Even Isilon Is Suffering

Isilon Systems, Inc. announced preliminary results for the quarter ended March 31, 2009. Based on preliminary estimates, total revenue is expected to be in the range of $26.5 million to $27.0 million, up approximately 10% to 12% from the same period one year ago and down approximately 15% to 17% sequentially from the fourth quarter of 2008.

The first quarter results will include a non-cash inventory write down of approximately $3.8 million or ($0.06) per share. This action is the result of softening economic conditions in the first quarter and lower forecasted demand for existing products due to anticipated migration to a new suite of products announced by Isilon in March 2009.

Based on preliminary revenue estimates, Isilon expects GAAP net loss per share to be in the range of ($0.16) to ($0.17) and non-GAAP net loss per share to be in the range of ($0.14) to ($0.15). Both GAAP and non-GAAP estimates include ($0.06) of loss per share associated with the non-cash inventory write down. As of March 31, 2009, cash, cash equivalents, and marketable securities totaled $76.3 million, compared with $77.8 million as of December 31, 2008.

Sujal Patel, Isilon chief executive officer, said the revenue shortfall resulted from a significant reduction in Q1 spending across a broad range of IT market sectors. "It’s clear that persistent global economic weakness and uncertainty has led to contraction in many of our customers’ IT budgets," said Patel. "And although the fundamental strength of Isilon’s value proposition continues to resonate with customers, softening economic conditions during the quarter required that we take steps to maintain the company’s path towards profitability and to ensure that we’re in a position to pursue strategic growth initiatives. In light of these conditions, we have implemented a workforce reduction that will impact approximately 10% of our global employee base and result in cost savings of approximately $4.0 million per year. While this was a difficult decision, I’m confident that this action will enable us to emerge from this downturn in a significantly stronger competitive position." The workforce reduction will create a one-time operational expense of approximately $850,000 in the second quarter of 2009.