Tuesday, November 1st, 2016

Time	Event
12:30p	Top Five Features to Look for in a Visibility Solution Michael Fimin is CEO and co-founder of Netwrix. The IT marketing community is masterful at creating buzz words — “big data,” “cloud,” the “Internet of Things,” “artificial intelligence” and more. Now the new buzz word “visibility” is popping up everywhere. During the RSA Conference 2016, nearly every vendor talked about visibility when discussing solutions that cover a certain part of the IT infrastructure or solve a particular problem. Visibility was widely discussed during sessions, and for the second year in a row, Amit Yoran, president of RSA, mentioned visibility in his speech, calling it a core part of any security strategy. Just what does it actually mean to have visibility? If we can’t see what is happening with sensitive data and systems, we simply cannot claim our IT infrastructure is secure. But just collecting log events without extracting meaningful data is of limited value — investigating incidents takes too long, and you can’t adjust your cyber-security strategy quickly to address emerging risks. Visibility provides the background information that gives context and helps you to better understand how your employees interact with corporate data. Visibility into what is going on across the entire IT infrastructure is a key component of any cyber security strategy. However, the recently released 2016 Netwrix Visibility Report revealed that organizations worldwide still struggle to gain complete visibility into their IT infrastructures. Most companies lack visibility across their IT networks (65 percent), unstructured data and files storage (78 percent), and cloud or hybrid environments (75 percent). The majority of the respondents had either zero or limited visibility into regular and privileged user activity, including the activity of third parties. Any IT pro who looks at the variety of “visibility” offerings from different vendors can easily get lost. It’s critical to dig deep and ask what the differences are between these solutions. Here are a few key features to look for: The simpler the solution is, the faster you can integrate it into your infrastructure, and the easier it will be to maintain. Just think about your SIEM solution. If you need expensive, hard-to-find professional staff and special knowledge to configure and maintain it, it’s hard to quickly and fully benefit from it. The global 2016 IT Risks Report conducted by Netwrix found that most organizations stress the importance of visibility and believe they have implemented adequate security controls. Yet, when they were asked about the cyber risks they were exposed to over the last year and their ability to quickly find a root cause of an incident, it became clear that they have far less visibility than they need. Look for a visibility solution that quickly provides the actionable information you need to quickly resolve any issue. Single pane of glass. Another essential feature is the ability to cover multiple IT systems and parts of IT infrastructure, track all types of changes and access attempts, and deliver information in an easy-to-read and unified format. According to the Voice of the Enterprise: Information Security Survey (Q3 2015) conducted by 451 Research, only 22 percent of SIEM users manage to use all data for analysis. This selectivity and lack of comprehensiveness poses a great security risk. Since no system is completely isolated, any system that is compromised can serve as a gateway to others. For that reason, the more systems a visibility solution can support, the more in-depth cross-system analysis is available and the faster you can detect malicious activity. Hybrid cloud support. According to Gartner, cloud technology is rapidly capturing the market, with 77 percent of organizations expected to use the cloud by 2017. However, most of them will choose hybrid cloud implementations, mainly out of security concerns. Therefore, look for a visibility solution that can ensure smooth operation and monitor user activity in various hybrid scenarios that combine on-premises, public cloud and private cloud infrastructures. Support of API. Be sure the visibility solution you choose provides maximum interoperability with your current systems and future investments via API integrations. This will enable your organization to be independent from any particular vendor’s offerings and ensure that you can monitor user activity across all applications, including cloud-based apps. According to the Netwrix 2016 IT Risks Report, 78 percent of organizations believe that visibility into IT changes improves IT security and data governance. Deep visibility into every level of the IT infrastructure gives you control and provides the context you need to quickly respond to cyber security incidents. By being able to quickly correlate user activities with changes to data and security configurations, you can detect misbehavior in a timely fashion and minimize the damage from security incidents. Industry Perspectives is a content channel at Data Center Knowledge highlighting thought leadership in the data center arena. See our guidelines and submission process for information on participating. View previously published Industry Perspectives in our Knowledge Library. (Comment on this)
2:33p	Brocade Communications in Advanced Talks to Sell Itself (Bloomberg) — Brocade Communications Systems Inc. is in advanced talks to sell itself, according to people familiar with the matter. The network-equipment maker is nearing the final stages of a sale process, said the people, who asked not to be named because the discussions are private. Chipmaker Broadcom Ltd. is one of the interested potential buyers, the people said. No deal has been reached and talks may still fall apart, they said. An acquisition of Brocade could be announced as soon as this week, said the people. Brocade shares were down about 5 percent this year through Friday, giving it a market valuation of about $3.5 billion. The company has about $1.2 billion in cash and $1.5 billion in debt. Brocade stock rose as much as 25 percent to $10.88 after being temporarily halted on Monday. Broadcom was little changed. A representative for Broadcom declined to comment. Representatives for Brocade didn’t immediately respond to requests for comment. Owning Brocade’s networking gear might be attractive for component makers such as Broadcom, which makes the chips that power switches. An acquisition would help a buyer play a greater role in the build-out of data centers needed to meet increasing demand for cloud computing. Broadcom Chief Executive Officer Hock Tan, who’s built a $67 billion chipmaker through a string of acquisitions, has said he is in the market for more purchases. He already has chips that power network switches and control storage devices, markets that provide Brocade with most of its income. San Jose, California-based Brocade has struggled to find growth in networking, where it is dwarfed by Cisco Systems Inc. Customers are turning away from proprietary hardware and software combinations that Cisco specializes in, opting instead for open-source software and cheaper hardware built on the kind of chips that Broadcom makes. Last year, Brocade sales rose 2 percent to $2.3 billion. That’s less than Cisco gets from its switch business in one quarter. (Comment on this)
5:01p	CyrusOne Q3 Earnings – Trick or Treat? Halloween got off to a spooky start for data center REIT CyrusOne shareholders after the company reported Q3 earnings on Monday, before the bell. However, CyrusOne’s solid earnings, raised guidance, strong leasing, and massive pipeline of new deals appeared to be overshadowed by uncertainty surrounding the revelation of an unexpected CFO change. CyrusOne shares were crushed in early trading prior to the start of the conference call held at 11:00 ET on Monday.  In what can only be described as a bipolar trading day, CONE shares initially plunged to a low of $40.82, or a drop of ~8 percent. This loss was halved during the conference call. By the end of the trading day shares had bounced back to within half a percent of Friday’s close of $44.83 per share. Here’s what appeared to be driving this white-knuckle rollercoaster ride for investors. The Trick In addition to the scheduled earnings release, CyrusOne’s simultaneous announcement of a CFO change caught analysts and investors flat-footed. CEO Gary Wojtaszek summed it up succinctly, “These things are never good…” answering a question on the earnings call regarding the sudden CFO transition. However, he immediately clarified his comment, pointing out that “Greg [Andrews] has done a masterful job here…” Notably, there will be a charge taken in Q4 for CFO Andrew’s severance, another indication of an amicable parting of the ways. The sting of this announcement was also mitigated by having already hired Diane M. Morefield to assume the CFO role. She is coming aboard in mid-November, which should provide time for an orderly transition. Morefield has an impressive resume, including extensive experience successfully managing the balance sheet of large, growth-oriented REITs. The Treats CyrusOne reported another strong leasing quarter, having signed an aggregate of 105,000 square feet of colocation space, totaling 17MW of power. This included adding three new Fortune 1000 logos during the quarter, consisting of another top 10 cloud provider and two new enterprise customers. Wojtaszek pointed out that CyrusOne now counts seven of the Top 10 cloud service providers as customers — up from having none as tenants just 24 months ago. Source: CyrusOne Q3 2016 Earnings presentation Wojtaszek said on the call that CyrusOne’s late-stage deal funnel has almost doubled in size since reporting results for the quarter ended June 30, 2016. Here are some of the highlights from the Q3 earnings report: Q3 2016 normalized FFO per share of $0.67 vs $0.57 per share year-over-year, (including a $0.04 non-recurring component). FY 2016 FFO Guidance raised to $2.59-$2.62, from $2.50-$2.58 per share. Booked-not-billed backlog of $68 million in annualized GAAP revenue as of the end of the third quarter, representing nearly $550 million in total contract value Monthly Recurring Revenue (MRR) signed during Q3’16 was more than double the MRR signed the same period during 2015. Portfolio utilization remains high at 93% occupancy for stabilized data centers, and 85% overall. Subsequent to the end of the quarter, CyrusOne leased up 100 percent of the second expansion phase at the Chicago – Aurora I facility. Read more: CyrusOne Plans Huge Expansion at CME Data Center Campus in Chicago Wojtaszek confirmed the CME Aurora II expansion was already underway on 15 acres acquired as part of the $130 million deal earlier this year. This massive data center expansion is expected to be up and running by Q2 2017, according to Wojtaszek. One challenge facing the publicly traded data center REIT during the second half of 2016 will be tough comparisons going forward, due to record leasing reported over the past year. Investors and analysts are trying to understand if the success of the past few quarters is the “new normal,” or if the enormous wave of cloud service provider deployments will begin to taper. Wholesale Pricing One concern voiced by a few industry insiders after CyrusOne announced record leasing for Q2 2016, was the question of “giving away the business,” in order to sign this barrage of large cloud deals. Read more: Data Center REIT CyrusOne Sprints Ahead In Cloud Leasing Race, Yet ‘No Respect’ Wojtaszek addressed this “innuendo” head-on in the presentation slide deck. He made it clear during the earnings call that the recently completed 30 MW Sterling II build-to-suit was developed at a 16 percent ROIC. Source: CyrusOne – Q3 Earnings presentation This is consistent with CyrusOne’s stated targeted range of 16-19 percent, and significantly higher than the 10-13 percent range reported by some publicly traded peers for wholesale deals. Market Expansions CyrusOne currently has 350,000 CSF under development, totaling 69MW of power capacity, including: Northern Virginia – 21MW, San Antonia 24MW, Phoenix 18MW and Chicago 6MW. More than 75 percent of capital being deployed in development pipeline is associated with pre-leased projects. During the quarter, CyrusOne acquired 29 acres of land in Phoenix and 23 acres of land outside of Chicago to support growth in those markets. CyrusOne also has an option to acquire 46 acres in the Pacific Northwest; plus land and shell for development of a fully pre-leased data center in Northern Virginia. In the US, CyrusOne is looking at West Coast markets, and is actively trying to acquire a Santa Clara site in order to target technology firms. Nevada was also raised as an expansion possibility. Additionally, CyrusOne is looking to plant the flag in Southeast, with Atlanta and Florida mentioned as markets of interest. Wojtaszek also acknowledged that CyrusOne will have to expand internationally in order to better serve its core Fortune 1000 customer base. In fact, CyrusOne wrote off expenses in Q3 related to M&A talks that did not bear fruit. It was unclear if those aborted acquisition attempts were domestic or global. Investor Takeaway CyrusOne continues to voice one of the strongest cases for the continued growth of data center outsourcing and enterprise cloud migration. CEO Wojtaszek explained that the hyperscale cloud providers which are disrupting the IT world have much better uses for their capital than owning expensive data center assets. He emphasized that CyrusOne has now proven to its existing enterprise and cloud customers that it can build data centers faster and cheaper. It appears another strong quarter of leasing and operating results, a boost in full year guidance, and a growing pipeline of prospects, were the proverbial “treats” which turned around a scary Halloween morning for shareholders.   (Comment on this)
10:15p	Alibaba’s Cloud Arm Set for Centerstage as E-Commerce Plateaus (Bloomberg) –It’s not the e-commerce business that’ll command the most attention when Alibaba Group Holding Ltd. posts earnings Wednesday. It’s the nascent cloud computing division that investors will scrutinize instead. China’s largest internet company reports just a week before Katy Perry and other stars headline a launch party for the annual Singles’ Day online shopping extravaganza. Yet it’s the less flashy internet-based computing unit that’s in the spotlight now that its e-commerce juggernaut is plateauing and the payoff from nascent businesses such as entertainment remains years away. Taking Amazon.com Inc.’s approach, Alibaba has placed cloud at the heart of its global expansion, eyeing top share in Japan in two years and beefing up its presence from the Middle East to the U.S. It already hosts more than a third of China’s websites. The company’s fastest-growing division probably helped power 53 percent growth in group revenue to 33.9 billion yuan ($5 billion) last quarter, according to estimates compiled by Bloomberg. And unlike other businesses such as video streaming or on-demand services, it may be close to contributing to the bottom line. “People have really high expectations for the cloud unit,” said Billy Leung, an analyst at Haitong International Securities Co. “For me, it’s already in the books, in the share price.” Shares of Alibaba have surged 25 percent this year compared with a rise of just 3.3 percent for the NYSE Composite Index. Alibaba has only recently begun to make inroads beyond China and into a global cloud market dominated by Amazon and Microsoft Corp. It’s the biggest provider of internet-based computing — everything from storage and data analysis to server hosting — for government agencies and corporations within its home market, but abroad it’s more narrowly focused on supporting Chinese-based organizations on foreign soil. The division now accounts for less than 5 percent of Alibaba’s revenue, the lion’s share of which comes from an e-commerce division still growing at double-digit rates. But that proportion is climbing steadily and could help the company grapple with a profusion of difficulties facing the wider economy. Chinese gross domestic product grew 6.7 percent in the third quarter, its slowest pace of expansion since 2009. “One of the key focuses this quarter will be Alibaba’s cloud unit performance,” said Li Muzhi, a Hong Kong-based analyst at Arete Research Services LLP who expects the unit’s revenue to soar 130 percent to 1.49 billion yuan. “If Alibaba’s cloud unit breaks even this quarter, that would be a confidence booster for investors.” Like Amazon’s, Alibaba’s cloud service emerged from the enormous computational power needed to handle millions of online shopping transactions. But unlike its U.S. counterpart, it enjoys home-field advantage in a vast Chinese market where web-based computing is still novel to many enterprises. Its push into cloud, where software and services are provided to customers via server farms the size of football fields, prompted a second data center in Silicon Valley and preparation for its first in Europe. Along the way, Alibaba forged partnerships with industry giants like Intel Corp. and Nvidia Corp. In July, the division’s president proclaimed it could match or even surpass Amazon within three to four years. Alibaba co-founder Jack Ma once referred to data as the new oil. Chief Executive Officer Daniel Zhang said last month that cloud computing will underpin the upgrading of China’s $4 trillion retail market, one of the company’s biggest opportunities. He envisions building a system that monitors in-store sales as they happen, giving retailers and brands the ability to adjust in real time. If that happens, the cloud could well become one of Alibaba’s bigger profit centers. Amazon Web Services earned $861 million of operating income last quarter, by far the U.S. company’s most lucrative division. Alibaba said in August that the unit was close to breaking even, driven by some 577,000 paying customers. Overall, Alibaba is expected to post 7 billion yuan of net income, a 69 percent drop propelled in part by the integration of loss-making online video streaming business Youku Tudou and Lazada Group SA, acquired earlier this year. Cloud is “the next revenue driver,” Credit Suisse analysts Evan Zhou and Monica Chen wrote in a note last week, tagging its growth for the September quarter at about 147 percent.that’ll command the most attention when Alibaba Group Holding Ltd. posts earnings Wednesday. It’s the nascent cloud computing division that investors will scrutinize instead.ember quarter at about 147 percent. (Comment on this)

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