Isilon Bleeds, Vows Profits

Isilon continued to lose money in its first quarter as a public company, but executives say they expect the company to break even later this year. (See Isilon Reports Earnings.)

The clustered NAS vendor went public in December without ever having a profitable quarter. (See Double-Take, Isilon Go Public.) Isilon lost money again last quarter, but it increased sales for the quarter and the full year while decreasing losses.

In its earnings report Wednesday evening, Isilon reported a loss of $3.3 million on revenue of $20.7 million last quarter, compared to a loss of $4.1 million on revenue of $8.7 million in last year's quarter.

For the full year, Isilon lost $16.4 million on $62.3 million in revenue, compared to a loss of $19.1 million on $21.1 million in revenue in 2005.

But CEO Steve Goldman and CFO Stu Fuhlendorf painted a bright picture based on strong momentum this year. They also see hope in a significant rise in digital content and the emerging popularity of clustered systems.Fuhlendorf forecasts revenue this quarter in the range of $21 million to $23 million, which would more than double Isilon's first quarter revenue from 2006. He says he expects 2007 revenue in the range of $115 million to $125 million, and the high end of that range would double 2006 revenue.

If Isilon hits those forecasts, "We would expect to reach break even and profitability in the second half of 2007," Fuhlendorf said on a call with analysts.

Goldman said Isilon will deliver new storage platforms this year while improving its clustered operating system software and adding three software applications. Isilon has already launched one new platform, the Isilon IQ 200 for department and SMB customers. (See Isilon Moves Down, Adaptec Moves Up.)

In a research note today, Goldman Sachs analyst Laura Congiliaro wrote that Isilon should get a boost from its growing software business, but it must land larger deals to reach its goals. "Isilons first quarterly report as a public company, while not completely over the top, was still strong," is how Conigliaro summed up Isilon's results.

Investors weren't impressed, as the price of Isilon's shares dropped 6.2 percent or $1.56 to $23.75 in after-market trading Wednesday. Still, the shares remain far above the $13 price when Isilon went public December 15.Isilon claimed 88 new customers last quarter, nearly twice as many as it nailed down in the fourth quarter of 2005. The company finished the year with 371 customers, according to its report. Isilon also said most of its revenue for last quarter and last year came from new orders from existing customers.

— Dave Raffo, News Editor, Byte and Switch