Prospectus Summary
This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and the related notes and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in each case included elsewhere in this prospectus.
COMPELLENT TECHNOLOGIES, INC.
Overview
We are a leading provider of enterprise-class network storage solutions that are highly scalable, feature rich and designed to be easy to use and cost effective. Our Storage Center is a Storage Area Network, or SAN, that enables users to intelligently store, recover and manage large amounts of data by combining our sophisticated software with standards-based hardware into a single integrated solution. Storage Center has been purchased by more than 550 enterprises worldwide, across a wide variety of industries including education, financial services, government, healthcare, insurance, legal, media, retail, technology and transportation. We believe that Storage Center is the most comprehensive enterprise-class network storage solution available today, providing increased functionality and lower total cost of ownership when compared to traditional storage systems.
We believe our business model is highly differentiated and provides us with several competitive advantages. We sell our products through an all-channel assisted sales model enabling us to quickly scale and cost effectively increase sales. We also employ a virtual manufacturing strategy, which significantly reduces inventory and eliminates the need for in-house or outsourced manufacturing. We believe these combined strategies create a highly efficient and scalable business model that enables us to reduce operating costs and improve capital efficiency.
Our management team has decades of storage industry experience and has founded and run other successful storage companies. We have achieved broad industry recognition for our innovative storage solution. In 2006, InfoWorld selected Storage Center as “Best SAN” and Computer Reseller News selected Compellent as “#1 Storage Standout.” Gartner, a third-party industry analyst, recently reported Compellent to be the fastest growing disk storage company in the world in 2006. We have achieved strong growth to date, with revenues increasing from $9.9 million in 2005 to $23.3 million in 2006. We grew revenues from $3.3 million in the first quarter of 2006 to $8.9 million in the first quarter of 2007.
Our Industry
Our industry is characterized by a number of evolving trends, two of which are particularly relevant to our business.
Growing Need for Data Storage and Management
Enterprises are storing a growing amount of data, which requires greater storage capacity and results in increased system acquisition and management costs. According to Gartner, between 2005 and 2010, storage demand, as measured by terabyte capacity, is expected to increase by 69% annually. This data growth is taxing enterprises in critical areas such as staffing, training, data and disaster recovery, capacity management, information lifecycle management, power and cooling, and regulatory compliance.
According to IDC, the total market for SAN storage system hardware in 2006 was $10.7 billion, the total market for all storage software in 2006 was $9.8 billion and these markets are expected to grow at a 10.1% and 11.2% compounded annual growth rate, respectively, through 2011. We believe that small to medium size enterprises, or SMEs, are the fastest growing segment of the storage industry. A Gartner U.S. SME survey in 2006 showed that 32% of the respondents’ total information technology budgets were allocated to storage. We believe that the major storage providers have yet to address effectively the needs of the SME market and that our differentiated product and business model will allow us to better address this market.
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1Storage hardware expense is a small percentage of the total cost incurred to manage storage. These additional costs are generally driven by the limitations of traditional storage systems, which we believe are unable to efficiently deal with the challenges of data proliferation and management.
Increasingly Complex Challenges for Storage Users
Network storage architectures, such as SAN, have opened up the possibility for multiple operating environments to share capacity, performance and management in a more cost effective manner. However, many traditional network storage systems rely on proprietary hardware designs that not only increase expense, but also create an environment that is not easily adaptable to growth or other technologies. Traditional networked storage systems have also historically been difficult to learn, manage and integrate. Consequently, storage users continue to face significant challenges in meeting their increasing data requirements, including system complexity, inefficient management of inactive data, the need for comprehensive data and disaster recovery capabilities, inefficient storage utilization, less effective server virtualization and the risk of technology obsolescence.
The Compellent Solution
Innovative Architecture
The foundation of our solution is our Dynamic Block Architecture. A block is the lowest level of data granularity within any storage system. Dynamic Block Architecture allows us to record and track specific information about each block of data and provides intelligence on how that block is being used.
Building on our Dynamic Block Architecture, Compellent’s Storage Center software applications intelligently improve data movement and access at the block-level, increasing utilization, automating tiered storage, simplifying replication and speeding data and disaster recovery. We deliver Storage Center in a modular fashion so that end users can optimize the solution to meet their changing requirements.
Storage Center’s standards-based hardware platform enables flexibility and scalability with a no single point of failure architecture to minimize downtime. Storage Center’s architecture is designed to enable rapid deployment and expansion of storage without disruption of service. Furthermore, Compellent’s standards-based approach enables enterprises to be technology neutral, adopting new hardware technologies to adapt to evolving business requirements.
Significant Benefits to Storage Users
We believe Storage Center is a highly sophisticated and easy-to-use system that addresses the challenges faced by today’s storage users in one integrated solution.
Simplified Storage Management. We designed Storage Center to simplify and reduce the complexity associated with traditional storage systems. Our intuitive interface and integrated architecture enables even less sophisticated users to accomplish advanced storage tasks in minutes, by automating manual, time-consuming storage management tasks. This enables enterprises to more efficiently deploy their information technology resources.
Automated, Cost-Effective Management of Inactive Data. Our solution allows for automatic movement of blocks of data between tiers of high cost, high performance storage and tiers of lower cost storage, based on access frequency and other parameters. Traditional storage solutions do not gather information about blocks of data that would enable them to implement automated tiered storage with this level of functionality. With over 80% of customers’ data classified as inactive, we believe our automated tiered storage can result in significant cost savings for our end users.
Rapid Data Recovery. Using Storage Center, storage administrators can typically recover and allocate any size volume to a server in seconds, without the constraints of traditional recovery methodologies and with more precision. Using a simple point-and-click interface, administrators can quickly recover data in the event of disruption.
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1Affordable and Reliable Disaster Recovery. We designed our thin replication technology to consume less disk space and require less bandwidth and management oversight than traditional storage solutions. Enterprises using Storage Center can easily set-up a remote replication solution, typically in just a few minutes. The simplicity and robustness of our disaster recovery solution makes it attractive for both enterprises with limited technical capabilities and large, sophisticated enterprises. One of the most important differentiators of our solution is our ability to test disaster recovery systems seamlessly and without disruption of service. We believe Compellent offers the only commercially available SAN solution that provides this level of capability.
Efficient Storage Utilization. Storage Center’s thin-provisioning technology only consumes physical disk capacity when data is written by an application or user, as opposed to allocating physical capacity to applications and end users upfront. We believe this capability significantly reduces end users’ total cost of ownership by enabling them to defer or avoid additional spending on storage until the capacity is truly required. Storage Center also enables power and cooling savings, improved performance, data availability and storage utilization, while automating many of the tasks associated with capacity planning.
Enabling the Virtualized Data Center. Compellent’s advanced storage virtualization technology using Dynamic Block Architecture enables end users to create an efficient shared storage pool. Storage Center dynamically distributes workloads across the entire pool, automatically improving utilization of storage resources for all applications. The result is a significant improvement in storage utilization, performance, flexibility and cost for end users. When combined with the growing adoption of server virtualization by enterprises of all sizes, we believe our storage virtualization leads to a more cost effective, flexible and high performing virtual data center.
Reducing Technology Risk. Compellent’s hardware architecture is designed to mitigate end user technology risk. Storage Center enables end users to simultaneously utilize any combination of our various standards-based hardware options and/or connectivity platforms and easily adopt new technologies as they become available. As our end users’ storage needs expand, Storage Center’s modular design enables end users to seamlessly add the appropriate technology without discarding current hardware and software investments.
Our Strategy
Our goal is to be the leading provider of feature-rich, easy to use and cost effective storage solutions for enterprises of all sizes. Key elements of our strategy include:
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1Risks Associated with Our Business
Our business is subject to numerous risks, as discussed more fully in the section entitled “Risk Factors” immediately following this prospectus summary. We have a limited operating history, which impedes our ability to forecast quarterly and annual revenues accurately. We have not been profitable in any quarter since inception and we had an accumulated deficit of $43.7 million as of March 31, 2007. We may never achieve profitability. Most of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical, sales, marketing and other resources than we have. Our future operating results depend on the future growth in the storage market and our ability to establish and maintain successful relationships with channel partners and end users for Storage Center.
callerid=999 iwidth=455 length=84Corporate Information
We were incorporated in Minnesota in March 2002 and reincorporated in Delaware in June 2002. The address of our principal executive office is 7625 Smetana Lane, Eden Prairie, Minnesota 55344, and our telephone number is (952) 294-3300. Our website address is www.compellent.com. We do not incorporate the information on our website into this prospectus, and you should not consider it part of this prospectus. As used in this prospectus, references to “Compellent,” “our,” “us” and “we” refer to Compellent Technologies, Inc. and our subsidiary unless the context requires otherwise.
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