Isilon's Revenues Up, Losses Widen

Isilon beat analyst revenue estimates with its first quarter results last night, but saw its losses widen as the vendor struggles to draw a line under its recent financial hassles.

The clustering specialist posted first quarter revenues of $24.1 million, up from $17.8 million in the same period last year, comfortably beating analyst estimates of $23.3 million.

Isilons losses nonetheless widened to 16 cents and $10.1 million during the same period, compared to a net loss of 11 cents and $6.9 million in the year-ago quarter, although the vendor’s results took a $2.8 million, 4-cent-per-share hit related to the recent review into its finances.

On a non-GAAP basis, Isilon’s losses were 14 cents per share and $8.8 million, compared to 11 cents and $6.4 million in the first quarter of 2007. Analysts had estimated a loss of 12 cents per share.

”I am encouraged by the first quarter results, despite the challenges of the last few quarters,” said Sujal Patel, the Isilon CEO, during a conference call last night, clearly eager to move on from the accounting and execution problems that had dogged the company since its IPO.The exec, who completed his first full quarter since returning as Isilon CEO last year, instead highlighted strong repeat business from existing customers, which accounted for 75 percent of revenues, and a growing number of large deals.

“Several deals in excess of $1 million came in from Fortune 500 companies,” he said, adding that the vendor’s typical deal size is in the six-digit range. “I am encouraged by Isilon’s long-term growth prospects -- although it’s still early days, this is an important step on our path to profitability.”

The CEO also promised that Isilon will continue to refresh its clustering hardware throughout 2008, a strategy that began with the launch of the high-end X 12000 in January.

“We’re just getting warmed up,” he said, adding that more than 100 customers have already deployed the X 12000. “You can expect to see major new products coming from Isilon later in 2008.”

Despite the upbeat tone of last night’s conference call, Patel admitted there is still a hangover from the recent audit committee investigation into Isilon’s finances, which was completed by the end of the first quarter.”We did lose some deals when we tried to acquire new customers,” he said, adding that it could take some time for investigation’s “business headwinds” to disappear.

The exec was also quizzed by analysts on the competitive landscape at a time when many storage vendors are struggling to combat a spending slowdown.

“We didn’t see any particular impact with regard to the macro-economic environment,” he said, adding that up until now, he has not noticed any new pricing activity from rivals such as NetApp and EMC.

Isilon execs on last night’s call refused to give guidance for the rest of this year and gave no indication of when the company is likely to reach profitability.

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