Isilon Systems, Inc. (NASDAQ: ISLN) sells clustered data storage devices specialized for digital content such as images and videos. Its customers range from small and medium businesses to Fortune 500 companies. Unlike traditional data storage systems, a clustered data storage system combines the processing power and storage capacity of multiple, smaller storage servers. This increases the scalability of the storage system, since an information technology organization can add additional storage servers as needed. It also leads to features such as the ability for multiple users to access the same digital content simultaneously. The company's clustered systems cater to the growth in digital data, such as images from scientific research and high-resolution videos from the media industry. Falling product prices per unit of storage capacity in the data storage market, in addition to the rapid increase in the amount of digital data that organizations are storing, have maintained the demand for Isilon's products, even in the macro downturn.
In 2009, ISLN had total revenues of $124 million, an increase from its 2008 total revenues of $114 million. As a result, ISLN was able to narrow its net loss. From 2008 to 2009, ISLN decreased its net loss from $25 million in 2008 to $19 million in 2009. ISLN has posted a net loss for the past five years.
Isilon sells clustered data storage systems for digital content. Clustered storage systems combine the data storage capacity of multiple file servers, called nodes, with an operating system that integrates the data stored on the separate servers. This data storage system is both scalable, since IT personnel can add additional nodes as needed, and reliable, since a user's data is not all gathered in one physical location. Isilon's products are specialized for digital content, such as videos and pictures. Unlike traditional data, such as e-mails, word documents, and accounting spreadsheets, digital content requires additional storage features, such as the ability to let multiple users access the same file at once.
Isilon's hardware products are file servers that can store terabytes of data (1 terabyte = 1000 gigabytes). What differentiates these servers is the company's trademark built-in operating system software that integrates the data from all of the separate nodes, which leads to the additional features that digital content requires.
Isilon also sells ancillary computer software products that enhance or take advantage of the company's system of integrated, but separate, file servers. These products include disaster recovery disk-to-disk backup, load balancing (distributing traffic so that a single file server is not overloaded), and data management applications.
Isilon is exposed to the media & entertainment, Internet, cable/telecommunications, energy, life sciences/health care and manufacturing industries, as well as intelligence gathering operations of the federal government. The size of its customers range from small/medium business to Fortune 500 corporations. Most of its customers are not bound by long-term contracts, so the company's earnings change on a purchase order basis.
The market for external data storage systems is expected to grow from $17.4B in 2005 to $22.7B in 2010, and the market for storage software is expected to grow from $9.1B to $14.3B. This growth is driven by the amount of information that is being stored electronically. Specifically, the amount of digital information (i.e. raw data in the form of images or videos), is expected to increase even more rapidly. For example, the demand for disk-based digital archiving capacity (i.e. storing data - documents, pictures, videos - digitally) is expected to grow from 377 petabytes in 2005 to 11,000 petabytes in 2010 (1 petabyte = 1 million gigabytes). The industries that are driving this growth include media & entertainment, Internet, cable and telecommunications, oil and gas, life sciences, and manufacturing. Emerging technologies such as Sony's Blu-Ray, increasing consumer demand for online content such as YouTube videos, growing industrial needs such as satellite imaging, and rising life science standards such as bio-imaging are all signs of a dramatic shift to digital content. These developments are driving the demand for high-capacity and scalable storage systems. In contrast to systems that cater to text-based data, Isilon's storage system is specialized for storing video/audio files, images, computer models, PDF files, and other raw data, letting the company take advantage of a fast-growing segment of the data storage market.
More and more information technology organizations are shifting away from using big, centralized computer systems to systems based on clusters of smaller computers. An IT system based on clusters increases the system's reliability, efficiency and scalability. In this system, the failure of one computer does not lead to the failure of the entire system. Clusters also decrease the chances of overloading by distributing the workload among the individual components of the system. Furthermore, installing additional, smaller components to an existing system is much easier than adding large components. These factors make cluser-based systems more attractive than traditional systems as the amount and importance of electronic data increase. In the data storage market, Direct Attached Storage (DAS), Storage Area Networks (SANs) and Network Attached Storage (NAS) are traditional storage systems sold by Isilon's competitors. Therefore, the trend towards cluster-based system increases the demand for Isilon's product, which are based on clustering.
This trend suggests that companies are getting higher computing power for a lower cost, and are realizing the benefits of investing in IT systems (i.e. Moore's Law, which states that the rate of computer hardware growth is exponential, resulting in increased demand). Specifically, Isilon's cluster-based system of standardized, cheap file servers enables companies to expand their IT systems as needed with relatively little cost.
Isilon competes in the data storage systems market. It competes against several large corporations, such as Hewlett-Packard Company (HPQ), International Business Machines (IBM), and Sun Microsystems (JAVA), that have business units in the data storage market. EMC (EMC) and Network Appliance (NTAP) are the largest companies that compete directly in the data storage market. Unlike these competitors, Isilon uses clustering technology instead of stand-alone NAS and SAN. In addition to the aformentioned companies, NetApp competes against venture capital-backed companies that also focus on developing advanced data storage technology.
EMC (EMC) - EMC is one of the top two companies in the data storage systems market, with business segments in information storage, content management and archiving, and RSA information security. It far outpaces both NetApp (its serious competitor in the data storage market) and Isilon with FY2007 revenues at $13B. 
NetApp (NTAP) - NetApp is the other top two company in the data storage sytems market, with revenues at $2.8B. NetApp pionereed NAS technology, and sells a data storage system that integrates many methods of inputting data for storage (i.e. combining NAS, SAN, etc.), which lets its customers buy from only one company.