Isilon Comes up for Air

Isilon, which has been dogged by accounting problems since it went public in late 2006, finally announced its 2007 results last night, after a major overhaul of its reporting procedures.

I am very pleased to report that the Audit Committee has finished its independent review, and we are now current with our financial reports,” said the Isilon CEO Sujal Patel, during a conference call last night.

The vendor’s 2007 revenues were $89 million, up from $61.2 million in the prior year, but below analyst estimates of $95.04 million.

Revenue for the third and fourth quarters was $21.6 million and $26.6 million, respectively, with the fourth-quarter figure beating analyst estimates of $23.88 million.

Isilon’s net loss for fiscal 2007 was $26.9 million, or 44 cents per share, compared to a net loss of $26 million, or $3.09 per share, in the prior year.On a non-GAAP basis, the vendor’s net loss was $23 million, or 37 cents per share, compared to a net loss of $16.9 million, or 34 cents per share, in 2006.

For the third and fourth quarters, Isilon’s non-GAAP net losses were, respectively, $5.9 million, or 10 cents per share, and $6.6 million, or 11 cents per share. Analysts had predicted a fourth-quarter net loss of 9 cents per share.

”It has been a difficult period for all of our stakeholders,” explained Patel during last night’s call, admitting that he was “personally frustrated” by the events of 2007.

The vendor, which went public in a blaze of publicity in late 2006, subsequently suffered weak financials , executive upheaval, and shareholder litigation.

Isilon has been keeping a low profile while its gets its house in order, and an audit committee eventually identified errors in the company’s previous recognition of revenue.To correct these problems, Isilon adjusted $7 million of the $67.4 million of revenue previously recorded from the fourth quarter of 2006 through the second quarter of 2007.

With so much uncertainty surrounding the company, Patel admitted that the audit affected sales. “It had an impact on our ability on our ability to close sales in Q4,” he said. “I believe that the impact was most pronounced with new customers.”

The exec nonetheless struck an upbeat note during last night’s call, explaining that he has restructured the company’s sales team and services organization, in addition to strengthening the company’s internal controls around revenue recognition.

“I continue to believe in Isilon’s long-term capabilities and long-term ability to capture a significant part of the storage market,” he said, adding that the vendor plans to increase its headcount from 321 people this year.

Although unwilling to divulge Isilon’s product roadmap, Patel promised significant R&D investment on the vendor’s recently announced X-Series clustered storage system .“The X-Series is a platform that we expect is going to replace the I-Series,” he said, but would not reveal when the I-Series will be phased out.

The Isilon founder, who returned to the company’s helm last October, even refused to be swayed by the current economic climate. “We certainly believe that we will be able to grow through whatever challenges are put before us,” he said, in response to an analyst’s question.

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