Even in technology markets, having a capable and innovative product is not always enough. You have to be able to sell it. And you have to earn a reputation for product reliability backed by responsive service.
These are some of the lessons Seattle-based Isilon Systems (ISLN) has learned well over the last couple of years.
Since its founding in 2001, Isilon had been a leader in building what are called scale-out network attached storage (NAS) systems. These data storage systems are designed for the huge files needed for audio and video and digital images. Until recently, Isilon was winning new business but losing money.
Although it didn't turn a profit until Q4 of last year, it has now reported three straight quarters in the black.
In this year's second quarter, Isilon's revenue grew by 56% vs. the year before, to $45.1 million. It reported non-GAAP earnings of 6 cents. Best of all, Isilon raised its revenue projection for all of 2010. It had previously guided to revenue growth in the mid-30% range. Now it has boosted that outlook to growth in the low- to mid-40% range.
Turnaround Under Way
A lot of things have gone right since Isilon had to deal with product and accounting issues, along with a string of money-losing quarters.
Analysts credit founder Sujal Patel, who took over as CEO in October 2007, with making key turnaround decisions. Isilon has improved product reliability and service and also extended its distribution reach by building strong relations with resellers.
"They had some issues with product maturity. Their products had some issues in how they would perform in certain environments," said Glenn Hanus, a Needham analyst. "They fixed the issue of product maturity and broadened their solutions portfolio. They've rebuilt their North American channel program, while improving service and building a strong senior management team."
"This was a company that had a good product," said Rajesh Ghai, an analyst at ThinkEquity. "But you need to have the distribution. Expansion of distribution over the last year has been a key" to Isilon's growth.
To build its strength among value-added resellers (VARs), Isilon dipped into the management ranks of NetApp (NTAP), a major — and more established — rival.
One key hire was Leonard Iventosch, who had built NetApp's strong channel distribution business. How was Isilon able to lure him away from its more established rival? It took more than just an overwhelming offer, says CFO Richter.
By NORM ALSTER, INVESTOR'S BUSINESS DAILY August 13, 2010
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