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IT IPOs reveal product warts

IT IPOs reveal product warts

Risks associated with storage companies and their products need to be better divulged

I am an admitted addict of new storage technologies and the benefits they can potentially deliver. Yet as interesting as they are, one should never underestimate the risks behind using these technologies or the companies that offer them. The problem is quantifying what risks they present to you and your company.

The good news is that as companies like Double-Take Software and Isilon Systems go public, they disclose in their public filings some of the risks associated with investing in them and using their products. The bad news is that the companies use different forms to divulge them.

For example, Double-Take Software lists one of the risks associated with investing in their company in their Form 424B4, which they filed on Dec 15, 2006. In it, Double-Take discloses their replication software is designed for Microsoft server environments and should Microsoft choose to offer a replication product, it may have a decidedly adverse affect on Double-Take's stock price and future growth. (Note: I am not aware of any such product forthcoming from Microsoft.)

Isilon System used a different form, filing a fourth amendment to their S-1 filing on December 14, 2006. This includes a cautionary note about a letter received from SeaChange International in July 2006 where SeaChange warns Isilon Systems that Isilon's products may be using SeaChange's patented technology. Though Isilon Systems responded and does not believe their products infringe upon SeaChange's patents, litigation could result. If it does, there is no certainty for the users of Isilon Systems' products as to what the legal outcome might be.

Technology from Double-Take Software and Isilon Systems solve very specific storage management problems that other companies are hard-pressed to match. But locating and reviewing difficult-to-find public filings can go a long ways towards helping users better balance the benefits that these technologies offer versus the potential risks they also present.


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