Storage: Home of the Brave

The rules that guide when a company floats an IPO have clearly changed

September 6, 2006

2 Min Read
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Gas prices at a four-month low. Housing prices down sharply in the second quarter. GDP cooking along at a modest 2.9 percent, while recession still looms as a real possibility.

As we sift through these economic indicators, like so many tea leaves, we're left wondering why on earth storage companies see this as a good time to float their shares in an IPO.

Isilon sneaked out a note about its plan before the holiday weekend. (See Isilon Reveals IPO Plans.) And CommVault's going to take the plunge as well, with shares that are expected to be priced somewhere between $12.50 and $14.50. (See CommVault's One Step Closer.)

Vendor bravery or VC greed? It's a tough call. While storage is one of the "must have" technology stocks these days, that's no guarantee of success for any startup.

But forget external market conditions for a minute. Even if all the leading indicators showed clear blue skies, you might wonder why some storage firms are proceeding with IPOs at all. As Dave Raffo points out in today's coverage, IPO candidates Double-Take, Isilon, and Riverbed haven't turned a penny of profit. Basically, they're ignoring the time-tested model whereby companies establish a few quarters of profitability before floating their shares.Or is the IPO just a bit of window dressing to make these startups look like better acquisition candidates? Seems like an expensive and risky way to put yourself up for sale.

Who was it that said "Hope is not a strategy"? Maybe someone at LSI Logic. (See Engenio Gets Cold Feet.) No matter. These days, it's brave to plan an IPO in any industry, even if the rules for when to float a company's stock have been rewritten.

-- Terry Sweeney, Editor in Chief, Byte and Switch

  • CommVault Systems Inc.

  • Double-Take Software Inc. (Nasdaq: DBTK)

  • Engenio Information Technologies Inc.

  • Isilon Systems Inc. (Nasdaq: ISLN)

  • LSI Logic Corp. (NYSE: LSI)

  • Riverbed Technology Inc.

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