CommVault's One Step Closer

CommVault, whose IPO has been expected for months, has issued a prospectus, a signal that it could launch itself as a public company anytime now.

According to its SEC filing, CommVault wants to list its common stock on the Nasdaq at a price between $12.50 and $14.50 per share. The company's symbol will be CVLT.

CommVault intends to raise $74.7 million by selling 6,148,148 shares of common stock at about $13.50 per share. A concurrent private placement of securities, which includes the offer of 102,640 shares of common stock offered at the same price to existing stockholders (including, incidentally, ex-Brocade CEO Greg Reyes), will bring in about $1.4 million more. In addition, CommVault plans to borrow $15 million more under a new term loan and reach into its cash and cash equivalents for $10.7 million.

All these proceeds will be shoveled into paying $101.8 million on the company's preferred stock as it is converted in common stock.

The situation makes this IPO decidedly lacklustre, especially given that back in March, some expected CommVault to raise more. (See CommVault's Taking the Plunge.) Also, the prospectus cites a number of troubling risk factors, including:

At least one analyst thinks CommVault's public debut will be fairly uneventful. "I don't think it is going to be a hot IPO," says a buyside Wall Street analyst who asked not to be named. "They are in a segment that is not growing very fast. The backup market is not growing double digits. But on the other hand, they have good products and would be able to compete well. They need to expand into adjacent technologies if they really want to grow the company."

The good news, of course, is that CommVault believes it does have the goods to make a go of it, and it views its mission as far beyond that of a backup firm. Instead, its mission is to be a provider of "data management software and services," in competition with CA, EMC (which is also a shareholder), HP, IBM, and Symantec.

"We believe that the storage management software market will grow from $5.6 billion in 2004 to $9.4 billion in 2009," the filing states.To get its fair share, CommVault's plan is to extend its market reach geographically and by adding more channels and strategic relationships. As well, it plans to extend its service offerings, which accounted for nearly 43 percent of its revenues in fiscal 2006.

Table 1: CommVault Revenues 2002 - 2006

There's also evidence that CommVault's got what it takes to keep its growth going. Since 2002, its revenues have grown over 30 percent annually. Between 2005 and 2006, they grew 32 percent. The company claims to have 4,300 customers as of June 30, 2006. "A representative sample of well-known customers with a significant deployment of CommVault software includes Ace Hardware Corporation, Centex Homes, Clifford Chance LLP, Cozen OConnor, Halcrow Group Ltd., Newell Rubbermaid Inc., North Fork Bank, Ricoh Company, Ltd., the United Kingdom’s Department of International Development and Welch Foods Inc.," the filing states. "Each of these customers has at least 125 servers protected by our software."The bad and good news about this long-awaited IPO will take some time to play out. In the meantime, it's likely to cause a mixed reaction. But one thing is clear: The storage industry will be watching, and others with pending IPOs, like Riverbed, will be taking notes. (See Riverbed Hedges IPO Bet.)

— Mary Jander, Site Editor, Byte and Switch