Clustered storage vendor Isilon Systems Inc., suffering from
growing pains in its transition to a public company, changed CEOs
in a boardroom shakeup.
Founder Sujal Patel is moving from chief technology officer
(CTO) to CEO, replacing Steve Goldman, who served as Isilon's CEO
since 2003. Chief financial officer (CFO) Stu Fuhlendorf is also
out, with controller Bill Richter taking over as interim CFO until
a replacement is hired.
Patel said he is confident that Isilon can overcome its
disappointing sales since its initial public offering (IPO) last
December.
"When I look at our market-leading products, expanding roster of
global customers and partners, and talented team of people, I have
never been more confident and passionate about the future of
Isilon," Patel said in a prepared statement.
Isilon had been held up as an example of what can happen if a
company turns public too early. Isilon had a successful IPO last
December despite a history of losses, but its stock price has
fallen drastically as the losses continued while the small vendor
tried to take on storage giants Network Appliance Inc. (NetApp) and
EMC Corp. Isilon's stock price, $23.10 on its first day of trading,
had fallen to $5.98 at yesterday's close.
Last month, Isilon warned that it would miss its earnings
forecast for the third quarter, despite Goldman's previous claim
that it had its largest sales pipeline ever heading into the
period. Financial analysts grilled Goldman during a conference call
discussing the miss. He blamed the disappointing results on poor
sales in Europe and the fact that its largest customer, Eastman
Kodak Co., did not buy any storage from Isilon last quarter
following a $4 million purchase the previous quarter. Goldman said
he would have more details when Isilon officially reports its
earnings. That was scheduled for tomorrow, but today, Isilon said
it is delaying its report.
By naming Patel CEO, Isilon's board is apparently sending a
message that it was unhappy with Goldman and is confident in the
company's technology. Although Patel has never run a company
before, he was the driving force behind Isilon's product platform
and board chairman William Ruckelshaus referred to him as
"visionary" in the release announcing the CEO change.
"We've had execution problems, but the fact is we still have
about a two-year lead in [clustered storage] technology over our
competitors," said Isilon marketing vice president Brett Goodwin
last week before the changes were made.
At least one financial analyst did not see the CEO change as
positive and speculated that it might lead to a sale of Isilon.
"This management upheaval only adds to our concerns surrounding
the company's execution-related issues over the past several
quarters," Aaron Rakers of Wachovia Corp. wrote today in a note to
investors. "This leaves us to wonder whether Isilon's next approach
is to entertain possible alternatives, such as an acquisition or
strategic partnership."