CEO Phil Soran makes Compellent's case for success

CEO Phil Soran of Compellent Technologies Inc. runs a company that added jobs and revenue last year as other companies hunkered down and cut payrolls.

Eden Prairie-based Compellent, conceived among three founders in Soran's basement in 2001, has taken market share from the huge likes of EMC, Hewlett-Packard and Dell, with a laser-like focus on its sole line of business -- storing digital data for clients more efficiently and more cheaply.

The company grew by more than a third to $125 million last year and added 180 customers for a total of 1,800 in 35 countries, amid rave trade-press reviews and industry kudos.

But Compellent's stock price has been halved since February to as low as $12.14 per share in April, losing about $400 million in market value. Compellent, which went public at $13.50 per share in 2007 at the market peak, closed at $12.64 Tuesday.

The bright long-term future has been clouded by short-term results that didn't meet expectations. First-quarter revenue grew only 13 percent, disappointing bullish investors and pleasing short sellers who thought the company's stock had gotten too rich.

"We had 17 consecutive quarters of [ever-better] sales growth, and one down one," Soran said in an interview Monday. "We doubled the size of our facility in 2009, hired 100 people [to a workforce of 410] and we're going to add 30 this quarter. We have a huge opportunity and we're going to invest in long-term growth of our business, our customers and our team."

Soran, 53, a onetime middle school math teacher and IBM storage salesman, is a popular CEO who lauds Minnesota for its productive workforce and his employees for their spirit and can-do approach. He said visiting customers invariably want to see the company's 60-person product-support unit to thank their assigned "co-pilot."

Soran and co-founders Larry Aszmann and John Guider, control about 3 million shares. They have a good track record. The trio started Xiotech Corp. -- now a competitor -- and sold it a decade ago for nearly $400 million.

Soran made $624,000 in salary and bonus in 2009.

With its stock price down, there has been speculation that Compellent could become an acquisition target for one of the huge technology complexes. But for now it appears Soran & Co. have time to prove they can drive value northward as a nimble, independent company.

Compellent this week is hosting its biggest-ever "C-Drive Partner Summit" at the downtown Minneapolis Marriott and its headquarters -- a $500,000-plus exposition, clinic and pep rally largely for the 600 independent IT-consultant "channel partners," or resellers, through whom it exclusively sells its storage systems.

Customers say the company has saved them money through its next-generation "fluid data" system that prioritizes the ever-mounting mass of e-mails, documents and other electronic data based on use. It stores the less-used stuff on less-used, less-expensive disk space that doesn't need to churn all the time. That also cuts electrical-power costs by up to two-thirds.

Tough questioning

Suffice to say, the mood Monday at the conference was a lot more buoyant than the sober conference call that Soran hosted for securities analysts last Thursday. Soran projected that second-quarter revenue would rise at least 15 percent, to more than $33 million, and a break-even quarter due to additional hiring, and investments in advancing the technology, marketing and customer service.

The analysts were wary, and Soran encountered tough questions about gross margins, strategy and tactics from Morgan Stanley, Piper Jaffray, Needham & Co. and William Blair & Co.

The underlying question: What makes Soran think things are going to work out any better in the second quarter and beyond?

"Our current offering is very, very competitive," Soran summarized. "And as I look at what we got planned to roll out in the next few quarters, I'm as excited as any time that I've seen for our company."

Mark Manning, IT director at the fast-growing pharmacy systems business of huge McKesson, recalled hiring Compellent in 2008, from among several storage bidders. He faced a "complete storage burnout" within six months -- equivalent to "being naked in a cactus field when a tornado comes through." Compellent's solution gave him more IT scalability and flexibility at lower operating and energy costs.

Compellent has no more than 10 percent exposure to any one industry. But health care, its biggest market, will be a huge opportunity as clinics and other providers move to electronic records designed to cut inefficiency and cost from the piecemeal systems of today. At a time when big companies are rebuilding profit margins through layoffs it's fun to watch a promising newcomer invest in people and a better future.

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com