Shareholders Sue Isilon

Cohen, Milstein, Hausfeld & Toll, P.L.L.C. announces class action lawsuit against Isilon Systems Inc.

December 15, 2007

3 Min Read
Network Computing logo

WASHINGTON -- The law firm Cohen, Milstein, Hausfeld & Toll, P.L.L.C. has filed a lawsuit in the United States District Court for the Western District of Washington on behalf of purchasers of Isilon Systems, Inc. (Isilon”) (NASDAQ:ISLN) common stock during the period between December 14, 2006 and October 3, 2007 (the “Class Period”), and on behalf of all persons or entities who acquired the common stock of Isilon pursuant and/or traceable to the Company’s false and misleading Registration Statement and Prospectus (collectively, the “Registration Statement”) issued in connection with its December 14, 2006 initial public offering (“IPO”).

The complaint charges Isilon and certain of its officers and directors with violations of the Securities Exchange Act of 1934 and the Securities Act of 1933. Isilon is a provider of clustered storage systems for digital content. Specifically, the complaint alleges that on December 14, 2006, Isilon completed its IPO of 8.9 million shares at $13.00 per share (including 590,717 shares sold as part of an over-allotment) for net proceeds of approximately $105.7 million, pursuant to the Registration Statement. The complaint further contends that the Registration Statement failed to disclose the truth about Isilon’s business operations, finances, business metrics, and future business and financial prospects. The complaint alleges that due to defendants’ positive, but false statements in the Registration Statement, Isilon’s stock immediately soared – its shares closing up over 77% on its first day of trading in the best debut of a technology IPO in more than six years. Isilon’s stock continued to climb, closing as high as $27.37 per share on December 29, 2006.

Then on October 3, 2007, after the market closed, Isilon announced disappointing preliminary results for its third quarter 2007. On this news, Isilon’s stock price collapsed from $7 per share on October 3, 2007 to close at $5.66 per share on October 4, 2007 – a decline of over 19% on volume of 3 million shares (over five times the average previous trading volume for the stock). This closing price represented an all-time trading low for Isilon.

According to the complaint, the true facts, which were omitted from the Registration Statement or were known by certain of the defendants but concealed from the investing public during the Class Period, were as follows: (a) the Company was not on track, nor would it be able, to reach profitability by the second half of 2007; (b) the Company’s clustered storage solutions did not provide a competitively differentiated business model which would enable the Company to effectively compete against the dominant players in the traditional storage market; (c) the Company’s past results were not indicative of its future operations, including the amount of revenue it derived from its large customers, such as the Eastman Kodak Company (“Kodak”), the Company’s ability to continue to sustain quarter over quarter revenue growth, and its ability to manage its cost structure; and (d) despite being able to grow and significantly diversify its overall customer base, the Company would remain highly dependent upon Kodak. Given that the clustered network attached storage market in which the Company operates is a highly competitive, high-growth emerging market, the Company had no reasonable basis to make projections about its 2007 results.

Isilon Systems Inc.

Stay informed! Sign up to get expert advice and insight delivered direct to your inbox

You May Also Like

More Insights