##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
 (Mark One)
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2009
 OR
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission File Number 001-33685
 
 COMPELLENT TECHNOLOGIES, INC.
 (Exact name of Registrant as specified in its charter)
 
 Delaware
    
    37-1434895(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 7625 Smetana Lane
Eden Prairie, Minnesota 55344
(952) 294-3300
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



COMPELLENT TECHNOLOGIES, INC.
 FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2009
 INDEX
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets  As of September 30, 2009 (unaudited) and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations (unaudited)  Three and Nine Months Ended September 30,
2009 and 2008
    
    
    4Condensed Consolidated Statements of Cash Flows (unaudited)  Nine Months Ended September 30, 2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    20Item 1A. Risk Factors
    
    
    20Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3. Defaults Upon Senior Securities
    
    
    32Item 4. Submission of Matters to a Vote of Security Holders
    
    
    32Item 5. Other Information
    
    
    32Item 6. Exhibits
    
    
    32Signatures
    
    
    33EX-31.1EX-31.2EX-32.1
  2




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 COMPELLENT TECHNOLOGIES, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2009
    
    
    2008(unaudited)
    
    
    See Note(in thousands, except share and per share amounts)AssetsCurrent assetsCash and cash equivalents
    
    $
    32,292
    
    
    $
    51,989Short-term investments
    
    
    28,813
    
    
    
    29,146Accounts receivable, net
    
    
    30,664
    
    
    
    19,167Inventories, net
    
    
    4,155
    
    
    
    3,564Other current assets
    
    
    3,088
    
    
    
    1,592Total current assets
    
    
    99,012
    
    
    
    105,458Long-term investments
    
    
    47,932
    
    
    
    19,153Property and equipment, net
    
    
    4,648
    
    
    
    3,446Total assets
    
    $
    151,592
    
    
    $
    128,057Liabilities and stockholders equityCurrent liabilitiesAccounts payable
    
    $
    7,121
    
    
    $
    2,885Accrued compensation
    
    
    5,352
    
    
    
    4,834Accrued liabilities
    
    
    1,351
    
    
    
    1,480Deferred revenue
    
    
    21,800
    
    
    
    15,128Total current liabilities
    
    
    35,624
    
    
    
    24,327Deferred revenue, net of current portion
    
    
    9,950
    
    
    
    5,464Commitments and contingenciesStockholders equityCommon stock, $0.001 par value, 300,000,000
shares authorized; 30,941,059 and 30,768,706
shares issued and outstanding as of
September 30, 2009 and December 31, 2008
    
    
    31
    
    
    
    31Additional paid in capital
    
    
    152,045
    
    
    
    147,974Accumulated deficit
    
    
    (46,336
    )
    
    
    (49,855
    )Accumulated other comprehensive income
    
    
    278
    
    
    
    116Total stockholders equity
    
    
    106,018
    
    
    
    98,266Total liabilities and stockholders equity
    
    $
    151,592
    
    
    $
    128,057
   3




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##### Table of Contents



COMPELLENT TECHNOLOGIES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited)
  For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands, except 
per share amounts)

    
    
    (in thousands, except 
per share amounts)RevenuesProduct
    
    $
    22,987
    
    
    $
    19,501
    
    
    $
    64,564
    
    
    $
    51,416Support and services
    
    
    9,225
    
    
    
    5,109
    
    
    
    24,437
    
    
    
    12,519Total revenues
    
    
    32,212
    
    
    
    24,610
    
    
    
    89,001
    
    
    
    63,935Cost of revenuesCost of product
    
    
    10,957
    
    
    
    9,338
    
    
    
    32,089
    
    
    
    24,716Cost of support and services
    
    
    2,825
    
    
    
    2,064
    
    
    
    8,232
    
    
    
    5,078Total cost of revenues
    
    
    13,782
    
    
    
    11,402
    
    
    
    40,321
    
    
    
    29,794Gross profit
    
    
    18,430
    
    
    
    13,208
    
    
    
    48,680
    
    
    
    34,141Operating expensesSales and marketing
    
    
    11,386
    
    
    
    9,041
    
    
    
    32,052
    
    
    
    25,823Research and development
    
    
    3,276
    
    
    
    2,452
    
    
    
    9,160
    
    
    
    7,111General and administrative
    
    
    1,680
    
    
    
    1,883
    
    
    
    4,630
    
    
    
    5,087Total operating expenses
    
    
    16,342
    
    
    
    13,376
    
    
    
    45,842
    
    
    
    38,021Operating income (loss)
    
    
    2,088
    
    
    
    (168
    )
    
    
    2,838
    
    
    
    (3,880
    )Interest income
    
    
    465
    
    
    
    632
    
    
    
    1,380
    
    
    
    2,125Income (loss) before taxes
    
    
    2,553
    
    
    
    464
    
    
    
    4,218
    
    
    
    (1,755
    )Income tax expense
    
    
    (294
    )
    
    
    
    
    
    
    (699
    )
    
    
    Net income (loss)
    
    $
    2,259
    
    
    $
    464
    
    
    $
    3,519
    
    
    $
    (1,755
    )Net income (loss) per weighted average share, basic
    
    $
    0.07
    
    
    $
    0.02
    
    
    $
    0.11
    
    
    $
    (0.06
    )Weighted average shares, basic
    
    
    30,818
    
    
    
    30,523
    
    
    
    30,732
    
    
    
    30,434Net income (loss) per weighted average share, diluted
    
    $
    0.07
    
    
    $
    0.01
    
    
    $
    0.11
    
    
    $
    (0.06
    )Weighted average shares, diluted
    
    
    31,944
    
    
    
    31,695
    
    
    
    31,682
    
    
    
    30,434
  4




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COMPELLENT TECHNOLOGIES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)
 For the Nine MonthsEnded September 30,2009
    
    
    2008(in thousands)Operating activitiesNet income (loss)
    
    $
    3,519
    
    
    $
    (1,755
    )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation and amortization
    
    
    1,700
    
    
    
    1,136Stock-based compensation expense
    
    
    3,033
    
    
    
    1,538Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (11,497
    )
    
    
    (8,075
    )Inventories, net
    
    
    (591
    )
    
    
    (1,360
    )Other current assets
    
    
    (1,496
    )
    
    
    (293
    )Accounts payable
    
    
    4,236
    
    
    
    2,271Accrued compensation and liabilities
    
    
    463
    
    
    
    2,282Deferred revenue
    
    
    11,158
    
    
    
    6,831Net cash provided by operating activities
    
    
    10,525
    
    
    
    2,575Investing activitiesPurchases of property and equipment
    
    
    (2,902
    )
    
    
    (1,735
    )Purchases of investments
    
    
    (81,614
    )
    
    
    (73,884
    )Proceeds from sales and maturities of investments
    
    
    53,343
    
    
    
    35,931Net cash used in investing activities
    
    
    (31,173
    )
    
    
    (39,688
    )Financing activitiesProceeds from issuance of common stock
    
    
    951
    
    
    
    543Net decrease in cash and cash equivalents
    
    
    (19,697
    )
    
    
    (36,570
    )Cash and cash equivalents, beginning of period
    
    
    51,989
    
    
    
    82,382Cash and cash equivalents, end of period
    
    $
    32,292
    
    
    $
    45,812Supplemental disclosure of cash flow information:Cash paid for income taxes
    
    $
    567
    
    
    $
    Supplemental non-cash disclosure:Vesting of restricted common stock
    
    $
    87
    
    
    $
    90Unrealized gain (loss) on available-for-sale investments
    
    $
    175
    
    
    $
    (127
    )
  5




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##### Table of Contents



COMPELLENT TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 1. Business Description and Summary of Significant Accounting Policies
 Business Description
  Basis of Presentation
  Revenue Recognition
  
    
    Persuasive Evidence of an Arrangement Exists.The Company determines that persuasive
evidence of an arrangement exists by receiving a purchase order or by obtaining a signed
quote.
 
    
    Delivery has Occurred.Substantially all products are shipped to end users. Delivery is
deemed to have occurred upon shipment when title has transferred. Products shipped with
acceptance criteria are not recognized as revenue until all conditional criteria are
satisfied.
 
    
    The Fee is Fixed or Determinable. Fees are considered to be fixed and determinable upon
establishment of an arrangement that contains the final terms of sale including description,
quantity and price of each product or service purchased, and the payment term is less than
twelve months.
 
    
    Collectability is Probable. Probability of collection is assessed on a case-by-case
basis. Customers are subject to a credit review process that evaluates the customers
financial position and ultimately their ability to pay. If the Company is unable to
determine from the outset of an arrangement that collectability is probable based upon its
review process, revenue is recognized upon cash receipt.
   6




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##### Table of Contents



Recent Accounting Pronouncements
     
    
    ASU No. 2009-13, Revenue Recognition
(ASC Topic 605)  Multiple-Deliverable
Revenue Arrangements, a consensus of the
FASB Emerging Issues Task Force; and
    
    ASU No. 2009-14, Software (ASC Topic
985)  Certain Revenue Arrangements That
Include Software Elements, a consensus of
the FASB Emerging Issues Task Force.
 ASU No. 2009-13:
 ASU No. 2009-14:
 7




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##### Table of Contents



2. Investments
 Fair Value Measurements
  Fair Value Measurements at September 30, 2009 UsingSeptember 30,Description
    
    2009
    
    
    Level 1 (1)
    
    
    Level 2 (2)
    
    
    Level 3 (3)Available-for-sale investments:Corporate debt securities (4)
    
    $
    32,561
    
    
    $
    32,561
    
    
    $
    
    
    
    $
    Variable rate demand notes (5)
    
    
    6,951
    
    
    
    
    
    
    
    6,951
    
    
    
    U.S. agency securities (4)
    
    
    25,616
    
    
    
    
    
    
    
    25,616
    
    
    
    Municipal bonds (4)
    
    
    4,898
    
    
    
    
    
    
    
    4,898
    
    
    
    Commercial paper (5)
    
    
    2,989
    
    
    
    
    
    
    
    2,989
    
    
    
    Certificates of deposit (6)
    
    
    4,631
    
    
    
    
    
    
    
    4,631
    
    
    
    Money market funds (7)
    
    
    30,240
    
    
    
    30,240
    
    
    
    
    
    
    
    Total
    
    $
    107,886
    
    
    $
    62,801
    
    
    $
    45,085
    
    
    $
    
 Fair Value Measurements at December 31, 2008 UsingDecember 31,Description
    
    2008
    
    
    Level 1 (1)
    
    
    Level 2 (2)
    
    
    Level 3 (3)Available-for-sale investments:Corporate debt securities (4)
    
    $
    12,934
    
    
    $
    11,363
    
    
    $
    1,571
    
    
    $
    Variable rate demand notes (4)
    
    
    7,291
    
    
    
    
    
    
    
    7,291
    
    
    
    U.S. agency securities (4)
    
    
    23,612
    
    
    
    
    
    
    
    23,612
    
    
    
    Certificates of deposit (6)
    
    
    7,406
    
    
    
    
    
    
    
    7,406
    
    
    
    Money market funds (7)
    
    
    36,496
    
    
    
    36,496
    
    
    
    
    
    
    
    Total
    
    $
    87,739
    
    
    $
    47,859
    
    
    $
    39,880
    
    
    $
    
 
 (1)
    
    Level 1 classification is applied to any asset that has a readily available quoted price from
an active market where there is significant transparency in the executed/quoted price.(2)
    
    Level 2 classification is applied to assets that have evaluated prices received from fixed
income vendors where the data inputs to these valuations, which are observable either directly
or indirectly, but do not represent quoted prices from an active market for each individual
security.(3)
    
    Level 3 classification is applied to assets when prices are not derived from existing market
data.(4)
    
    Included in short-term and long-term investments on the condensed consolidated balance
sheets.(5)
    
    Included in short-term investments on the condensed consolidated balance sheets.(6)
    
    Included in cash and cash equivalents and short-term investments on the condensed
consolidated balance sheets.(7)
    
    Included in cash and cash equivalents on the condensed consolidated balance sheets.  8




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Investments
  Gross UnrealizedContractual Maturities
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueCorporate debt securities
    
    Less than 3 years
    
    $
    32,292
    
    
    $
    307
    
    
    $
    (38
    )
    
    $
    32,561Variable rate demand notes
    
    Less than 12 months
    
    
    6,951
    
    
    
    
    
    
    
    
    
    
    
    6,951U.S. agency securities
    
    Less than 3 years
    
    
    25,570
    
    
    
    52
    
    
    
    (6
    )
    
    
    25,616Municipal bonds
    
    Less than 2 years
    
    
    4,908
    
    
    
    4
    
    
    
    (14
    )
    
    
    4,898Commercial paper
    
    Less than 12 months
    
    
    2,989
    
    
    
    
    
    
    
    
    
    
    
    2,989Certificates of deposit
    
    Less than 12 months
    
    
    4,631
    
    
    
    
    
    
    
    
    
    
    
    4,631Money market funds
    
    Less than 12 months
    
    
    30,240
    
    
    
    
    
    
    
    
    
    
    
    30,240Total
    
    
    
    $
    107,581
    
    
    $
    363
    
    
    $
    (58
    )
    
    $
    107,886
   3. Inventories
  September 30,
    
    
    December 31,2009
    
    
    2008Component materials
    
    $
    534
    
    
    $
    280Finished systems
    
    
    3,621
    
    
    
    3,284Total
    
    $
    4,155
    
    
    $
    3,564
 4. Property and Equipment
  September 30,
    
    
    December 31,2009
    
    
    2008Computer equipment
    
    $
    953
    
    
    $
    698Office furniture and equipment
    
    
    8,045
    
    
    
    5,632Computer software
    
    
    881
    
    
    
    710Leasehold improvements
    
    
    1,137
    
    
    
    1,06511,016
    
    
    
    8,105Accumulated depreciation and amortization
    
    
    (6,368
    )
    
    
    (4,659
    )Total
    
    $
    4,648
    
    
    $
    3,446
 5. Comprehensive Income/(Loss)
  9




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6. Stock-Based Compensation
 Stock-Based Compensation Expense
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Cost of product
    
    $
    10
    
    
    $
    54
    
    
    $
    36
    
    
    $
    141Cost of support and services
    
    
    18
    
    
    
    
    
    
    
    156
    
    
    
    Sales and marketing
    
    
    405
    
    
    
    253
    
    
    
    1,298
    
    
    
    688Research and development
    
    
    139
    
    
    
    107
    
    
    
    552
    
    
    
    301General and administrative
    
    
    386
    
    
    
    134
    
    
    
    991
    
    
    
    408Effect on income (loss) before taxes
    
    $
    958
    
    
    $
    548
    
    
    $
    3,033
    
    
    $
    1,538Effect on basic and diluted earnings (loss) per share
    
    $
    0.03
    
    
    $
    0.02
    
    
    $
    0.10
    
    
    $
    0.05
  Stock Options Exercised for Unvested Restricted Common Stock
   Numberof SharesBalance outstanding at December 31, 2008
    
    
    151,820Vested
    
    
    (88,744
    )Balance outstanding at September 30, 2009
    
    
    63,076
 7. Income Taxes
   10




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8. Net Income (Loss) Per Common Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    2,259
    
    
    $
    464
    
    
    $
    3,519
    
    
    $
    (1,755
    )Shares used in computing net income (loss) per share, basic
    
    
    30,818
    
    
    
    30,523
    
    
    
    30,732
    
    
    
    30,434Dilutive effect of stock options and unvested restricted common stock
    
    
    1,126
    
    
    
    1,172
    
    
    
    950
    
    
    
    Shares used in computing net income (loss) per share, diluted
    
    
    31,944
    
    
    
    31,695
    
    
    
    31,682
    
    
    
    30,434Net income (loss) per common share, basic
    
    $
    0.07
    
    
    $
    0.02
    
    
    $
    0.11
    
    
    $
    (0.06
    )Net income (loss) per common share, diluted
    
    $
    0.07
    
    
    $
    0.01
    
    
    $
    0.11
    
    
    $
    (0.06
    )
  9. Commitments and Contingencies
 Indemnification Obligations
  Legal Proceedings
   11




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10. Segment and Geographic Information
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenuesUnited States
    
    $
    27,166
    
    
    $
    21,044
    
    
    $
    73,810
    
    
    $
    54,292International
    
    
    5,046
    
    
    
    3,566
    
    
    
    15,191
    
    
    
    9,643Total
    
    $
    32,212
    
    
    $
    24,610
    
    
    $
    89,001
    
    
    $
    63,935
 11. Subsequent Events
  12




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, that are based on our managements beliefs and assumptions and on
information currently available to our management. Forward-looking statements include all
statements other than statements of historical fact contained in this Quarterly Report on Form
10-Q, including, but not limited to, statements about:
 
    
    our expectations regarding our revenue, gross margin and expenses;
    
    our ability to compete in our industry;
    
    our ability to maintain and grow our channel partner relationships;
    
    our growth strategy and our growth rate;
    
    our ability to protect our intellectual property rights;
    
    pricing and availability of our suppliers products; and
    
    assumptions underlying or related to any of the foregoing.
 In some cases, you can identify forward-looking statements by terms such as anticipate,
believe, can, continue, could, estimate, expect, intend, may, potential,
predict, project, should, will, would and similar expressions intended to identify
forward-looking statements. These statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, performance, time frames or achievements to be
materially different from any future results, performance, time frames or achievements expressed or
implied by the forward-looking statements. We discuss many of these risks, uncertainties and other
factors in this Quarterly Report on Form 10-Q in greater detail in Part II, Item IA. Risk
Factors. Given these risks, uncertainties and other factors, you should not place undue reliance
on these forward-looking statements. Also, these forward-looking statements represent our estimates
and assumptions only as of the date hereof. We hereby qualify all of our forward-looking statements
by these cautionary statements. Except as required by law, we assume no obligation to update these
forward-looking statements publicly, or to update the reasons actual results could differ
materially from those anticipated in these forward-looking statements, even if new information
becomes available in the future.
 The following discussion should be read in conjunction with our
condensed consolidated financial statements and the related notes contained elsewhere in this
Quarterly Report on Form 10-Q and in our other Securities and Exchange Commission, or SEC, filings,
including our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC
on March 16, 2009.
 Overview
   13




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Critical Accounting Policies and Estimates
   Results of Operations
  Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    Change
    
    
    September 30,
    
    
    Change2009
    
    
    2008
    
    
    $
    
    
    %
    
    
    2009
    
    
    2008
    
    
    $
    
    
    %RevenuesProduct
    
    $
    22,987
    
    
    $
    19,501
    
    
    $
    3,486
    
    
    
    17.9
    %
    
    $
    64,564
    
    
    $
    51,416
    
    
    $
    13,148
    
    
    
    25.6
    %Support and services
    
    
    9,225
    
    
    
    5,109
    
    
    
    4,116
    
    
    
    80.6
    
    
    
    24,437
    
    
    
    12,519
    
    
    
    11,918
    
    
    
    95.2Total revenues
    
    
    32,212
    
    
    
    24,610
    
    
    
    7,602
    
    
    
    30.9
    
    
    
    89,001
    
    
    
    63,935
    
    
    
    25,066
    
    
    
    39.2Cost of revenuesCost of product
    
    
    10,957
    
    
    
    9,338
    
    
    
    1,619
    
    
    
    17.3
    
    
    
    32,089
    
    
    
    24,716
    
    
    
    7,373
    
    
    
    29.8Cost of support and
services
    
    
    2,825
    
    
    
    2,064
    
    
    
    761
    
    
    
    36.9
    
    
    
    8,232
    
    
    
    5,078
    
    
    
    3,154
    
    
    
    62.1Total cost of revenues
    
    
    13,782
    
    
    
    11,402
    
    
    
    2,380
    
    
    
    20.9
    
    
    
    40,321
    
    
    
    29,794
    
    
    
    10,527
    
    
    
    35.3Gross profit
    
    
    18,430
    
    
    
    13,208
    
    
    
    5,222
    
    
    
    39.5
    
    
    
    48,680
    
    
    
    34,141
    
    
    
    14,539
    
    
    
    42.6Operating expensesSales and marketing
    
    
    11,386
    
    
    
    9,041
    
    
    
    2,345
    
    
    
    25.9
    
    
    
    32,052
    
    
    
    25,823
    
    
    
    6,229
    
    
    
    24.1Research and development
    
    
    3,276
    
    
    
    2,452
    
    
    
    824
    
    
    
    33.6
    
    
    
    9,160
    
    
    
    7,111
    
    
    
    2,049
    
    
    
    28.8General and
administrative
    
    
    1,680
    
    
    
    1,883
    
    
    
    (203
    )
    
    
    (10.8
    )
    
    
    4,630
    
    
    
    5,087
    
    
    
    (457
    )
    
    
    (9.0
    )Total operating
expenses
    
    
    16,342
    
    
    
    13,376
    
    
    
    2,966
    
    
    
    22.2
    
    
    
    45,842
    
    
    
    38,021
    
    
    
    7,821
    
    
    
    20.6Operating income (loss)
    
    
    2,088
    
    
    
    (168
    )
    
    
    2,256
    
    
    
    *
    
    
    
    2,838
    
    
    
    (3,880
    )
    
    
    6,718
    
    
    
    *Interest income
    
    
    465
    
    
    
    632
    
    
    
    (167
    )
    
    
    (26.4
    )
    
    
    1,380
    
    
    
    2,125
    
    
    
    (745
    )
    
    
    (35.1
    )Income (loss) before taxes
    
    
    2,553
    
    
    
    464
    
    
    
    2,089
    
    
    
    450.2
    
    
    
    4,218
    
    
    
    (1,755
    )
    
    
    5,973
    
    
    
    *Income tax expense
    
    
    (294
    )
    
    
    
    
    
    
    (294
    )
    
    
    
    
    
    
    (699
    )
    
    
    
    
    
    
    (699
    )
    
    
    Net income (loss)
    
    $
    2,259
    
    
    $
    464
    
    
    $
    1,795
    
    
    
    386.9
    %
    
    $
    3,519
    
    
    $
    (1,755
    )
    
    $
    5,274
    
    
    
    *
 
 *
    
    Percentage is not meaningful 14




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##### Table of Contents



Comparison of Three Months Ended September 30, 2009 and 2008
 Revenues
  Three Months Ended September 30,2009
    
    
    2008%
    
    
    
    
    
    
    %of Total
    
    
    
    
    
    
    of Total
    
    
    Change$
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    
    $
    
    
    %RevenuesProduct
    
    $
    22,987
    
    
    
    71.4
    %
    
    $
    19,501
    
    
    
    79.2
    %
    
    $
    3,486
    
    
    
    17.9
    %Support and services
    
    
    9,225
    
    
    
    28.6
    
    
    
    5,109
    
    
    
    20.8
    
    
    
    4,116
    
    
    
    80.6Total revenues
    
    $
    32,212
    
    
    
    100.0
    %
    
    $
    24,610
    
    
    
    100.0
    %
    
    $
    7,602
    
    
    
    30.9
    %
 Product Revenue.
 Support and Services Revenue.
 Cost of Revenues and Gross Margin
  Three Months Ended September 30,2009
    
    
    2008%
    
    
    
    
    
    
    %of Related
    
    
    
    
    
    
    of Related
    
    
    Change$
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    
    $
    
    
    %Cost of revenuesCost of product
    
    $
    10,957
    
    
    
    47.7
    %
    
    $
    9,338
    
    
    
    47.9
    %
    
    $
    1,619
    
    
    
    17.3
    %Cost of support and services
    
    
    2,825
    
    
    
    30.6
    
    
    
    2,064
    
    
    
    40.4
    
    
    
    761
    
    
    
    36.9Total cost of revenues
    
    $
    13,782
    
    
    
    42.8
    %
    
    $
    11,402
    
    
    
    46.3
    %
    
    $
    2,380
    
    
    
    20.9
    %Gross margin
    
    
    
    
    
    
    57.2
    %
    
    
    
    
    
    
    53.7
    %
 Cost of Product Revenue.
 Cost of Support and Services Revenues.
 Gross Margin.
 15




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Operating Expenses
  Three Months Ended September 30,2009
    
    
    2008%
    
    
    
    
    
    
    %of Total
    
    
    
    
    
    
    of Total
    
    
    Change$
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    
    $
    
    
    %Operating expensesSales and marketing
    
    $
    11,386
    
    
    
    35.3
    %
    
    $
    9,041
    
    
    
    36.7
    %
    
    $
    2,345
    
    
    
    25.9
    %Research and development
    
    
    3,276
    
    
    
    10.2
    
    
    
    2,452
    
    
    
    10.0
    
    
    
    824
    
    
    
    33.6General and administrative
    
    
    1,680
    
    
    
    5.2
    
    
    
    1,883
    
    
    
    7.7
    
    
    
    (203
    )
    
    
    (10.8
    )Total operating expenses
    
    $
    16,342
    
    
    
    50.7
    %
    
    $
    13,376
    
    
    
    54.4
    %
    
    $
    2,966
    
    
    
    22.2
    %
 Sales and Marketing Expense.
 Research and Development Expense.
 General and Administrative Expense.
 Interest Income
 Interest Income.
 Income Tax Expense
 Income Tax Expense.
 Comparison of Nine Months Ended September 30, 2009 and 2008
 Revenues
  Nine Months Ended September 30,2009
    
    
    2008%
    
    
    
    
    
    
    %of Total
    
    
    
    
    
    
    of Total
    
    
    Change$
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    
    $
    
    
    %RevenuesProduct
    
    $
    64,564
    
    
    
    72.5
    %
    
    $
    51,416
    
    
    
    80.4
    %
    
    $
    13,148
    
    
    
    25.6
    %Support and services
    
    
    24,437
    
    
    
    27.5
    
    
    
    12,519
    
    
    
    19.6
    
    
    
    11,918
    
    
    
    95.2Total revenues
    
    $
    89,001
    
    
    
    100.0
    %
    
    $
    63,935
    
    
    
    100.0
    %
    
    $
    25,066
    
    
    
    39.2
    %
 16




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##### Table of Contents



Product Revenue.
 Support and Services Revenue.
 Cost of Revenues and Gross Margin
  Nine Months Ended September 30,2009
    
    
    2008%
    
    
    
    
    
    
    %of Related
    
    
    
    
    
    
    of Related
    
    
    Change$
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    
    $
    
    
    %Cost of revenuesCost of product
    
    $
    32,089
    
    
    
    49.7
    %
    
    $
    24,716
    
    
    
    48.1
    %
    
    $
    7,373
    
    
    
    29.8
    %Cost of support and services
    
    
    8,232
    
    
    
    33.7
    
    
    
    5,078
    
    
    
    40.6
    
    
    
    3,154
    
    
    
    62.1Total cost of revenues
    
    $
    40,321
    
    
    
    45.3
    %
    
    $
    29,794
    
    
    
    46.6
    %
    
    $
    10,527
    
    
    
    35.3
    %Gross margin
    
    
    
    
    
    
    54.7
    %
    
    
    
    
    
    
    53.4
    %
 Cost of Product Revenue.
 Cost of Support and Services Revenue.
 Gross Margin.
 Operating Expenses
  Nine Months Ended September 30,2009
    
    
    2008%
    
    
    
    
    
    
    %of Total
    
    
    
    
    
    
    of Total
    
    
    Change$
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    
    $
    
    
    %Operating expensesSales and marketing
    
    $
    32,052
    
    
    
    36.0
    %
    
    $
    25,823
    
    
    
    40.4
    %
    
    $
    6,229
    
    
    
    24.1
    %Research and development
    
    
    9,160
    
    
    
    10.3
    
    
    
    7,111
    
    
    
    11.1
    
    
    
    2,049
    
    
    
    28.8General and administrative
    
    
    4,630
    
    
    
    5.2
    
    
    
    5,087
    
    
    
    8.0
    
    
    
    (457
    )
    
    
    (9.0
    )Total operating expenses
    
    $
    45,842
    
    
    
    51.5
    %
    
    $
    38,021
    
    
    
    59.5
    %
    
    $
    7,821
    
    
    
    20.6
    %
 Sales and Marketing Expense.
 17




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##### Table of Contents



Research and Development Expense.
 General and Administrative Expense.
 Interest Income
 Interest Income.
 Income Tax Expense
 Income Tax Expense.
 Liquidity and Capital Resources
  Cash Flows
  Nine Months EndedSeptember 30,2009
    
    
    2008Net cash provided by operating activities
    
    $
    10,525
    
    
    $
    2,575Net cash used in investing activities
    
    
    (31,173
    )
    
    
    (39,688
    )Net cash provided by financing activities
    
    
    951
    
    
    
    543Net decrease in cash and cash equivalents
    
    $
    (19,697
    )
    
    $
    (36,570
    )
 Operating Activities
  18




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##### Table of Contents



Investing Activities
   Financing Activities
   Operating and Capital Expenditure Requirements
  Contractual Obligations
 Managements
Discussion and Analysis of Financial Condition and Results of Operations  Contractual Obligations
 Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
  19




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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 Quantitative and Qualitative Disclosure About Market Risk,
 
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  Inherent Limitations of Internal Controls
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
   
 Item 1A. Risk Factors.
 We have identified the following risks and uncertainties that may have a material adverse
effect on our business, financial condition or results of operations. Investors should carefully
consider the risks described below before making an investment decision. The risks described below
are not the only ones we face. Additional risks not presently known to us or that we currently
believe are immaterial may also significantly impair our business operations. Our business could be
harmed by any of these risks. The trading price of our common stock could decline due to any of
these risks, and investors may lose all or part of their investment.
 20




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##### Table of Contents



Risks Related to Our Business
 Unfavorable economic and market conditions and a lessening demand in the information technology
market could adversely affect our operating results.
  We have a limited operating history and a history of losses, and we may not achieve or sustain
profitability in the future on a quarterly or annual basis.
  Our quarterly operating results may fluctuate significantly, which makes our future results
difficult to predict.
   
    
    reductions in end users budgets for information technology purchases and delays in their
budgeting and purchasing cycles, given current macroeconomic conditions;
    
    hardware and software configuration and mix;
    
    fluctuations in demand, including due to seasonality, for our products and services;
    
    changes in pricing by us in response to competitive pricing actions;
 21




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##### Table of Contents




    
    the sale of Storage Center in the timeframes we anticipate, including the number and size
of orders in each quarter;
    
    our ability to develop, introduce and ship in a timely manner new products and product
enhancements that meet end user requirements;
    
    the timing of product releases or upgrades by us or by our competitors;
    
    any significant changes in the competitive dynamics of our market, including new entrants
or substantial discounting of products;
    
    our ability to control costs, including our operating expenses and the costs of the
components we purchase;
    
    the extent to which our end users renew their service and maintenance agreements with us;
    
    volatility in our stock price, which may lead to higher stock compensation expenses; and
    
    general economic conditions in our domestic and international markets.
 The markets in which we compete are highly competitive and dominated by large corporations and we
may not be able to compete effectively.
   
    
    our products functionality, scalability, performance, ease of use, reliability,
availability and cost effectiveness relative to that of our competitors products;
    
    our success in utilizing new and proprietary technologies to offer products and features
previously not available in the marketplace;
    
    our success in identifying new markets, applications and technologies;
    
    our ability to attract and retain value-added resellers, which we refer to as channel
partners;
    
    our name recognition and reputation;
    
    our ability to recruit software engineers and sales and marketing personnel; and
    
    our ability to protect our intellectual property.
   22




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##### Table of Contents



We are dependent on a single product and the lack of continued market acceptance of Storage Center
would result in lower revenue.
  
    
    any decline in demand for Storage Center;
    
    the failure of Storage Center to achieve continued market acceptance;
    
    the introduction of products and technologies that serve as a replacement or substitute
for, or represent an improvement over, Storage Center;
    
    technological innovations or new communications standards that Storage Center does not
address; and
    
    our inability to release enhanced versions of Storage Center on a timely basis.
  Our products must meet exacting specifications, and defects and failures may occur, which may cause
channel partners or end users to return or stop buying our products.
  
    
    lost revenue;
    
    increased costs, including warranty expense and costs associated with end user support;
    
    delays or cancellations or rescheduling of orders or shipments;
    
    product returns or discounts;
    
    diversion of management resources;
    
    damage to our reputation and brand equity;
    
    payment of damages for performance failures;
    
    reduced orders from existing channel partners and end users; and
    
    declining interest from potential channel partners or end users.
 23




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##### Table of Contents



We will not sustain our percentage growth rate, and we may not be able to manage any future growth
effectively.
   
    
    increase our channel partners and end users in the mid-size enterprise market;
    
    address new markets, such as large enterprise end users and end users outside the United
States;
    
    control expenses;
    
    recruit, hire, train and manage additional qualified engineers;
    
    add additional sales and marketing personnel;
    
    expand our international operations; and
    
    implement and improve our administrative, financial and operational systems, procedures
and controls.
   Our gross margin may vary and such variation may make it more difficult to forecast our earnings.
  
    
    demand for Storage Center and related services;
    
    discount levels and price competition;
 24




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##### Table of Contents




    
    average order system size and end user mix;
    
    hardware and software component mix;
    
    the cost of components;
    
    level of fixed costs of customer service personnel;
    
    the mix of services as a percentage of revenue;
    
    new product introductions and enhancements; and
    
    geographic sales mix.
  We receive a substantial portion of our revenue from a limited number of channel partners, and the
loss of, or a significant reduction in, orders from one or more of our major channel partners would
result in lower revenue.
   The loss of any key suppliers or the failure to accurately forecast demand for our products or
successfully manage our relationships with our key suppliers could negatively impact our ability to
sell our products.
   25




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##### Table of Contents



If our third-party repair service fails to timely and correctly resolve hardware failures
experienced by our end users, our reputation will suffer, our competitive position will be impaired
and our expenses could increase.
  If we are unsuccessful in developing and selling new products, services and product enhancements,
our competitive position will be adversely affected and our ability to grow our revenue will be
impaired.
  If our channel partners fail to timely and correctly install and configure our storage systems, or
face disruptions in their business, our reputation will suffer, our competitive position could be
impaired and we could lose customers.
  26




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##### Table of Contents



If we fail to attract or retain engineering or sales and marketing personnel or if we lose the
services of our founders or key management, our ability to grow our business and our competitive
position would be impaired.
   We expect to face numerous challenges as we attempt to grow our operations, and our channel partner
and end user base internationally.
   
    
    difficulties of managing and staffing international offices, and the increased travel,
infrastructure and legal compliance costs associated with international locations;
    
    greater difficulty in collecting accounts receivable and longer collection periods;
 27




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##### Table of Contents




    
    difficulty in contract enforcement;
    
    regulatory, political or economic conditions in a specific country or region;
    
    compliance with local laws and regulations and unanticipated changes in local laws and
regulations, including tax laws and regulations;
    
    export and import controls; trade protection measures and other regulatory requirements;
    
    effects of changes in currency exchange rates;
    
    potentially adverse tax consequences;
    
    service provider and government spending patterns;
    
    reduced protection of our intellectual property and other assets in some countries;
    
    greater difficulty documenting and testing our internal controls;
    
    differing employment practices and labor issues; and
    
    man-made problems such as computer viruses and acts of terrorism and international
conflicts.
  If we fail to protect our intellectual property rights adequately, our ability to compete
effectively or to defend ourselves from litigation could be impaired which could reduce our revenue
and increase our costs.
   Assertions by third parties of infringement by us of their intellectual property rights could
result in a significant diversion of managements time and increased expenses.
  28




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##### Table of Contents




    
    stop selling products or using technology that contains the allegedly infringing
intellectual property;
    
    lose the opportunity to license our technology to others or to collect royalty payments
based upon successful protection and assertion of our intellectual property against others;
    
    incur significant legal expenses;
    
    pay substantial damages to the party whose intellectual property rights we may be found
to be infringing;
    
    redesign those products that contain the allegedly infringing intellectual property; or
    
    attempt to obtain a license to the relevant intellectual property from third parties,
which may not be available on reasonable terms or at all.
  If we fail to comply with the terms of our open source software license agreement, we could be
required to release portions of our software codes, which could impair our ability to compete and
result in lower revenue.
  We may need to raise additional funds in the future, which may not be available to us on terms
acceptable to us, or at all.
  29




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##### Table of Contents



We may engage in future acquisitions that could disrupt our business, cause dilution to our
stockholders, reduce our financial resources and result in increased expenses.
  Risks Related to the Ownership of Our Common Stock
 Our stock price is volatile and purchasers of our common stock could incur substantial losses.
  
    
    quarterly variations in our results of operations or those of our competitors;
    
    fluctuations in the valuation of companies perceived by investors to be comparable to us;
    
    economic developments in the storage industry as a whole;
    
    general economic conditions and slow or negative growth of related markets;
    
    changes in financial estimates including our ability to meet our future revenue and
operating profit or loss projections;
    
    changes in earnings estimates or recommendations by securities analysts;
    
    announcements by us or our competitors of acquisitions, new products, significant
contracts, commercial relationships or capital commitments;
    
    our ability to develop and market new and enhanced products on a timely basis;
    
    commencement of, or our involvement in, litigation;
    
    disruption to our operations;
    
    any major change in our board of directors or management; and
    
    changes in governmental regulations.
  30




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##### Table of Contents



If securities analysts or industry analysts downgrade our stock, publish negative research or
reports, or do not publish reports about our business, our stock price and trading volume could
decline.
  A limited number of stockholders will have the ability to influence the outcome of director
elections and other matters requiring stockholder approval.
  Delaware law and our amended and restated certificate of incorporation and bylaws contain
provisions that could delay or discourage takeover attempts that stockholders may consider
favorable and result in a lower market price for our common stock.
  
    
    the division of our board of directors into three classes;
    
    the right of the board of directors to elect a director to fill a vacancy created by the
expansion of the board of directors or due to the resignation or departure of an existing
board member;
    
    the prohibition of cumulative voting in the election of directors, which would otherwise
allow less than a majority of stockholders to elect director candidates;
    
    the requirement for the advance notice of nominations for election to the board of
directors or for proposing matters that can be acted upon at a stockholders meeting;
    
    the ability of our board of directors to alter our bylaws without obtaining stockholder
approval;
    
    the ability of the board of directors to issue, without stockholder approval, up to
10,000,000 shares of preferred stock with terms set by the board of directors, which rights
could be senior to those of our common stock;
    
    the elimination of the rights of stockholders to call a special meeting of stockholders
and to take action by written consent in lieu of a meeting; and
    
    the required approval of at least 66 2/3% of the shares entitled to vote at an election
of directors to adopt, amend or repeal our bylaws or repeal the provisions of our amended
and restated certificate of incorporation regarding the election and removal of directors.
  31




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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Unregistered Sales of Equity Securities
  Use of Proceeds from the Sale of Registered Securities
   
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits.
 Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    Date
    
    Number
    
    Herewith3.1
    
    Amended and Restated Certificate of Incorporation of
Compellent Technologies, Inc.
    
    8-K
    
    10/16/07
    
    
    3.13.2
    
    Amended and Restated Bylaws of Compellent Technologies, Inc.
    
    S-1
    
    07/02/07
    
    
    3.44.1
    
    Reference is made to Exhibits 3.1 and 3.2.4.2
    
    Specimen Common Stock Certificate.
    
    S-1/A
    
    09/21/07
    
    
    4.231.1
    
    Certification of Chief Executive Officer of Compellent
Technologies, Inc., as required by Rule 13a-14(a) or Rule
15d-14(a).
    
    
    
    
    
    
    
    
    
    X31.2
    
    Certification of Chief Financial Officer of Compellent
Technologies, Inc., as required by Rule 13a-14(a) or Rule
15d-14(a).
    
    
    
    
    
    
    
    
    
    X32.1
    
    Certification by the Chief Executive Officer and Chief
Financial Officer, as required by Rule 13a-14(b) or Rule
15d-14(b) and Section 1350 of Chapter 36 of Title 18 of the
United States Code (18 U.S.C. §1350).*
    
    
    
    
    
    
    
    
    
    X
 
 *
    
    The certification attached as Exhibit 32.1 that accompanies this Quarterly Report on Form
10-Q, is not deemed filed with the SEC and is not to be incorporated by reference into any
filing of Compellent Technologies, Inc. under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after the date of this
Form 10-Q, irrespective of any general incorporation language contained in such filing. 32




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##### Table of Contents



SIGNATURES
   Compellent Technologies, Inc./s/ John. R. JuddJohn R. JuddChief Financial Officer 33




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##### Table of Contents



EXHIBIT INDEX
 Incorporated by ReferenceExhibit
    
    
    
    
    
    
    
    
    
    
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    Date
    
    Number
    
    Herewith3.1
    
    Amended and Restated Certificate of Incorporation of
Compellent 
Technologies, Inc.
    
    8-K
    
    10/16/07
    
    
    3.13.2
    
    Amended and Restated Bylaws of Compellent Technologies, Inc.
    
    S-1
    
    07/02/07
    
    
    3.44.1
    
    Reference is made to Exhibits 3.1 and 3.2.4.2
    
    Specimen Common Stock Certificate.
    
    S-1/A
    
    09/21/07
    
    
    4.231.1
    
    Certification of Chief Executive Officer of Compellent
Technologies, Inc., as 
required by Rule 13a-14(a) or Rule
15d-14(a).
    
    
    
    
    
    
    
    
    
    X31.2
    
    Certification of Chief Financial Officer of Compellent
Technologies, Inc., as 
required by Rule 13a-14(a) or Rule
15d-14(a).
    
    
    
    
    
    
    
    
    
    X32.1
    
    Certification by the Chief Executive Officer and Chief
Financial Officer, as 
required by Rule 13a-14(b) or Rule
15d-14(b) and Section 1350 of Chapter 36 of
Title 18 of the
United States Code (18 U.S.C. §1350).*
    
    
    
    
    
    
    
    
    
    X
 
 *
    
    The certification attached as Exhibit 32.1 that accompanies this Quarterly Report on Form
10-Q, is not deemed filed with the SEC and is not to be incorporated by reference into any
filing of Compellent Technologies, Inc. under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after the date of this
Form 10-Q, irrespective of any general incorporation language contained in such filing. 34