Isilon Systems Announces Preliminary Results for 2007 Third Quarter

    SEATTLE, Oct. 3 /PRNewswire-FirstCall/ -- Isilon(R) Systems (Nasdaq:  
 ISLN), the leader in clustered storage, today announced preliminary results
 for the third quarter of 2007 ended September 30, 2007. Based on
 preliminary estimates, total revenue is expected to be in the range of
 $23.2 million to $23.7 million, down approximately 6 percent to 8 percent
 sequentially from the second quarter of 2007 and up approximately 30
 percent to 33 percent from the same period one year ago. Previously, on the
 company's second quarter conference call on July 26, 2007, the company
 stated it expected total revenue in the range of $25 million to $27.5
 million for the third quarter of 2007.
     Based on preliminary revenue estimates for the third quarter of 2007,
 Isilon expects GAAP gross margin to be in the range of 54.4 percent to 56.4
 percent and non-GAAP(1) gross margin in the range of 54.6 percent to 56.6
 percent. Based on preliminary revenue and gross margin estimates, Isilon
 expects GAAP net loss per share to be in the range of ($0.10) to ($0.12)
 and non-GAAP net loss per share to be in the range of ($0.08) to ($0.10).
 Isilon management will host a conference call today at 2:00 p.m. PT (5:00
 p.m. ET) to discuss the preliminary results.
     "We are disappointed with our Q3 results," said Steve Goldman,
 president and chief executive officer. "Despite the fact that our recent
 growth rate has not been matching our expectations, continued spending by
 an ever broadening range of new and existing customers underscores the
 strong value proposition of Isilon clustered storage."
     Isilon's preliminary third quarter results are subject to review by the
 company as well as its independent auditors. The company's final results
 for the third quarter of 2007 will be announced on October 25, 2007 after
 the close of market.
     Preliminary Results Conference Call Information
     Isilon's conference call to discuss the preliminary results for the
 third quarter of 2007 will be held today at 2:00 p.m. PT (5:00 p.m. ET) and
 will be accessible via live webcast on the Investor Relations section of
 Isilon's website at, where the webcast also
 will be archived.
     A recording of the conference call will be available approximately one
 hour after the call is completed through 12:00 midnight ET, October 17,
 2007. To listen to the recording, please dial 888-286-8010 (domestic) or
 617-801-6888 (international); the passcode for the recording is 10214735.
     About Isilon
     Isilon Systems (Nasdaq:   ISLN) is the worldwide leader in clustered
 storage systems and software for digital content and unstructured data,
 enabling enterprises to transform data into information -- and information
 into breakthroughs. Isilon's award-winning family of IQ clustered storage
 systems combines Isilon's OneFS operating system software with the latest
 advances in industry-standard hardware to deliver modular, pay-as-you-grow,
 enterprise-class storage systems. Isilon's clustered storage solutions
 speed access to critical business information while dramatically reducing
 the cost and complexity of storing it. Information about Isilon can be
 found at
     Safe Harbor Statement
     This press release contains "forward looking statements" within the
 meaning of the Private Securities Litigation Reform Act of 1995. These
 statements are not guarantees of future performance. These forward-looking
 statements are based on management's expectations as of October 3, 2007,
 and assumptions which are inherently subject to uncertainties, risks and
 changes in circumstances that are difficult to predict. The use of words
 such as "intends" and "expects" among others, generally identify
 forward-looking statements. However, these words are not the exclusive
 means of identifying such statements. Such forward-looking statements may
 relate, among other things, to our expected financial and operating
 results, the benefits of our products, technologies and services and our
 ability to achieve our goals, plans and objectives.
     Actual results and the timing and outcome of events may differ
 materially from those expressed or implied in the forward-looking
 statements for a variety of reasons, including, among others: risks
 associated with anticipated growth in the storage of unstructured, digital
 content; competitive factors, including changes in the competitive
 environment, pricing pressures, sales cycle time and increased competition;
 our ability to build and expand our direct sales operations and reseller
 distribution channels; our ability to build sales backlogs and improve
 sales linearity; general economic and industry conditions, including
 expenditure trends for storage-related products; new product introductions
 and our ability to develop and deliver innovative products; our ability to
 provide high-quality service and support offerings; our reliance on a
 limited number of suppliers and our ability to forecast demand for our
 products and potential shortages or price fluctuations in our supply chain;
 risks associated with international operations; and other important factors
 as described in Isilon Systems, Inc.'s reports and documents filed from
 time to time with the Securities and Exchange Commission, including the
 factors described in the sections captioned "Risk Factors" in our most
 recently submitted 10-K and 10-Q.
     Except as required by law, Isilon Systems, Inc. undertakes no
 obligation to update any forward-looking or other statements in this press
 release, whether as a result of new information, future events or
     (1) Use of Non-GAAP Financial Measures
     Isilon provides non-GAAP information to enhance investors' overall
 understanding of the company's current financial performance and the
 company's prospects for the future and to aid in comparing current
 operating results with those of past periods. The company believes the
 non-GAAP measures provide useful information to management and investors by
 excluding certain items that may not be indicative of Isilon's core
 operating results and business outlook.
     This press release includes non-GAAP gross margin and non-GAAP loss per
 share. These non-GAAP measures exclude charges related to stock-based
 compensation. Isilon excludes stock-based compensation expenses from its
 non-GAAP measures primarily because they are non-cash expenses that Isilon
 does not believe reflect core operating results. Stock-based compensation
 expense is dependent on a number of factors over which management has
 limited control and is not a factor management utilizes in operating the
     These non-GAAP measures are not in accordance with, or an alternative
 for, measures prepared in accordance with GAAP and may be different from
 non-GAAP measures used by other companies. In addition, these non-GAAP
 measures are not based on any comprehensive set of accounting rules or
 principles. Isilon believes that non-GAAP measures have inherent
 limitations in that they do not reflect all of the amounts associated with
 Isilon's results of operations as determined in accordance with GAAP and
 that these measures should only be used to evaluate Isilon's results of
 operations in conjunction with the corresponding GAAP measures.
     The table that follows provides a reconciliation of the most directly
 comparable GAAP measures to the non-GAAP measures used by management.
                              Isilon Systems, Inc.
             Reconciliation of GAAP to non-GAAP preliminary results
                                                               Net loss per
                                                               common share,
                                           Gross margin %    basic and diluted
     Three Months Ended
         September 30, 2007
         GAAP                              54.4% - 56.4%   $(0.10) -  $(0.12)
           Stock-based compensation         0.2% -  0.2%     0.02  -    0.02
         Non-GAAP                          54.6% - 56.6%   $(0.08) -  $(0.10)

SOURCE Isilon Systems, Inc.

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