by Andrea Orr
[Posted on October 10, 2007 - 4:59 PM]
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DiggCompellent Technologies Inc.'s market debut Wednesday recalled, in its soaring stock price if not its scale, this summer's initial public offering for virtualization technology maker VMware Inc.
Shares of Compellent, which has raised roughly $53 million in three rounds of venture capital funding, opened on the New York Stock Exchange at $13.50 per share, above the company's previously forecast range of $10 to $12, and rose as high as $28.30 before settling at $23.90, up 77%, in late-day trade.
Morgan Stanley was the lead underwriter in the 6 million share offering.
Like Palo Alto, Calif.-based VMware, Compellent of Eden Prairie, Minn., makes technology to help companies better manage increasingly complex networks, offering data storage products for small and midsize businesses.
Although the company does not describe its product as virtualization technology, it effectively performs the same function as this class of software.
Storage Area Networks, or SANs, are already widely used by the world's largest companies to store massive amounts of data in a way that can be easily sorted and retrieved. Compellent targets smaller businesses that face similar challenges storing growing quantities of data, but that can't afford most of the SAN technology on the market. The company has more than 600 customers around the world.
Specifically, Compellent's technology is based on a concept of "dynamic block architecture," which separates stored data into small blocks that can be individually processed. This approach allows companies to more easily add extra storage capacity without affecting their networks and offers ways to classify data in different "tiers," enabling more effective retrieval of the most commonly used corporate data.
Although Compellent's revenues are growing quickly ,the company is not yet profitable. Sales more than doubled in 2006 to $23.3 million, from $9.9 million the prior year, while its net loss grew to $13.1 million, from $9.2 million. That swift growth continued in the first six months of fiscal 2007, when Compellent's revenues totaled $20.9 million, compared with $9.5 million in the year-ago period. The company's loss for the six month period totaled $4.1 million, compared with $3.4 million in the year-ago period.
The company's venture backers include Nomura Group of Japan, Centennial Ventures of Denver, Crescendo Ventures of Palo Alto, Calif., El Dorado Ventures of Menlo Park, Calif., Cargill Ventures of Minnetonka, Minn., and Affinity Capital Management of Minneapolis.
Along with VMware, which went public at $29 per share and now trades above $105, Compellent joins a number of other successful high-tech IPOs of 2007, including China Digital TV Holding Co. Ltd. and Cavium Networks Inc.
Not all tech IPOs have done well, however, and analysts note that investors are betting less on a given sector than they are seeking promising companies. Airvana Inc., for instance, a maker of mobile broadband services, is now trading below the price at which it went public earlier this year.
Still, most analysts say that storage technology has some of the best long-term growth potential, given the challenge of storing growing amounts of data. Gartner Inc. last year estimated that demand for storage technology will grow by 69% a year through 2010.
