Isilon Moves Closer to IPO

While most of the storage world was still digesting its turkey, clustered storage startup Isilon set a target range for the price of shares for its pending IPO and will likely be one of two storage firms to go public before the end of the year. (See Isilon Reveals IPO Plans.)

In an SEC document filed Friday, Isilon disclosed its expectations to sell 8.35 million shares priced between $8.50 and $9.50 per share. Isilon did not set a date for pricing shares, but companies usually complete their IPO within three weeks of setting their price range.

Replication software vendor Double-Take is also expected to go public by the end of the year. (See Double-Take Seeks IPO.) Double-Take set its planned IPO terms earlier in the month, saying it hoped to sell up to 7.5 million shares for between $9 and $11.

That would make at least four storage IPOs in 2006. WAFS startup Riverbed and backup software vendor CommVault went public one day apart in late September. (See Riverbed Comes Out at $9.75 and CommVault Swims in Public Pool.) InfiniBand chip vendor Mellanox has also revealed plans to go public, but has yet to set a share range. (See Mellanox Ready for IPO .)

Isilon's latest filing revealed it had a strong third quarter in revenue but continues to lose money. Isilon reported $17.8 million in revenue for the quarter and lost $5 million. For the first nine months of 2006, its revenue was $41.6 million -- nearly double its 2005 total of $21 million and more than triple its $12.4 million revenue from the first nine months of last year. Still, Isilon lost $15 million so far this year and has a $64.7 million accumulated deficit.As the only storage systems vendor with plans to go public this year, Isilon's IPO price will be closely watched by a bunch of other private vendors. 3PAR, BlueArc, Compellent, EqualLogic, and LeftHand Networks are systems vendors who have hinted they will consider IPOs in 2007 if market conditions are favorable.

The market has reacted positively to recent storage IPOs. Riverbed exceeded its target price and CommVault hit the high end of its range. Share prices have since risen for both. Riverbed's IPO price was $9.75 and it opened today at $33.47. CommVault opened today at $19.18, up from its $14.50 IPO price.

At least one Wall Street analyst says Isilon could be a tougher sell for investors, mainly because it needs to compete with the likes of EMC and Network Appliance to achieve significant growth in the clustered storage/NAS market. (See Isilon Snaps Its Clusters.)

"They think they can grow the business rapidly if they raise money," the analyst says of Isilon. "But the problem is that there are too many players in the midrange storage systems and competition is cut-throat."

Dave Raffo, News Editor, Byte and Switch