Feeds

Has Compellent caught a cold?

Second quarter of depressed earnings likely

Maximizing your infrastructure through virtualization

Compellent is ending seventeen quarters of revenue growth with an expected $4.3m to $4.8m sequential revenue decrease for its first 2010 quarter.

CEO Phil Soran has issued reduced guidance for the quarter, saying revenues are expected to be between $31.5m and $32m, significantly lower than the forecast $35m to $37m.

Last quarter Compellent reported another quarter of revenue growth but missed its earnings forecast, something Wall Street disliked a lot. The shares plunged from the January 2010 high of $24.40 to a low of $15.40 in February, a 37 per cent fall. They then recovered to the $17 - $18 range but have just been pummelled again, dropping to $13.30 on the revenue guidance news.

What is going on here? With a $3.5m to $6.5m revenue shortfall it is painfully obvious that net income is going to be severely affected. In fact, considering that net income last quarter was $1.3m, and that was lower than forecast, then it may well be that Compellent will report a loss of $3m, and this when the USA is climbing out of a recession, NetApp reporting booming revenues and Nexsan having an IPO. Why are things looking like the recession never ended in Compellent's markets?

CEO Phil Soran said: "This sequential decrease in revenue is mainly due to seasonality that had more of an impact on the Company this quarter than it has previously, changes made to optimise our sales organization, and delays in larger revenue orders."

Reverse the sales organisation changes at once sir, this is optimisation Wall St. will not like.

Compellent has gained 130 new customers this quarter, more than the 98 in the first 2008 quarter. Its quarterly revenues are up on the year-ago quarter's $28.1m, out of which it made a $1m profit. Its gross margin is up. Its cash and investments are up. Its deferred revenues are up. Forbes magazine has just lauded Compellent as its third fastest growing US technology company, pipping 3PAR by one spot.

Everything is rosy, just dandy, blooming marvellous, but for one thing: existing customers held back on large purchases and an anticipated slowing down of revenue growth in the transition from 2009 to 2010 didn't happen as it had in previous years but turned into a revenue decrease. Oops, major oops in fact.

One obvious conclusion is that sales forecasting needs tightening up. Another could be that Compellent's technology advantages are being eroded and need shoring up. Competitors such as EMC are adding automated data movement across storage tiers to their disk arrays and thus lessening the gap between themselves and Compellent. Wall St. will be looking for Compellent to extract sales organisation and technology rabbits from its hat next quarter and get back on an earnings and revenue growth track. ®

The Power of One eBook: Top reasons to choose HP BladeSystem

More from The Register

next story
Sysadmin Day 2014: Quick, there's still time to get the beers in
He walked over the broken glass, killed the thugs... and er... reconnected the cables*
Auntie remains MYSTIFIED by that weekend BBC iPlayer and website outage
Still doing 'forensics' on the caching layer – Beeb digi wonk
SHOCK and AWS: The fall of Amazon's deflationary cloud
Just as Jeff Bezos did to books and CDs, Amazon's rivals are now doing to it
BlackBerry: Toss the server, mate... BES is in the CLOUD now
BlackBerry Enterprise Services takes aim at SMEs - but there's a catch
The triumph of VVOL: Everyone's jumping into bed with VMware
'Bandwagon'? Yes, we're on it and so what, say big dogs
Carbon tax repeal won't see data centre operators cut prices
Rackspace says electricity isn't a major cost, Equinix promises 'no levy'
Disaster Recovery upstart joins DR 'as a service' gang
Quorum joins the aaS crowd with DRaaS offering
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Securing Web Applications Made Simple and Scalable
Learn how automated security testing can provide a simple and scalable way to protect your web applications.