SAN vendor Compellent Technologies went public today after
pricing shares higher than expected and will use the cash to try
and compete with storage giants EMC Corp., Hewlett-Packard Co.
(HP), Hitachi Data Systems (HDS), IBM, and Network Appliance Inc.
(NetApp).
Compellent priced 6 million shares at $13.50 Tuesday night and
began trading today. The price was above the vendor's expected
range of $10 to $12. Compellent got a higher than expected price,
although it never had a profitable quarter, losing $6.8 million in
2006, $4.1 million in the first half of this year and a total of
$45.7 million since it started in 2002.
Other storage systems vendors on deck to go public will be
encouraged by the result. EqualLogic Inc., 3PARdata Inc. and
BlueArc Corp. have already filed forms for their initial public
offerings (IPO), and all have a track record of financial losses.
Compellent said it would use the net proceeds of approximately
$75.3 million for sales and marketing, research and development,
and working capital. According to its prospectus, Compellent's
strategy is to move beyond the small to medium-sized enterprise
market where it started and into large enterprises.
Besides giving it capital, going public can help a small company
compete with market leaders, because many companies will not store
mission critical business data on systems sold by startups.
Compellent's strategy is to compete with larger companies by
selling less expensive and easier to use storage systems. Unlike
its larger storage rivals that have separate platforms for entry
level, midrange and enterprise storage, Compellent has one platform
called Storage Center. It also has software, such as thin
provisioning and dynamic block architecture, that helps users
provision and add storage, which Compellent claims lets customers
scale easily when they want to grow. However, Storage Center's
scalability into larger enterprises may be limited by its support
for only two controllers.
Compellent supports Fibre Channel and iSCSI on the same system
and recently added network attached storage (NAS) support though
Microsoft Windows Storage Server 2003 R2.
Compellent is one of the companies major storage vendors refer
to as "ankle biters," and Compellent is even small for an ankle
biter. Of the four storage system vendors who have filed for IPOs,
Compellent had the least amount of revenue, despite more than 600
enterprise customers. Compellent had $23.3 million in revenue in
2006, compared to $68 million for EqualLogic, $66 million for 3PAR
and $42 million for BlueArc. Compellent disclosed revenue of $20.9
million for the first six months of 2007, far behind EqualLogic's
$53.2 million for the same period and even less than 3PAR's $23.1
million for the second quarter of 2007.
Compellent and the other system vendors looking to go public
will try to avoid the fate of clustered storage vendor Isilon
Systems Inc., which had a successful IPO last year despite failing
to register a profitable quarter and saw the price of its shares
plummet after two disappointing quarters. Isilon's stock price fell
from $13 at its IPO last December to $6 at close Tuesday.
Financial analyst Kaushik Roy of Pacific Growth Equities gives
Compellent little chance of long-term success. Roy says Compellent
doesn't have a strong emerging technology to build its products
around, such as data deduplication that has helped Data Domain find
success or iSCSI that EQualLogic builds its SANs on.
"I don't ever hear about Compellent in the marketplace," Roy
said. "I hear about EqualLogic, but not Compellent. Do they do
anything that nobody else does with their systems? They might do
all right in the seasonally strong fourth quarter, but reality will
set in during Q1 and Q2 next year."