Digital Realty missed estimates for the third quarter, leading to a falling share price of about $43.37—a low for 2013—according to DatacenterDynamics. Nevertheless, the company signed $47 million worth of new leases during the quarter, which “represents the third-highest quarter in the company’s history, and the dollar volume of leases signed year-to-date has already exceeded the full-year activity in 2012,” said Digital Realty CEO Michael F. Foust. A drag on the third-quarter results, however, was a non-cash straight-line expense adjustment of $10 million for a New York lease scheduled to expire next year. In addition, oversupply of data center space in various markets is weighing on the company.
When viewed in light of investor exuberance over the upcoming IPO of Twitter—a company that is not profitable—downward stock movement over “disappointing” results for a company like Digital Realty points to the current irrationality of the stock market. The matter of oversupply of data center space in some markets, however, is a trend worth watching, particularly as more companies rely on the cloud (and major cloud providers with their own data centers).
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