Isilon's Losses Roll On

Clustering specialist Isilon's losses continued in its second quarter results last night, as the vendor wrestles with deal slippage and training its sales staff to sell its products. (See Isilon Announces Q2 Results.)

Isilon recorded a net loss of $3.6 million, or 6 cents a share, compared to a net loss of $5.5 million, or 89 cents per share, in the same quarter last year.

On a non-GAAP basis, Isilon's net loss was $2.6 million, or 4 cents per share, in line with analyst estimates, compared with $4.6 million and 10 cents in the year-ago quarter.

Isilon's revenues for the second quarter were $25.1 million, up 87 percent from $13.4 million in the second quarter of last year, although just below analyst estimates of $26.36 million.

In trading today, shares of Isilon plunged $5.08 (34.07%) to $9.83.The vendor, which went public in a blaze of publicity late last year, also lost money in its first quarter, prompting analysts to urge the company to seek out larger deals. (See Isilon: The Honeymoon's Over, Isilon Announces Results, The Slings & Arrows of IPOs, and Isilon Bleeds, Vows Profits.)

Speaking on a conference call last night, Isilon CEO Steve Goodman explained that sales backlog affected the vendor's second quarter performance. "Back-end loaded sales bookings have been an ongoing challenge for Isilon," he said. "The slippage of a small number of deals can have a material impact on our results."

Ramping up sales efforts is also proving a challenge for the firm. "We have found that the time required to ramp up new sales personnel is taking longer than anticipated," said Goodman, explaining that process has been complicated by the number of new products introduced by Isilon in the past 12 months. (See Isilon Adds Thin Provisioning, Clusters, Isilon Releases New Systems, The Clustered Storage Revolution - by Isilon Systems, Isilon Releases SyncIQ 2.0, Isilon Launches MigrationIQ, and Netia, Isilon Team Up.)

The exec described these problems as par for the course for a firm like Isilon, which went public last December, and has just over 300 employees. (See Double-Take, Isilon Go Public.) "These are classic growing pain issues that are very much within our control," he said, adding that more than half of Isilon's 53 new hires are salespeople.

Isilon will also look to improve its bookings cycle, avoiding a second quarter deal slippage, by growing its sales channel and customer base, according to the Isilon CEO.The vendor, which recently reached the 500 customer mark, racked up 91 new customers during the second quarter. "This was the best quarter in Isilon's history for customer wins," explained Goodman.

The Isilon CEO was also questioned by analysts about the competitive landscape -- a controversial topic, given previous sniping between Isilon and rival NetApp. (See Isilon's Counting on Clusters and NetApp Stokes Competitive Fires.) "During the second quarter, we did not see any fundamental change in the macro environment or the competitive landscape," said the exec.

Brett Goodwin, vice president of marketing and business development at Isilon, explained that there was no specific pricing pressure from NetApp and EMC during the quarter, despite recent saber-rattling in the clustered NAS space. "There wasn't really a change," he said. "As it relates to NetApp, it's still their traditional products that we run into - it's very rarely their GX [product]."

Isilon had previously predicted that it would reach profitability sometime in the second half of this year, but this timeframe has now been pushed back. "We expect to reach breakeven and profitability in 2008," said Isilon CFO Stu Fuhlendorf during last night's call.

— James Rogers, Senior Editor Byte and Switch