a subsidiary of Singapore Technologies Telemedia Pte Ltd) into the internet exchange services business of Equinix. Plaintiffs, who were allegedly holders of Pihana common stock, allege that their rights as shareholders were violated, and the transaction was effectuated improperly, by Pihana's majority shareholders, officers and directors, with the alleged assistance of Equinix and others. Among other things, plaintiffs contend that they effectively had a right to block the transaction, that this supposed right was disregarded, and that they improperly received no consideration when the deal was completed. The complaint seeks to recover unspecified punitive damages, equitable relief, fees and costs, and compensatory damages in an amount that plaintiffs allegedly “believe may be all or a substantial portion of the approximately $725 million value of Equinix held by Defendants” (a group that includes more than 30 individuals and entities). An amended complaint, which adds new plaintiffs (other alleged holders of Pihana common stock) but is otherwise substantially similar to the original pleading, was filed on September 29, 2008. On October 13, 2008, a complaint was filed by another purported holder of Pihana common stock, naming the same defendants and asserting substantially similar allegations as the August 22, 2008 and September 29, 2008 pleadings. We believe that plaintiffs’ claims and alleged damages are without merit and we intend to defend the litigation vigorously.

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Item 1A. Risk Factors

In addition to the other information contained in this report, the following risk factors should be considered carefully in evaluating our business and us:

We may not be able to successfully integrate IXEurope and achieve the benefits we expect from the IXEurope acquisition.

We will only achieve the benefits that are expected to result from the IXEurope acquisition if we can successfully integrate its administrative, finance, operations, sales and marketing organizations, and implement appropriate systems and controls.

The success of the IXEurope acquisition and integration into our operations will involve a number of risks, including, but not limited to:

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the possible diversion of our management’s attention from other business concerns, including our previously announced expansion plans in the U.S. and Asia-Pacific regions;

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the potential inability to successfully pursue or realize some or all of the anticipated revenue opportunities associated with the IXEurope acquisition, some of which were anticipated in our purchase price;

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the potential that our existing customer base will not choose us as their global colocation solution as expected;

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the potential inability to maintain our historic levels of stability, uptime and quality for our customers;

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the possible loss of IXEurope’s key employees;

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the potential inability to achieve expected operating efficiencies in IXEurope’s operations, including through the thorough integration of our operations, marketing, sales and financial systems;

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the increased complexity and diversity of our operations after the IXEurope acquisition compared to our prior operations;

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the impact on our internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002; and

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unanticipated problems, expenses or liabilities.

If we fail to integrate IXEurope successfully and/or fail to realize the intended benefits of the IXEurope acquisition, our results of operations could be materially and adversely affected. In addition, the IXEurope acquisition resulted in a substantial goodwill asset, which will be subject to an annual impairment analysis. If this goodwill were to be impaired in the future, it could have a significant negative impact on our results of operations and financial condition.

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Our substantial debt could adversely affect our cash flows and limit our flexibility to raise additional capital.

We have a significant amount of debt. As of September 30, 2008, our total indebtedness was approximately $1.2 billion and our stockholders’ equity was $837.3 million.

Our substantial amount of debt could have important consequences. For example, it could:

·	require us to dedicate a substantial portion of our cash flow from operations to make payments on our debt, reducing the availability of our cash flow to fund future capital expenditures, working capital, execution of our expansion strategy and other general corporate requirements;

·	make it more difficult for us to satisfy our obligations under our various debt instruments;

·	increase our vulnerability to general adverse economic and industry conditions and adverse changes in governmental regulations;

·	limit our flexibility in planning for, or reacting to, changes in our business and industry, which may place us at a competitive disadvantage compared with our competitors;

·	limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity; and

·	make us more vulnerable to increases in interest rates because of the variable interest rates on some of our borrowings, a portion of which we have now hedged.

The occurrence of any of the foregoing factors could have a material adverse effect on our business, results of operations and financial condition. In addition, the performance of our stock price may trigger events that would require the write-off of a significant portion of our debt issuance costs related to our convertible debt, which may have a material adverse effect on our results of operations and financial condition.

In addition, of our total indebtedness as of September 30, 2008, $515.5 million was non-convertible senior debt (of which $254.7 million is with a single lender). Although these are committed facilities, most of which are fully drawn or advanced for which we are amortizing debt repayments of either principal and/or interest only, and we are in full compliance with all covenants related to them, deteriorating market and liquidity conditions may give rise to issues which may impact the lenders' ability to hold these debt commitments to their full term. Accordingly, these lenders of committed and drawn facilities may attempt to call this debt which would have a material adverse effect on our liquidity, even though no call provisions exist without being in default.

If we are not able to generate sufficient operating cash flows or obtain external financing, our ability to fund incremental expansion plans may be limited.

Our capital expenditures, together with ongoing operating expenses and obligations to service our debts, will be a substantial drain on our cash flow and may decrease our cash balances. We recognize that the capital markets are currently limited for external financing opportunities. Additional debt or equity financing, especially in the current credit-constrained climate, may not be available when needed or, if available, may not be available on satisfactory terms. Further, as of September 30, 2008, we had a total of $40.8 million of additional liquidity available to us from our Asia-Pacific and European financings (of which approximately $12.9 million was subsequently drawn in October 2008 through the date of this filing). Although these are committed facilities and we are in full compliance with all covenants related to them, given the current economic environment, the lenders may elect to cancel any unused portions of these facilities at any time, which would have a significant impact on our liquidity. Our inability to obtain needed debt and/or equity financing or to generate sufficient cash from operations may require us to prioritize projects or curtail capital expenditures which could adversely affect our results of operations.

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We are exposed to fluctuations in the market values of our portfolio investments and in interest rates; impairment of our investments could harm our results of operations.

We maintain an investment portfolio of various holdings, types and maturities, including money market funds and other short-term and long-term securities. These securities are classified as available-for-sale and, consequently, are recorded on our consolidated balance sheets at fair value with unrealized gains or losses as a separate component of accumulated other comprehensive income or loss. Our portfolio includes fixed income securities, the values of which are subject to market price volatility. If the market price declines, we may recognize in our statements of operations the decline in fair value of our investments below the cost basis when the decline is judged to be other-than-temporary. For information regarding the sensitivity of and risks associated with the market value of our portfolio and interest rates, refer to our discussion of our investment portfolio and interest rate risks in “Quantitative and Qualitative Disclosures About Market Risk” included in Part I, Item 3 of this Quarterly Report on Form 10-Q.

The global financial crisis may have an impact on our business and financial condition in ways that we currently cannot predict.

The continued credit crisis and related turmoil in the global financial markets has had and may continue to have an impact on our business and our financial condition. For example, we are currently unable to access cash invested with The Reserve Primary Fund, a prime obligations money market fund that has suspended redemptions and is being liquidated. We had invested approximately $50.9 million in this fund, which had a fair value of $49.4 million as of September 30, 2008. Despite making redemption requests for the entire amount of our investment, we have not received any distribution as of October 24, 2008. While we expect to receive substantially all of our current holdings in this fund within the next 12 months, it is possible we may encounter difficulties in receiving distributions given the current credit market conditions. If the current market conditions continue to deteriorate, we may suffer further losses on our investment portfolio, which could have a material adverse effect on our liquidity.

The global financial crisis could impact our liquidity in other ways. Customer collections are our primary source of cash. While we believe we have a well diversified customer base and no concentration of credit risk with any single customer, we have a number of large customers in the financial services sector. While we believe we have a strong customer base and have experienced strong collections in the past, if the current market conditions continue to deteriorate we may experience increased churn in our customer base, including reductions in their commitments to us, which could also have a material adverse effect on our liquidity. Deteriorating market and liquidity conditions may also give rise to issues which may impact our lenders' ability to hold their debt commitments to us to their full term. Accordingly, while this would be highly unusual, these lenders of committed and drawn facilities could attempt to call this debt which would have a material adverse effect on our liquidity, even though no call provisions exist without being in default.

The credit crisis could also have an impact on our foreign exchange forward contract and interest rate swap hedging contracts if our counterparties are forced to file for bankruptcy or are otherwise unable to perform their obligations.

Finally, our ability to access the capital markets may be severely restricted at a time when we would like, or need, to do so, which could have an impact on our flexibility to pursue additional expansion opportunities and maintain our desired level of revenue growth in the future.

Fluctuations in foreign currency exchange rates in the markets in which we operate internationally could harm our results of operations.

We may experience gains and losses resulting from fluctuations in foreign currency exchange rates. To date, the majority of our revenues and costs have been denominated in U.S. dollars; however, the majority of revenues and costs in our international operations have been denominated in foreign currencies. Where our prices are denominated in U.S. dollars, our sales could be adversely affected by declines in foreign currencies relative to the U.S. dollar, thereby making our products and services more expensive in local currencies. We are also exposed to risks resulting from fluctuations in foreign currency exchange rates in connection with our international expansions. To the extent we are paying contractors in foreign currencies, our expansions could cost more than anticipated from declines in the U.S dollar relative to foreign currencies. In addition, fluctuating foreign currency exchange rates have a direct impact on how our international results of operations translate into U.S. dollars.

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Although we have in the past, and may decide in the future, to undertake foreign exchange hedging transactions to reduce foreign currency transaction exposure, we do not currently intend to eliminate all foreign currency transaction exposure. For example, while we hedge certain of our balance sheet foreign currency assets and liabilities, we do not hedge revenue. During fiscal 2007 and the first half of 2008, the U.S. dollar had been generally weaker relative to the currencies of the foreign countries in which we operate. This overall weakness of the U.S. dollar had a positive impact on our consolidated results of operations because the foreign denominations translated into more U.S. dollars. However, during the past several months, the U.S. dollar has strengthened relative to certain of the currencies of the foreign countries in which we operate. This has significantly impacted our consolidated financial position and results of operations as amounts in foreign currencies are generally translating into less U.S. dollars. To the extent the U.S. dollar strengthens further, this will continue to have a significant impact to our consolidated financial position and results of operations including the amount of revenue that we report in future periods. For additional information on foreign currency risk, refer to our discussion of foreign currency risk in “Quantitative and Qualitative Disclosures About Market Risk” included in Part I, Item 3 of this Quarterly Report on Form 10-Q.

We have incurred substantial losses in the past and may incur additional losses in the future.

Although we have generated cash from operations for the past several years and expect this trend to continue, we have incurred substantial losses in the past. As of September 30, 2008 our accumulated deficit was $543.6 million. Although we have generated net income in our first, second and third quarters of 2008, we are also currently investing heavily in our future growth through the build-out of several additional IBX centers and IBX center expansions. As a result, we will incur higher depreciation and other operating expenses, as well as interest expense, that will negatively impact our ability to sustain profitability unless and until these new IBX centers generate enough revenue to exceed their operating costs and cover our additional overhead needed to scale our business for this anticipated growth. In addition, costs associated with the IXEurope acquisition and the integration of the two companies, as well as the additional interest expense associated with debt financing we have undertaken to fund our growth initiatives, may also negatively impact our ability to achieve and sustain profitability. Finally, given the competitive and evolving nature of the industry in which we operate, we may not be able to sustain or increase profitability on a quarterly or annual basis.

We are continuing to invest in our expansion efforts but may not have sufficient customer demand in the future to realize expected returns on these investments.

We are considering the acquisition or lease of additional properties and the construction of new IBX centers beyond those expansion projects already announced. We will be required to commit substantial operational and financial resources to these IBX centers, generally 12–18 months in advance of securing customer contracts, and we may not have sufficient customer demand in those markets to support these centers once they are built. In addition, unanticipated technological changes could affect customer requirements for data centers and we may not have built such requirements into our new IBX centers. Any of these contingencies, if they were to occur, could make it difficult for us to realize expected or reasonable returns on these investments.

Our construction of additional new IBX centers could involve significant risks to our business.

In order to sustain our growth in certain of our existing and new markets, we must acquire suitable land with or without structures to build new IBX centers from the ground up. We call these “greenfield builds.” Greenfield builds are currently underway, or being contemplated, in several key markets. A greenfield build involves substantial planning and lead-time, much longer time to completion than an IBX retrofit of an existing data center, and significantly higher costs of construction, equipment and materials, which could have a negative impact on our returns. A greenfield build also requires us to carefully select and rely on the experience of one or more general contractors and associated subcontractors during the construction process. Should a general contractor or significant subcontractor experience financial or other problems during the construction process, we could experience significant delays, increased costs to complete the project and other negative impacts to our expected returns. Site selection is also a critical factor in our expansion plans, and there may not be suitable properties available in our markets with the necessary combination of high power capacity and fiber connectivity.

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While we may prefer to locate new IBX centers adjacent to our existing locations, we may be limited by the inventory and location of suitable properties as well as by the need for adequate power and fiber to the site. In the event we decide to build new IBX centers separate from our existing IBX centers, we may provide services to interconnect these two centers. Should these services not provide the necessary reliability to sustain service, this could result in lower interconnection revenue, lower margins and could have a negative impact on customer retention over time.

Any failure of our physical infrastructure or services could lead to significant costs and disruptions that could reduce our revenue and harm our business reputation and financial results.

Our business depends on providing customers with highly reliable service. We must protect our customers’ IBX infrastructure and their equipment located in our IBX centers. We continue to acquire IBX centers not built by us. If we discover that these IBX centers and their infrastructure assets are not in the condition we expected when they were acquired, we may be required to incur substantial additional costs to repair or upgrade the centers. The services we provide in each of our IBX centers are subject to failure resulting from numerous factors, including:

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human error;

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equipment failure;

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physical or electronic security breaches;

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fire, earthquake, flood, tornados and other natural disasters;

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extreme temperatures;

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water damage;

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fiber cuts;

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power loss;

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terrorist acts;

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sabotage and vandalism; and

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the failure of business partners who provide our resale products.

Problems at one or more of our IBX centers, whether or not within our control, could result in service interruptions or significant equipment damage. We have service level commitment obligations to certain of our customers, including our significant customers. As a result, service interruptions or significant equipment damage in our IBX centers could result in difficulty maintaining service level commitments to these customers and potential claims related to such failures. Because our IBX centers are critical to many of our customers’ businesses, service interruptions or significant equipment damage in our IBX centers could also result in lost profits or other indirect or consequential damages to our customers. We cannot guarantee that a court would enforce any contractual limitations on our liability in the event that one of our customers brings a lawsuit against us as the result of a problem at one of our IBX centers.

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We may incur significant liability to our customers in connection with a loss of power or our failure to meet other service level commitment obligations, or if we are held liable for a substantial damage award. In addition, any loss of service, equipment damage or inability to meet our service level commitment obligations could reduce the confidence of our customers and could consequently impair our ability to obtain and retain customers, which would adversely affect both our ability to generate revenues and our operating results.

Furthermore, we are dependent upon Internet service providers, telecommunications carriers and other website operators in the U.S., Asia-Pacific region, Europe and elsewhere, some of which have experienced significant system failures and electrical outages in the past. Users of our services may in the future experience difficulties due to system failures unrelated to our systems and services. If for any reason, these providers fail to provide the required services, our business, financial condition and results of operations could be materially adversely impacted.

We expect our operating results to fluctuate.

We have experienced fluctuations in our results of operations on a quarterly and annual basis. The fluctuations in our operating results may cause the market price of our common stock to decline. We expect to experience significant fluctuations in our operating results in the foreseeable future due to a variety of factors, including, but not limited to:

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financing or other expenses related to the acquisition, purchase or construction of additional IBX centers;

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fluctuations of foreign currencies in the markets in which we operate;

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mandatory expensing of employee stock-based compensation;

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demand for space, power and services at our IBX centers;

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changes in general economic conditions, such as the current economic downturn, and specific market conditions in the telecommunications and Internet industries, both of which may have an impact on our customer base;

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costs associated with the write-off or exit of unimproved or underutilized property;

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the provision of customer discounts and credits;

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the mix of current and proposed products and services and the gross margins associated with our products and services;

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the timing required for new and future centers to open or become fully utilized;

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competition in the markets in which we operate;

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conditions related to international operations;

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increasing repair and maintenance expenses in connection with aging IBX centers;

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lack of available capacity in our existing IBX centers to book new revenue or delays in opening up new or acquired IBX centers that delay our ability to book new revenue in markets which have otherwise reached capacity;

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the timing and magnitude of other operating expenses, including taxes, capital expenditures and expenses related to the expansion of sales, marketing, operations and acquisitions, if any, of complementary businesses and assets; and

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the cost and availability of adequate public utilities, including power.

Any of the foregoing factors, or other factors discussed elsewhere in this report, could have a material adverse effect on our business, results of operations and financial condition. Although we have experienced growth in revenues in recent quarters, this growth rate is not necessarily indicative of future operating results. We have generated net losses every fiscal year since inception. It is possible that we may not be able to generate positive net income on a quarterly or annual basis in the future. In addition, a relatively large portion of our expenses are fixed in the short-term, particularly with respect to lease and personnel expenses, depreciation and amortization and interest expenses. Therefore, our results of operations are particularly sensitive to fluctuations in revenues. As such, comparisons to prior reporting periods should not be relied upon as indications of our future performance. In addition, our operating results in one or more future quarters may fail to meet the expectations of securities analysts or investors. If this occurs, we could experience an immediate and significant decline in the trading price of our stock.

Our inability to use our tax net operating losses will cause us to pay taxes at an earlier date and in greater amounts, which may harm our operating results.

We believe that our ability to use our pre-2003 tax net operating losses, or NOLs, in any taxable year is subject to limitations under Section 382 of the United States Internal Revenue Code of 1986, as amended, or the Code, as a result of the significant change in the ownership of our stock that resulted from our combination with i-STT Pte Ltd and Pihana Pacific, Inc. in 2002. We expect that a significant portion of our NOLs that accrued prior to December 31, 2002 will expire unused as a result of this limitation.

We are exposed to potential risks from legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002.

Although we received an unqualified opinion regarding the effectiveness of our internal controls over financial reporting as of December 31, 2007, in the course of our ongoing evaluation of our internal controls over financial reporting we have identified certain areas which we would like to improve and are in the process of evaluating and designing enhanced processes and controls to address these areas identified during our evaluation, none of which we believe constitutes or will constitute a material change. However, we cannot be certain that our efforts will be effective or sufficient for us, or our independent registered public accounting firm, to issue unqualified reports in the future, especially as our business continues to grow and evolve.

IXEurope, since it was acquired in September 2007, was scoped out of internal control testing for 2007; however, it will be in scope for 2008. It may be difficult to design and implement effective financial controls for combined operations, and differences in existing controls of any acquired businesses, including IXEurope, may result in weaknesses that require remediation when the financial controls and reporting are combined.

Our ability to manage our operations and growth will require us to improve our operational, financial and management controls, as well as our internal reporting systems and controls. We may not be able to implement improvements to our internal reporting systems and controls in an efficient and timely manner and may discover deficiencies in existing systems and controls.

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If we cannot effectively manage our international operations, and successfully implement our international expansion plans, our revenues may not increase and our business and results of operations would be harmed.

For the years ended December 31, 2007, 2006 and 2005, we recognized 23%, 14% and 13%, respectively, of our revenues outside the U.S. For the nine months ended September 30, 2008, we recognized 37% of our revenues outside the U.S.

To date, the neutrality of our IBX centers and the variety of networks available to our customers has often been a competitive advantage for us. In certain of our acquired IBX centers the limited number of carriers available reduces that advantage. As a result, we may need to adapt our key revenue-generating services and pricing to be competitive in that market.

We are currently undergoing expansions or evaluating expansion opportunities in Europe and in the Asia-Pacific region. Undertaking and managing expansions in foreign jurisdictions may present unanticipated challenges to us. In addition, any expansion requires substantial operational and financial resources, and we may not have sufficient customer demand to support the expansion once complete. Unanticipated technological changes could also affect customer requirements for data centers and we may not have built such requirements into our expanded IBX centers.

Our international operations are generally subject to a number of additional risks, including:

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the costs of customizing IBX centers for foreign countries;

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protectionist laws and business practices favoring local competition;

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greater difficulty or delay in accounts receivable collection;

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difficulties in staffing and managing foreign operations, including negotiating with foreign labor unions or workers’ councils;

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political and economic instability;

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our ability to obtain, transfer, or maintain licenses required by governmental entities with respect to our business; and

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compliance with evolving governmental regulation with which we have little experience.

The increased use of high power density equipment may limit our ability to fully utilize our IBX centers.

Customers are increasing their use of high-density electrical power equipment, such as blade servers, in our IBX centers which has significantly increased the demand for power on a per cabinet basis. Because most of our centers were built several years ago, the current demand for electrical power may exceed the designed electrical capacity in these centers. As electrical power, not space, is typically the limiting factor in our IBX data centers, our ability to fully utilize those IBX centers may be limited. The availability of sufficient power may also pose a risk to the successful operation of our new IBX centers. The ability to increase the power capacity of an IBX, should we decide to, is dependent on several factors including, but not limited to, the local utility’s ability to provide additional power; the length of time required to provide such power; and/or whether it is feasible to upgrade the electrical infrastructure of an IBX to deliver additional power to customers. Although we are currently designing and building to a much higher power specification, there is a risk that demand will continue to increase and our IBX centers could become obsolete sooner than expected.

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We have made, and may continue to make, acquisitions which pose integration and other risks that could harm our business.

We have recently acquired several new IBX centers, and we may seek to acquire additional IBX centers, real estate for development of new IBX centers, or complementary businesses, such as IXEurope and Virtu, products, services or technologies. As a result of these acquisitions, we may be required to incur additional debt and expenditures and issue additional shares of our common stock to pay for the acquired businesses, products, services or technologies, which may dilute our stockholders’ ownership interest and may delay, or prevent, our profitability. These acquisitions may also expose us to risks such as:

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the potential inability to successfully pursue or realize some or all of the anticipated revenue opportunities associated with an acquisition, some of which would be anticipated in any purchase price;

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the possibility that we may not be able to successfully integrate acquired businesses or achieve the level of quality in such businesses to which our customers are accustomed;

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the possibility that additional capital expenditures may be required;

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the possibility that senior management may be required to spend considerable time negotiating agreements and integrating acquired businesses;

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the possible loss or reduction in value of acquired businesses;

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the possibility that our customers may not accept either the existing equipment infrastructure or the “look-and-feel” of a new or different IBX center;

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the possibility that carriers may find it cost-prohibitive or impractical to bring fiber and networks into a new IBX center;

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the possibility of pre-existing undisclosed liabilities regarding the property or IBX center, including but not limited to environmental or asbestos liability, of which our insurance may be insufficient or for which we may be unable to secure insurance coverage; and

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the possibility that the concentration of our IBX centers in the Silicon Valley, Los Angeles and Tokyo, Japan metro areas may increase our exposure to seismic activity, especially if these centers are located on or near fault zones.

We cannot assure you that the price for any future acquisitions will be similar to prior IBX acquisitions. In fact, we expect acquisition costs, including capital expenditures required to build or render new IBX centers operational, to increase in the future. If our revenue does not keep pace with these potential acquisition and expansion costs, we may not be able to maintain our current or expected margins as we absorb these additional expenses. There is no assurance we would successfully overcome these risks or any other problems encountered with these acquisitions.

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Our business could be harmed by prolonged electrical power outages or shortages, increased costs of energy or general lack of availability of electrical resources.

Our IBX centers are susceptible to regional costs of power, electrical power shortages, planned or unplanned power outages and limitations, especially internationally, on the availability of adequate power resources.

Power outages, such as those that occurred in California during 2001, the Northeast in 2003, and from the tornados on the U.S. east coast in 2004, could harm our customers and our business. We attempt to limit exposure to system downtime by using backup generators and power supplies; however, we may not be able to limit our exposure entirely even with these protections in place, as was the case with the power outages we experienced in our Chicago and Washington, D.C. metro area IBX centers in 2005 and London metro area IBX centers in 2007.

In addition, global fluctuations in the price of power can increase the cost of energy, and although contractual price increase clauses exist in the majority of our customer agreements, we may not always choose to pass these increased costs on to our customers.

In each of our markets, we rely on third parties to provide a sufficient amount of power for current and future customers. At the same time, power and cooling requirements are growing on a per unit basis. As a result, some customers are consuming an increasing amount of power per cabinet. We generally do not control the amount of electric power our customers draw from their installed circuits. This means that we could face power limitations in our centers. This could have a negative impact on the effective available capacity of a given center and limit our ability to grow our business, which could have a negative impact on our financial performance, operating results and cash flows.

We may also have difficulty obtaining sufficient power capacity for potential expansion sites in new or existing markets. We may experience significant delays and substantial increased costs demanded by the utilities to provide the level of electrical service required by our current IBX center designs.

We may be forced to take steps, and may be prevented from pursuing certain business opportunities, to ensure compliance with certain tax-related covenants agreed to by us.

We agreed to a covenant in connection with our combination with i-STT Pte Ltd and Pihana Pacific, Inc. in 2002 (which we refer to as the FIRPTA covenant) that we would use all commercially reasonable efforts to ensure that at all times from and after the closing of the combination none of our capital stock issued to STT Communications would constitute “United States real property interests” within the meaning of Section 897(c) of the Code. Under Section 897(c) of the Code, our capital stock issued to STT Communications would generally constitute “United States real property interests” at such point in time that the fair market value of the “United States real property interests” owned by us equals or exceeds 50% of the sum of the aggregate fair market values of (a) our “United States real property interests,” (b) our interests in real property located outside the United States and (c) any other assets held by us which are used or held for use in our trade or business. Currently, the fair market value of our “United States real property interests” is significantly below the 50% threshold. However, in order to ensure compliance with the FIRPTA covenant, we may be limited with respect to the business opportunities we may pursue, particularly if the business opportunities would increase the amounts of “United States real property interests” owned by us or decrease the amount of other assets owned by us. In addition, we may take proactive steps to avoid our capital stock being deemed a “United States real property interest,” including, but not limited to, (a) a sale-leaseback transaction with respect to some or all of our real property interests, or (b) the formation of a holding company organized under the laws of the Republic of Singapore which would issue shares of its capital stock in exchange for all of our outstanding stock (which would require the submission of that transaction to our stockholders for their approval and the consummation of that exchange). We will take these actions only if such actions are commercially reasonable for our stockholders and us. We have entered into an agreement with STT Communications and its affiliate pursuant to which we will no longer be bound by the FIRPTA covenant as of September 30, 2009. If we were to breach this covenant, we may be liable for damages to STT Communications.

Increases in property taxes could adversely affect our business, financial condition and results of operations.

Our IBX centers are subject to state and local real property taxes in the U.S. and certain of our European jurisdictions. The state and local real property taxes on our IBX centers may increase as property tax rates change and as the value of the properties are assessed or reassessed by taxing authorities. Many state and local governments are facing budget deficits, which may cause them to increase assessments or taxes. If property taxes increase, our business, financial condition and operating results could be adversely affected.

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A small number of our stockholders has voting control over a substantial portion of our stock and has influence over matters requiring stockholder consent.

Several of our stockholders each hold voting control over greater than 10% of our outstanding common stock. In addition, these stockholders are not prohibited from buying shares of our stock in public or private transactions. As a result, each of these stockholders is able to exercise significant control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, which could prevent or delay a third party from acquiring or merging with us.

Our non-U.S. customers include numerous related parties of STT Communications.

We continue to have contractual and other business relationships and may engage in material transactions with affiliates of STT Communications, a greater than 10% stockholder. Circumstances may arise in which the interests of STT Communications’ affiliates may conflict with the interests of our other stockholders. In addition, entities affiliated with STT Communications make investments in various companies. They have invested in the past, and may invest in the future, in entities that compete with us. In the context of negotiating commercial arrangements with affiliates, conflicts of interest have arisen in the past and may arise, in this or other contexts, in the future. We cannot assure you that any conflicts of interest will be resolved in our favor.

Environmental regulations may impose upon us new or unexpected costs.

We are subject to various environmental and health and safety laws and regulations, including those relating to the generation, storage, handling and disposal of hazardous substances and wastes. Certain of these laws and regulations also impose joint and several liability, without regard to fault, for investigation and cleanup costs on current and former owners and operators of real property and persons who have disposed of or released hazardous substances into the environment. Our operations involve the use of hazardous substances and materials such as petroleum fuel for emergency generators, as well as batteries, cleaning solutions and other materials. In addition, we lease, own or operate real property at which hazardous substances and regulated materials have been used in the past. At some of our locations, hazardous substances or regulated materials are known to be present in soil or groundwater and there may be additional unknown hazardous substances or regulated materials present at sites we own, operate or lease. At some of our locations, there are land use restrictions in place relating to earlier environmental cleanups that do not materially limit our use of the sites. To the extent any hazardous substances or any other substance or material must be cleaned up or removed from our property, we may be responsible under applicable laws, regulations or leases for the removal or cleanup of such substances or materials, the cost of which could be substantial.

In addition, we are subject to environmental, health and safety laws regulating air emissions, storm water management and other issues arising in our business. While these obligations do not normally impose material costs upon our operations, unexpected events, equipment malfunctions and human error, among other factors, can lead to violations of environmental laws, regulations or permits. Noncompliance with existing, or adoption of more stringent, environmental or health and safety laws and regulations or the discovery of previously unknown contamination could require us to incur costs or become the basis of new or increased liabilities that could be material.

Fossil fuel combustion creates greenhouse gas emissions that are linked to global climate change. Regulations to limit greenhouse gas emissions are coming into force in the European Union in an effort to prevent or reduce climate change. In the United States, federal proposals are under consideration that would implement some form of regulation or taxation to mitigate greenhouse gas emissions. Several states within the United States have adopted laws intended to limit fossil fuel consumption and/or encourage renewable energy development for the same purpose. The proposals include a tax on carbon, a carbon “cap-and-trade” market, and/or other restrictions on carbon and greenhouse gas emissions. California’s recently enacted Global Warming Solutions Act of 2006 established a statewide greenhouse gas emissions cap and will require mandatory emissions reporting. We do not anticipate to be directly regulated by each of the potential or developing climate change-related laws, but such legislation is likely to increase the costs of electricity or fossil fuels, and these cost increases could materially increase our costs of operation or limit the availability of electricity or emergency generator fuels. If laws reducing greenhouse gas emissions are passed, we may be required to modify our emergency power sources systems, buildings or other infrastructure in order to comply, the cost of which could be substantial.

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To the extent any of these environmental regulations impose new or unexpected costs, our business, results of operations or financial conditions may be adversely affected.

We depend on a number of third parties to provide Internet connectivity to our IBX centers; if connectivity is interrupted or terminated, our operating results and cash flow could be materially adversely affected.

The presence of diverse telecommunications carriers’ fiber networks in our IBX centers is critical to our ability to retain and attract new customers. We are not a telecommunications carrier, and as such we rely on third parties to provide our customers with carrier services. We believe that the availability of carrier capacity will directly affect our ability to achieve our projected results. We rely primarily on revenue opportunities from the telecommunications carriers’ customers to encourage them to invest the capital and operating resources required to connect from their centers to our IBX centers. Carriers will likely evaluate the revenue opportunity of an IBX center based on the assumption that the environment will be highly competitive. We cannot assure you that any carrier will elect to offer its services within our IBX centers or that once a carrier has decided to provide Internet connectivity to our IBX centers that it will continue to do so for any period of time. Further, many carriers are experiencing business difficulties or announcing consolidations. As a result, some carriers may be forced to downsize or terminate connectivity within our IBX centers, which could have an adverse effect on our operating results.

Our new IBX centers require construction and operation of a sophisticated redundant fiber network. The construction required to connect multiple carrier facilities to our IBX centers is complex and involves factors outside of our control, including regulatory processes and the availability of construction resources. If the establishment of highly diverse Internet connectivity to our IBX centers does not occur, is materially delayed or is discontinued, or is subject to failure, our operating results and cash flow will be adversely affected. Any hardware or fiber failures on this network may result in significant loss of connectivity to our new IBX expansion centers. This could affect our ability to attract new customers to these IBX centers or retain existing customers.

We may be vulnerable to security breaches which could disrupt our operations and have a material adverse effect on our financial performance and operating results.

A party who is able to compromise the security measures on our networks or the security of our infrastructure could misappropriate either our proprietary information or the personal information of our customers, or cause interruptions or malfunctions in our operations. We may be required to expend significant capital and resources to protect against such threats or to alleviate problems caused by breaches in security. As techniques used to breach security change frequently, and are generally not recognized until launched against a target, we may not be able to implement security measures in a timely manner or, if and when implemented, these measures could be circumvented. Any breaches that may occur could expose us to increased risk of lawsuits, loss of existing or potential customers, harm to our reputation and increases in our security costs, which could have a material adverse effect on our financial performance and operating results.

A small number of customers account for a significant portion of our revenues, and the loss of any of these customers could significantly harm our business, financial condition and results of operations.

While no single customer accounted for 10% of our revenues for the nine months ended September 30, 2008 or the year ended December 31, 2007, our top 10 customers accounted for 21%, inclusive of the impact of the IXEurope acquisition and exclusive of the impact of the Virtu acquisition, and 23%, exclusive of the impact of the IXEurope acquisition, respectively, of our revenues during these periods. As of September 30, 2008, excluding customers acquired in the Virtu acquisition, we had 2,203 customers. We expect that a small percentage of our customers will continue to account for a significant portion of our revenues for the foreseeable future. We cannot guarantee that we will retain these customers or that they will maintain their commitments in our IBX centers at current levels. If we lose any of these key customers, or if any of them decide to reduce the level of their commitment to us, our business, financial condition and results of operations could be adversely affected.

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We resell products and services of third parties that may require us to pay for such products and services even if our customers fail to pay us for them, which may have a negative impact on our operating results.

In order to provide resale services such as bandwidth, managed services and other network management services, we contract with third party service providers. These services require us to enter into fixed term contracts for services with third party suppliers of products and services. If we experience the loss of a customer who has purchased a resale product, we will remain obligated to continue to pay our suppliers for the term of the underlying contracts. The payment of these obligations without a corresponding payment from customers will reduce our financial resources and may have a material adverse effect on our operating and financial results and cash flows.

We may not be able to compete successfully against current and future competitors.

Our IBX centers and other products and services must be able to differentiate themselves from those of other providers of space and services for telecommunications companies, webhosting companies and other colocation providers. In addition to competing with neutral colocation providers, we must compete with traditional colocation providers, including local phone companies, long distance phone companies, Internet service providers and web-hosting facilities. Similarly, with respect to our other products and services, including managed services, bandwidth services and security services, we must compete with more established providers of similar services. Most of these companies have longer operating histories and significantly greater financial, technical, marketing and other resources than us.

Because of their greater financial resources, some of our competitors have the ability to adopt aggressive pricing policies, especially if they have been able to restructure their debt or other obligations. As a result, in the future, we may suffer from pricing pressure that would adversely affect our ability to generate revenues and adversely affect our operating results. In addition, these competitors could offer colocation on neutral terms, and may start doing so in the same metropolitan areas in which we have IBX centers. Some of these competitors may also provide our target customers with additional benefits, including bundled communication services, and may do so in a manner that is more attractive to our potential customers than obtaining space in our IBX centers. If these competitors were able to adopt aggressive pricing policies together with offering colocation space, our ability to generate revenues would be materially adversely affected.

We may also face competition from persons seeking to replicate our IBX concept by building new centers or converting existing centers that some of our competitors are in the process of divesting. We may continue to see increased competition for data center space and customers from large REITS who also operate in our market. We may experience competition from our landlords, some of which are REITS, in this regard. Rather than leasing available space in our buildings to large single tenants, they may decide to convert the space instead to smaller square foot units designed for multi-tenant colocation use. Landlords/REITS may enjoy a cost effective advantage in providing services similar to those provided by our IBXs, and in addition to the risk of losing customers to these parties this could also reduce the amount of space available to us for expansion in the future. Competitors may operate more successfully or form alliances to acquire significant market share. Furthermore, enterprises that have already invested substantial resources in outsourcing arrangements may be reluctant or slow to replace, limit or compete with their existing systems by becoming a customer. Customers may also decide it is cost effective for them to build out their own data centers which could have a negative impact on our results of operations. In addition, other companies may be able to attract the same potential customers that we are targeting. Once customers are located in competitors’ facilities, it may be extremely difficult to convince them to relocate to our IBX centers.

Because we depend on the retention of key employees, failure to maintain competitive compensation packages, including equity incentives, may be disruptive to our business.

Our success in retaining key employees and discouraging them from moving to a competitor is an important factor in our ability to remain competitive. As is common in our industry, our employees are typically compensated through grants of equity awards in addition to their regular salaries. In addition to granting equity awards to selected new hires, we periodically grant new equity awards to certain employees as an incentive to remain with us. To the extent we are unable to offer competitive compensation packages to our employees and adequately maintain equity incentives due to equity expensing or otherwise, and should employees decide to leave us, this may be disruptive to our business and may adversely affect our business, financial condition and results of operations.

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Because we depend on the development and growth of a balanced customer base, failure to attract and retain this base of customers could harm our business and operating results.

Our ability to maximize revenues depends on our ability to develop and grow a balanced customer base, consisting of a variety of companies, including network service providers, site and performance management companies, and enterprise and content companies. The more balanced the customer base within each IBX center, the better we will be able to generate significant interconnection revenues, which in turn increases our overall revenues. Our ability to attract customers to our IBX centers will depend on a variety of factors, including the presence of multiple carriers, the mix of products and services offered by us, the overall mix of customers, the IBX center’s operating reliability and security and our ability to effectively market our services. In addition, some of our customers are, and are likely to continue to be, Internet companies that face many competitive pressures and that may not ultimately be successful. If these customers do not succeed, they will not continue to use the IBX centers. This may be disruptive to our business and may adversely affect our business, financial condition and results of operations.

Our products and services have a long sales cycle that may materially adversely affect our business, financial condition and results of operations.

A customer’s decision to license cabinet space in one of our IBX centers and to purchase additional services typically involves a significant commitment of resources. In addition, some customers will be reluctant to commit to locating in our IBX centers until they are confident that the IBX center has adequate carrier connections. As a result, we have a long sales cycle. Furthermore, we may expend significant time and resources in pursuing a particular sale or customer that does not result in revenue. Delays due to the length of our sales cycle may materially adversely affect our business, financial condition and results of operations.

The failure to obtain favorable terms when we renew our IBX center leases could harm our business and results of operations.

While we own certain of our IBX centers, others are leased under long-term arrangements with lease terms expiring at various dates ranging from 2010 to 2027. These leased centers have all been subject to significant development by us in order to convert them from, in most cases, vacant buildings or warehouses into IBX centers. All of our IBX center leases have renewal options available to us. However, these renewal options provide for rent set at then-prevailing market rates. To the extent that then-prevailing market rates are higher than present rates, these higher costs may adversely impact our business and results of operations.

If the market price of our stock continues to be highly volatile, the value of an investment in our common stock may decline.

Since January 1, 2007, the closing sale price of our common stock on the NASDAQ Global Select Market ranged from $53.00 to $116.66 per share. The market price of the shares of our common stock has been and may continue to be highly volatile. General economic and market conditions, and market conditions for telecommunications stocks in general, may affect the market price of our common stock.

In addition, actual sales, or the market’s perception with respect to possible sales, of a substantial number of shares of our common stock within a narrow period of time could cause our stock price to fall. On November 9, 2005, 4.3 million shares of our common stock were sold by i-STT Investments (Bermuda) Ltd. to Credit Suisse First Boston Capital LLC (“CSFB Capital”) pursuant to a Forward Purchase Agreement (the “Purchase Agreement”) under which i-STT Bermuda will (subject to its right to settle its obligations under the Purchase Agreement in cash) be obligated to deliver up to 4.3 million shares of Equinix common stock on November 15, 2008 in settlement of its obligations under the Purchase Agreement. CSFB will, in turn, use such shares of our common stock, or cash, as the case may be, to settle its obligations to the purchasers of its 5.50% Shared Appreciation Income Linked Securities (“SAILS”) due November 15, 2008. The release of 4.3 million shares of our common stock to the purchasers of the SAILS, and their subsequent resale by such purchasers on the market, could cause our stock price to fall.

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Announcements by others or us may also have a significant impact on the market price of our common stock. These announcements may relate to:

•

our operating results;

•

new issuances of equity, debt or convertible debt by us;

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developments in our relationships with corporate customers;

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announcements by our customers or competitors;

•

changes in regulatory policy or interpretation;

•

governmental investigations;

•

changes in the ratings of our stock by securities analysts;

•

our purchase or development of real estate and/or additional IBX centers;

•

acquisitions by us of complementary businesses; or

•

the operational performance of our IBX centers.

The stock market has from time to time experienced extreme price and volume fluctuations, which have particularly affected the market prices for emerging telecommunications companies, and which have often been unrelated to their operating performance. These broad market fluctuations may adversely affect the market price of our common stock.

We are subject to securities class action and other litigation, which may harm our business and results of operations.

During the quarter ended September 30, 2001, putative shareholder class action lawsuits were filed against us, a number of our officers and directors, and several investment banks that were underwriters of our initial public offering. Similar complaints were filed against more than 300 other issuers, their officers and directors, and investment banks. The suits allege that the underwriter defendants agreed to allocate stock in our initial public offering to certain investors in exchange for excessive and undisclosed commissions and agreements by those investors to make additional purchases in the aftermarket at pre-determined prices. Plaintiffs allege that the prospectus for our initial public offering was false and misleading and in violation of the securities laws because it did not disclose these arrangements. A previously agreed upon settlement with the plaintiffs has been terminated. On August 14, 2007, the plaintiffs filed amended complaints in six cases selected as test, or “focus,” cases and moved for class certification on September 27, 2007. On October 10, 2008, at the request of Plaintiffs, Plaintiffs’ motion for class certification was withdrawn, without prejudice. If Plaintiffs re-file their motion and it is successful, it is likely that they will amend their complaint against Equinix.

On June 29, 2006 and September 18, 2006, shareholder derivative actions were filed in the Superior Court of the State of California, County of San Mateo, naming Equinix as a nominal defendant and several of Equinix's current and former officers and directors as individual defendants. These actions were consolidated, and the consolidated complaint was filed in January 2007. In March 2007, the state court stayed this action in deference to a federal shareholder derivative action filed in the United States District Court for the Northern District of California in October 2006. The federal action named Equinix as a nominal defendant and several current and former officers and directors as individual defendants. This complaint alleged that the individual defendants breached their fiduciary duties and violated California and federal securities laws as a result of purported backdating of stock options, insider trading and the dissemination of false statements. On April 12, 2007, the federal action was voluntarily dismissed without prejudice pursuant to a joint stipulation entered as an order by the court. On May 3, 2007, the state court lifted the stay on proceedings in the state court action. On March 3, 2008, the state court plaintiff filed a second amended consolidated complaint after the court granted two motions to dismiss prior complaints with leave to amend. The second amended consolidated complaint alleged that the individual defendants breached their fiduciary duties and violated California securities law as a result of purported backdating of stock option grants, insider trading and the dissemination of false financial statements. The second amended consolidated complaint sought to recover, on behalf of Equinix, unspecified monetary damages, corporate governance changes, equitable and injunctive relief, restitution and fees and costs. On July 8, 2008, the state court granted our motion to dismiss the second amended consolidated complaint without leave to amend and entered a final judgment dismissing the action and all claims asserted therein in their entirety without leave to amend. The time for the state court plaintiff to appeal the judgment expired on September 9, 2008.

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On August 22, 2008, a complaint was filed against Equinix, certain former officers and directors of Pihana Pacific, Inc. (“Pihana”), certain investors in Pihana, and others. The lawsuit was filed in the First Circuit Court of the State of Hawaii, and arises out of December 2002 agreements pursuant to which Equinix merged Pihana and i-STT (a subsidiary of Singapore Technologies Telemedia Pte Ltd) into the internet exchange services business of Equinix. Plaintiffs, who were allegedly holders of Pihana common stock, allege that their rights as shareholders were violated, and the transaction was effectuated improperly, by Pihana's majority shareholders, officers and directors, with the alleged assistance of Equinix and others. Among other things, plaintiffs contend that they effectively had a right to block the transaction, that this supposed right was disregarded, and that they improperly received no consideration when the deal was completed. The complaint seeks to recover unspecified punitive damages, equitable relief, fees and costs, and compensatory damages in an amount that plaintiffs allegedly “believe may be all or a substantial portion of the approximately $725 million value of Equinix held by Defendants” (a group that includes more than thirty individuals and entities). An amended complaint, which adds new plaintiffs (other alleged holders of Pihana common stock), but is otherwise substantially similar to the original pleading, was filed on September 29, 2008. On October 13, 2008, a complaint was filed by another purported holder of Pihana common stock, naming the same defendants and asserting substantially similar allegations as the August 22, 2008 and September 29, 2008 pleadings. We believe that plaintiffs’ claims and alleged damages are without merit and we intend to defend the litigation vigorously.

We continue to participate in the defense of litigation, as discussed above, which may increase our expenses and divert management’s attention and resources. In addition, we may, in the future, be subject to other litigation. For example, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. Any adverse outcome in litigation could seriously harm our business and results of operations.

Risks Related to Our Industry

If the use of the Internet does not continue to grow, our revenues may not grow.

Acceptance and use of the Internet may not continue to develop at historical rates. Demand for Internet services and products are subject to a high level of uncertainty and are subject to significant pricing pressure. As a result, we cannot be certain that a viable market for our IBX centers will be sustained. If the market for our IBX centers grows more slowly than we currently anticipate, our revenues may not grow and our operating results could suffer.

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Government regulation may adversely affect the use of the Internet and our business.

Various laws and governmental regulations governing Internet related services, related communications services and information technologies and electronic commerce remain largely unsettled, even in areas where there has been some legislative action. This is true both in the U.S. and the various foreign countries in which we operate. It may take years to determine whether and how existing laws, such as those governing intellectual property, privacy, libel, telecommunications services and taxation, apply to the Internet and to related services such as ours. We have limited experience with such international regulatory issues and substantial resources may be required to comply with regulations or bring any non-compliant business practices into compliance with such regulations. In addition, the development of the market for online commerce and the displacement of traditional telephony service by the Internet and related communications services may prompt an increased call for more stringent consumer protection laws or other regulation both in the U.S. and abroad that may impose additional burdens on companies conducting business online and their service providers. The compliance with, adoption or modification of, laws or regulations relating to the Internet, or interpretations of existing laws, could have a material adverse effect on our business, financial condition and results of operation.

Industry consolidation may have a negative impact on our business model.

The telecommunications industry is currently undergoing consolidation. As customers combine businesses, they may require less colocation space, and there may be fewer networks available to choose from. Given the competitive and evolving nature of this industry, further consolidation of our customers and/or our competitors may present a risk to our network neutral business model and have a negative impact on our revenues. In addition, increased utilization levels industry-wide could lead to a reduced amount of attractive expansion opportunities available to us.

Terrorist activity throughout the world and military action to counter terrorism could adversely impact our business.

The September 11, 2001 terrorist attacks in the U.S., the ensuing declaration of war on terrorism and the continued threat of terrorist activity and other acts of war or hostility appear to be having an adverse effect on business, financial and general economic conditions internationally. These effects may, in turn, increase our costs due to the need to provide enhanced security, which would have a material adverse effect on our business and results of operations. These circumstances may also adversely affect our ability to attract and retain customers, our ability to raise capital and the operation and maintenance of our IBX centers. We may not have adequate property and liability insurance to cover catastrophic events or attacks.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

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Item 6. Exhibits

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Filing Date/ Period End Date	Exhibit	Filed Herewith

2.1	Combination Agreement, dated as of October 2, 2002, by and among Equinix, Inc., Eagle Panther Acquisition Corp., Eagle Jaguar Acquisition Corp., i-STT Pte Ltd, STT Communications Ltd., Pihana Pacific, Inc. and Jane Dietze, as representative of the stockholders of Pihana Pacific, Inc.	Def. Proxy 14A	12/12/02
3.1	Amended and Restated Certificate of Incorporation of the Registrant, as amended to date.	10-K/A	12/31/02	3.1
3.2	Certificate of Designation of Series A and Series A-1 Convertible Preferred Stock.	10-K/A	12/31/02	3.3
3.3	Bylaws of the Registrant.	10-K	12/31/02	3.2
3.4	Certificate of Amendment of the Bylaws of the Registrant.	10-Q	6/30/03	3.4
4.1	Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.
4.2	Registration Rights Agreement (see Exhibit 10.7).
4.3	Indenture dated February 11, 2004 by and between Equinix, Inc. and U.S. Bank National Association, as trustee.	10-Q	3/31/04	10.99
4.4	Indenture dated March 30, 2007 by and between Equinix, Inc. and U.S. Bank National Association, as trustee.	8-K	3/30/07	4.4
4.5	Form of 2.50% Convertible Subordinated Note Due 2012 (see Exhibit 4.4).
4.6	Indenture dated September 26, 2007 by and between Equinix, Inc. and U.S. Bank National Association, as trustee.	8-K	9/26/07	4.4
4.7	Form of 3.00% Convertible Subordinated Note Due 2014 (see Exhibit 4.6).
10.1	Form of Indemnification Agreement between the Registrant and each of its officers and directors.	S-4 (File No. 333-93749)	12/29/99	10.5
10.2+	Lease Agreement with Carlyle-Core Chicago LLC, dated as of September 1, 1999.	S-4/A (File No. 333-93749)	5/9/00	10.9

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		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Filing Date/ Period End Date	Exhibit	Filed Herewith

10.3	2000 Equity Incentive Plan, as amended.	10-K	12/31/07	10.3
10.4	2000 Director Option Plan, as amended.	10-K	12/31/07	10.4
10.5	2001 Supplemental Stock Plan, as amended.	10-K	12/31/07	10.5
10.6	Form of Severance Agreement entered into by the Company and each of the Company’s executive officers.	10-Q	9/30/02	10.58
10.7	Registration Rights Agreement by and among Equinix and the Initial Purchasers, dated as of December 31, 2002.	10-K	12/31/02	10.75
10.8	Securities Purchase and Admission Agreement, dated April 29, 2003, among Equinix, certain of Equinix’s subsidiaries, i-STT Investments Pte Ltd, STT Communications Ltd and affiliates of Crosslink Capital.	8-K	5/1/03	10.1
10.9+	Lease Agreement dated as of April 21, 2004 between Eden Ventures LLC and Equinix, Inc.	10-Q	6/30/04	10.103
10.10	Equinix, Inc. 2004 International Employee Stock Purchase Plan effective as of June 3, 2004.	10-Q	6/30/04	10.105
10.11	Equinix, Inc. Employee Stock Purchase Plan effective as of June 3, 2004.	10-Q	6/30/04	10.106
10.12	Form of Restricted Stock Agreement for Equinix’s executive officers under the Company’s 2000 Equity Incentive Plan.	10-K	12/31/05	10.115
10.13	Lease Agreement dated June 9, 2005 between Equinix Operating Co., Inc. and Mission West Properties L.P. and associated Guaranty of Equinix, Inc.	10-Q	6/30/05	10.117
10.14	Letter Agreement dated October 6, 2005 among Equinix, Inc., STT Communications Ltd. and I-STT Investments Pte. Ltd.	8-K	10/6/05	99.1
10.15	Lease Agreement dated December 21, 2005 between Equinix Operating Co., Inc. and iStar El Segundo, LLC and associated Guaranty of Equinix, Inc.	10-K	12/31/05	10.126
10.16+	Loan and Security Agreement and Note between Equinix RP II, LLC and SFT I, Inc. dated December 21, 2005 and associated Guaranty of Equinix, Inc.	10-K	12/31/05	10.127

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		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Filing Date/ Period End Date	Exhibit	Filed Herewith

10.17	Lease Agreement dated as of December 21, 2005 between Equinix RP II, LLC and Equinix, Inc.	10-K	12/31/05	10.128
10.18	Lease Agreement dated September 14, 2006 between 777 Sinatra Drive Corp. and Equinix, Inc.	10-Q	9/30/06	10.135
10.19	First Omnibus Modification Agreement dated December 27, 2006 by and among SFT I, Inc. (“SFT I”), Equinix RP II, LLC (“RP II”) and Equinix, Inc. (“Equinix”), Amended and Restated Promissory Note dated December 27, 2006 by RP II in favor of SFT I and Reaffirmation of Guaranty dated December 27, 2006 by RP II and Equinix in favor of SFT I.	10-K	12/31/06	10.37
10.20	First Amendment to Deed of Lease dated December 27, 2006 by and between Equinix RP II, LLC and Equinix Operating Co., Inc.	10-K	12/31/06	10.38
10.21	Development Loan and Security Agreement dated February 2, 2007 by and between CHI 3, LLC and SFT I, Inc. and related Promissory Notes One through Four.	10-Q	3/31/07	10.37
10.22	Guaranty dated February 2, 2007 by and between Equinix, Inc. and SFT I, Inc.	10-Q	3/31/07	10.38
10.23	Completion and Payment Guaranty dated February 2, 2007 by and between Equinix, Inc. and SFT I, Inc.	10-Q	3/31/07	10.39
10.24	Master Lease dated February 2, 2007 by and between CHI 3, LLC and Equinix Operating Co., Inc. and associated Guaranty of Lease by Equinix, Inc.	10-Q	3/31/07	10.40
10.25	Severance Agreement dated March 16, 2007 by and between Stephen M. Smith and Equinix, Inc.	10-Q	3/31/07	10.44
10.26	Form of Restricted Stock Agreements for Stephen M. Smith under the Equinix, Inc. 2000 Equity Incentive Plan.	10-Q	3/31/07	10.45
10.27	Facility Agreement dated August 31, 2007 by and among Equinix Singapore Pte. Ltd., Equinix Japan K.K., the Additional Borrowers (as defined therein), the Lenders (as defined therein), and ABN AMRO BANK N.V., and related Guarantee dated August 31, 2007 by Equinix, Inc.	10-Q	9/30/07	10.47

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		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Filing Date/ Period End Date	Exhibit	Filed Herewith

10.28	£82,000,000 Senior Facilities Agreement dated June 29, 2007 by and among IXEurope plc, CIT Bank Limited, as arranger, CIT Capital Finance (UK) Limited, as administrative agent and security trustee and the Lenders (as defined therein).	10-Q	9/30/07	10.49
10.29	Amendment and Accession Agreement, dated as of January 31, 2008, by and among Equinix Singapore Pte. Ltd., Equinix Japan K.K. and Equinix Australia Pty. Limited, as Borrowers, ABN AMRO Bank N.V., Singapore Branch, ABN AMRO Bank N.V., Japan Branch and ABN AMRO Australia Pty Limited, as Lenders and ABN AMRO Bank N.V., as Facility Agent, Arranger and Collateral Agent and related Amendment No. 1 to Guarantee by Equinix, Inc.	10-K	12/31/07	10.32
10.30	2008 Equinix Annual Incentive Plan.	10-K	12/31/07	10.33
10.31	Form of Restricted Stock Unit Agreement for Equinix’s executive officers under the Company’s 2000 Equity Incentive Plan.	10-K	12/31/07	10.34
10.32	Equinix, Inc. Sub-Plan to the 2004 International Employee Stock Purchase Plan for Participants Located in the European Economic Area.	10-Q	3/31/08	10.32
10.33	Letter Agreement, dated April 22, 2008, by and between Eric Schwartz and Equinix, Inc.	10-Q	6/30/08	10.34
10.34	Severance Agreement, dated May 22, 2006, by and between Eric Schwartz and Equinix, Inc.	10-Q	6/30/08	10.35
10.35	Letter Agreement, dated April 25, 2008, by and between Peter Ferris and Equinix, Inc.	10-Q	6/30/08	10.36
10.36	Letter Amendment, dated May 6, 2008, to £82,000,000 Senior Facilities Agreement dated June 29, 2007, by and among Equinix Group Limited, CIT Bank Limited, as arranger, CIT Capital Finance (UK) Limited, as administrative agent and security trustee and the Lenders (as defined therein).	10-Q	6/30/08	10.37
10.37	Second Amendment and Accession Agreement, dated as of June 6, 2008, by and among Equinix Singapore Pte. Ltd., Equinix Japan K.K., Equinix Australia Pty. Limited and Equinix Hong Kong Limited, as Borrowers, ABN AMRO Bank N.V. and Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., Hong Kong Branch, as Lenders and ABN AMRO Bank N.V., as Facility Agent, Arranger and Collateral Agent and related Amendment No. 2 to Guarantee by Equinix, Inc.	10-Q	6/30/08	10.38
10.38	Letter Agreement, dated July 22, 2008, by and between Marjorie Backaus and Equinix, Inc.				X
10.39	Lease Agreement, dated September 30, 2008, by and between Equinix Paris SAS and Digital Realty (Paris 2) SCI, and related guarantee by Equinix, Inc.				X
21.1	Subsidiaries of Equinix, Inc.				X
31.1	Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.2	Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1	Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
32.2	Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X

+ Confidential treatment has been requested for certain portions which are omitted in the copy of the exhibit electronically filed with the Securities and Exchange Commission. The omitted information has been filed separately with the Securities and Exchange Commission pursuant to Equinix’s application for confidential treatment.

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EQUINIX, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		EQUINIX, INC.

Date: October 24, 2008
	By:	/s/ Keith D. Taylor
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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INDEX TO EXHIBITS

Exhibit Number		Description of Document

10.38		Letter Agreement, dated July 22, 2008, by and between Marjorie Backaus and Equinix, Inc.
10.39		Lease Agreement, dated September 30, 2008, by and between Equinix Paris SAS and Digital Realty (Paris 2) SCI, and related guarantee by Equinix, Inc.
21.1		Subsidiaries of Equinix, Inc.
31.1		Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.