Double-Take Seeks IPO

Double-Take has become the third storage company to file for an IPO this year. The replication software company formerly known as NSI Software revealed its intentions to go public Thursday night. (See Double-Take Files For IPO.)

Earlier this year, backup software vendor CommVault and WAFS startup Riverbed filed for an IPO with the SEC. (See Riverbed Makes It Official and CommVault's Taking the Plunge.)

While CommVault's March filing was anticipated for years and there were rumblings about Riverbed for months before it filed in April, Double-Take has rarely been mentioned by industry insiders as an immediate IPO candidate.

But Double-Take executives say they've increased revenue from $7.6 million in 2001 to nearly $41 million in four years. They point to IDC's forecast that the Windows replication market that Double-Take addresses will increase from $310 million in 2005 to $940 million in 2010. Double-Take is also looking to go after the SMB market, while its competitors (CA, EMC, Neverfail, Symantec, and the like) are mainly focused on the larger enterprise accounts.

"You're typically not going to see them go toe-to-toe with EMC in the large enterprise," says analyst Greg Schulz of StorageIO Group. "They're more of a midmarket play, or maybe for branches of large enterprises."Double-Take did take steps in recent months to smooth its path to the public markets. In May, Double-Take expanded its business by acquiring French-based Sunbelt System Software. (See Double-Take Buys Distributor.) And it changed its name in March because Double-Take -- the name of NSI's product family -- had greater brand recognition than NSI Software. (See NSI Becomes Double-Take.)

Does Double-Take have what it takes? According to its S-1 filing, more than 10,000 companies use Double-Take's replication software, including more than half of the Fortune 500 firms.

Good stuff, but Double-Take recorded $40.7 million in revenue and lost $3.8 million last year, and the company had $10.7 million in revenue with a $373,000 profit in the quarter that ended in March. The company lost $3.8 million in 2005 and lost $8 million in 2004. Sunbelt, acquired in a stock deal worth from $10 million to $12 million, had $16.5 million in revenue last year and $4.6 million in the first quarter of 2006.

All this doesn't exactly make Double-Take a powerhouse, especially for a company that competes against the likes of EMC.

The surprise, according to Schulz, is that Double-Take is going the IPO route instead of being acquired. "I would have pegged them being more of an acquisition candidate," he says. There have been several acquisitions of replication vendors lately. EMC acquired Kashya for $153 million in May and CA picked up XOsoft last month. (See EMC Coughs Up for Kashya and Don't Call Him a Troll.)In its SEC filing, Double-Take said it plans to raise up to $86.3 million in the IPO. The company received more than $60 million in three rounds of venture funding. (See ABS VC NSI CEO.)

Filing and actually going public are two different things, however. This week, Internet firm Go Daddy and bar code technology company Alien Technology pulled planned IPOs. Last year, storage systems company Engenio and blade server startup Egenera did the same. (See Engenio Gets Cold Feet.)

Still, other storage vendors are expected to follow with IPO plans this year. Industry insiders expect InfiniBand chip vendor Mellanox to file, and clustered file system vendor Isilon is often mentioned as a candidate. (See Will Mellanox Make IPO Move?.)

Table 1: Storage IPO Candidates

Dave Raffo, News Editor, Byte and Switch