Isilon Posts First Profit, Gives Props to Its People and Partners

Ding, ding. What’s that sound? It’s Isilon Systems ringing the NASDAQ market closing bell at 4 pm ET this afternoon.

The Seattle data storage company (NASDAQ: ISLN) is celebrating its first quarterly profit in its nine-year history. I caught up with CEO and founder Sujal Patel by phone from New York this morning after the company’s earnings call.

Isilon’s revenue for the fourth quarter of 2009 was $37.5 million, up 23 percent from $30.5 million in the previous quarter and up 18 percent from $31.8 million in the fourth quarter of 2008. That translated into a small quarterly profit of $140,000, as compared with a net loss of $4.9 million in the third quarter of 2009. The company’s revenue for all of 2009 was $123.9 million, up 8 percent from $114.4 million in 2008.

“It is a small profit, but it’s an important milestone for the company,” Patel says. “It provides validation for the business model.” That model includes an increasingly successful global channel strategy that targets sales in the $500,000 to $1 million range, he says.

The foundation for Isilon’s comeback was laid in the past two years, as I detailed in October. The company, which had come crashing back to earth after a high-flying IPO in late 2006, had a bit of a restart the following year, when Patel was renamed CEO. (He had previously been chief executive for Isilon’s first three years). Patel led the charge to reinvest in R&D, established a more cost-effective product distribution strategy, and brought in a more experienced senior management team.

But its technology has always been the company’s main advantage. Isilon’s network-attached storage system helps companies deal with huge amounts of unstructured data in a relatively cheap and easy way. (It also has products in virtualization, archiving, and cluster computing.) The company’s big customers include Sony, XM Radio, LexisNexis, Facebook, MySpace, Kodak, Adobe, and major movie studios and TV networks. But Isilon has also expanded a lot from its original focus on media and entertainment companies. Patel says in the last quarter, media made up only 32 percent of its business, while other sectors like online services (11 percent), government (10 percent), and biomedical research (16 percent) have become quite significant.

I asked whether we should expect to see Isilon go for higher profits this year. “This will be a growth year for us, and we will expand our operating margin,” Patel says. “We are a growth company, and we may make a tradeoff for further profitability and go for further growth.”

He says the big challenge for Isilon is that “there are far more opportunities out there” than it can successfully reach for. “We’re focused on building a scalable go-to-market strategy and a scalable partner model,” he says. He adds that he feels “very confident” in the company’s level of innovation, product roadmap, customer strategy, and especially its culture of customer focus and drive.

Now Isilon is looking to settle into its role as one of the few successful mid-size public companies in the Seattle tech community. It currently has about 360 employees and is actively hiring, with “a lot of jobs open,” Patel says.

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