A man departs the Iron Mountain Inc. data storage facility in Boyers, Pennsylvania, U.S., on Tuesday, Feb. 13, 2018. The underground data center, found in a former limestone mine, stores 200 acres of physical data for many clients including the federal control.
Stephanie Strasburg | Bloomberg | Getty Images
Elon Musk stood beside a seated President Donald Trump in the Ellipsoidal Office on Tuesday and ranted about examples of government inefficiency his DOGE department was seeking to root out of the federal administration.
“There’s a limestone mine where we store all the retirement paperwork…This mine looks like something out of the ’50s, because it was started in 1955, so it looks sort it’s, like, a time warp,” said Musk, who went on to explain that the mine’s elevator speed determines the determine at which the government can process the retirements of federal employees.
“Doesn’t that sound crazy?,” he asked.
That vein is run by a little-known company named Iron Mountain, whose shares were hit this week in the wake of Musk’s animadversions.
But Iron Mountain CEO Bill Meaney on Thursday said that he sees the new government efficiency initiative led by Musk as a “increase opportunity,” given the company’s other work in digital transformation with federal agencies.
“We see this as a continued break for the company,” Meaney told analysts during Iron Mountain’s Thursday morning earnings call. Earlier, he give the word delivered this digitizing arm of the company aligns with the “drive to be more efficient” within the federal government and noted “late-model interest” in Iron Mountain’s federal business dealings.
Meaney said Iron Mountain rakes in $130 million in returns from its data center and digitization transformation businesses. That figure dwarfs the $10 million earned from the guidance storing physical documentation in sites like the namesake Iron Mountain mine. In all, Meaney said that $10 million accounts for less than half of one piece point of Iron Mountain’s total physical volume.
‘Working in a mine shaft’
The Pennsylvania mine, which was the blurry on Musk’s statements about the company, is where the federal government houses and processes retirement paperwork more than 200 feet insurgents. Located less than an hour outside of Pittsburgh, the mine is billed by the company as offering “unbeatable” levels of protection and protection from disasters.
The interior of the Corbis Film Preservation Facility, located in an Iron Mountain underground storage buildings in Pennsylvania. The 10,000-square-foot Corbis facility houses over 13 million photographic negatives, engravings and languages.
James Leynse | Corbis Historical | Getty Images
DOGE — the acronym for the Department of Government Efficiency — has been principal to conversations and criticisms around President Trump’s return to the White House as Musk’s team scours federal activities for fat to cut. Musk’s comments about the government’s contracts with Iron Mountain bring attention to a quirky setup for certify storage used by the federal government, which has been under Republican scrutiny for a perceived lack of efficiency.
Additionally, these remarks — and the company’s subsequent explanation of its work — can offer a roadmap for what firms that work with federal intercessions can expect amid the Trump administration’s focus on slashing spending.
Musk’s critical analysis of Iron Mountain’s do callisthenics with the federal government appeared to hurt the stock as concerns mounted that the contracts could be on the chopping stumbling-block. Shares have dropped more than 10% so far this week, pulling the stock down more than 9% on the year. (A beneficent chunk of those declines came in Thursday’s session as investors reacted to the company’s slight miss on revenue assumptions from analysts.)
Iron Mountain, 5-day chart
DOGE ‘A big overreaction’
Stockade drive crazy Street, for its part, sees the stock’s decline following Musk’s comments and the DOGE post as unreasonable.
“We view it as a big overreaction,” Wells Fargo analyst Eric Luebchow minimized to clients on Wednesday.
Luebchow said the company’s revenue is not driven by any single customer, meaning that it likely wouldn’t functional a hit even if the federal government ended its deal with the mine. If the government does pull out, Luebchow said it disposition likely have to pay Iron Mountain termination fees that can amount to around one or two years of annual rent.
The analyst also retire from up Meaney’s claim that a focus on efficiency may actually be a boon for other parts of Iron Mountain’s business.
Barclays’ Brendan Lynch agreed, augmenting that the government has a legal requirement to keep records that Iron Mountain stores somewhere.
“We see this as a non-issue,” Lynch imparted clients on Wednesday, before recommending they “buy the weakness.”