##### 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 March 31, 2008
 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
    
    (I.R.S. Employerincorporation or organization)
    
    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
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



COMPELLENT TECHNOLOGIES, INC.
 FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2008
 INDEX
 PagePART I  FINANCIAL INFORMATIONItem 1. Consolidated Financial StatementsConsolidated Balance Sheets  As of March 31, 2008 and December 31, 2007
    
    
    3Consolidated Statements of Operations  Three Months Ended March 31, 2008 and 2007
    
    
    4Consolidated Statements of Cash Flows  Three Months Ended March 31, 2008 and 2007
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4T. Controls and Procedures
    
    
    20PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    36Item 3. Defaults Upon Senior Securities
    
    
    36Item 4. Submission of Matters to a Vote of Security Holders
    
    
    36Item 5. Other Information
    
    
    36Item 6. Exhibits
    
    
    36Signatures
    
    
    38Certification of Chief Executive OfficerCertification of Chief Financial OfficerCertification of CEO and CFO
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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Consolidated Financial Statements.
 COMPELLENT TECHNOLOGIES, INC.
 
 CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2008
    
    
    2007(unaudited)(in thousands, except share andper share amounts)AssetsCurrent assetsCash and cash equivalents
    
    $
    76,480
    
    
    $
    82,382Short-term investments
    
    
    5,682
    
    
    
    11,350Accounts
receivable, net of allowance of $450 and $408
as of March 31, 2008 and December 31, 2007
    
    
    13,895
    
    
    
    13,311Inventories
    
    
    2,573
    
    
    
    2,538Prepaid expenses and other current assets
    
    
    1,291
    
    
    
    1,046Total current assets
    
    
    99,921
    
    
    
    110,627Long-term investments
    
    
    10,910
    
    
    
    Property and equipment, net
    
    
    3,047
    
    
    
    2,749Total assets
    
    $
    113,878
    
    
    $
    113,376Liabilities and stockholders equityCurrent liabilitiesAccounts payable
    
    $
    2,422
    
    
    $
    3,216Accrued compensation and benefits
    
    
    2,911
    
    
    
    3,083Accrued liabilities
    
    
    1,663
    
    
    
    1,139Deferred
revenue, current
    
    
    9,308
    
    
    
    7,934Total current liabilities
    
    
    16,304
    
    
    
    15,372Deferred revenue, non-current
    
    
    3,216
    
    
    
    2,588Commitments and contingenciesStockholders equityCommon
stock, $0.001 par value, 300,000,000 shares authorized;
30,604,450 and 30,593,468 shares issued and outstanding as
of March 31, 2008 and December 31, 2007
    
    
    31
    
    
    
    31Additional paid in capital
    
    
    145,314
    
    
    
    144,824Accumulated deficit
    
    
    (51,055
    )
    
    
    (49,439
    )Accumulated other comprehensive income
    
    
    68
    
    
    
    Total stockholders equity
    
    
    94,358
    
    
    
    95,416Total liabilities and stockholders equity
    
    $
    113,878
    
    
    $
    113,376
  3




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COMPELLENT TECHNOLOGIES, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three MonthsEnded March 31,2008
    
    
    2007(unaudited)(in thousands, exceptper share amounts)RevenueProduct
    
    $
    14,876
    
    
    $
    7,426Product support and services
    
    
    3,437
    
    
    
    1,435Total revenue
    
    
    18,313
    
    
    
    8,861Cost of revenueCost of product
    
    
    7,347
    
    
    
    3,821Cost of product support and services
    
    
    1,408
    
    
    
    942Total cost of revenue
    
    
    8,755
    
    
    
    4,763Gross profit
    
    
    9,558
    
    
    
    4,098Operating expensesSales and marketing
    
    
    7,953
    
    
    
    4,198Research and development
    
    
    2,348
    
    
    
    1,552General and administrative
    
    
    1,745
    
    
    
    701Total operating expenses
    
    
    12,046
    
    
    
    6,451Loss from operations
    
    
    (2,488
    )
    
    
    (2,353
    )Interest income
    
    
    872
    
    
    
    223Net loss
    
    $
    (1,616
    )
    
    $
    (2,130
    )Net loss per common share, basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.51
    )Shares used in computing net loss per common
share, basic and diluted
    
    
    30,344
    
    
    
    4,177
  4




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COMPELLENT TECHNOLOGIES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Three MonthsEnded March 31,2008
    
    
    2007(unaudited)(in thousands)Operating activitiesNet loss
    
    $
    (1,616
    )
    
    $
    (2,130
    )Adjustments to reconcile net loss to net cash used in
operating activitiesDepreciation and amortization
    
    
    296
    
    
    
    253Compensation expense related to stock
options
    
    
    453
    
    
    
    93Changes in operating assets and liabilitiesAccounts receivable
    
    
    (584
    )
    
    
    902Inventories
    
    
    (35
    )
    
    
    55Prepaid expenses
    
    
    (245
    )
    
    
    119Accounts payable
    
    
    (794
    )
    
    
    (308
    )Accrued liabilities
    
    
    384
    
    
    
    (487
    )Deferred revenues
    
    
    2,002
    
    
    
    934Net cash used in operating activities
    
    
    (139
    )
    
    
    (569
    )Investing activitiesPurchase of property and equipment
    
    
    (594
    )
    
    
    (1,009
    )Purchase of investments
    
    
    (27,624
    )
    
    
    Proceeds from sales and maturities of investments
    
    
    22,450
    
    
    
    258Net cash used in investing activities
    
    
    (5,768
    )
    
    
    (751
    )Financing activitiesProceeds from exercise of stock options
    
    
    5
    
    
    
    16Payments for repurchase of common stock
    
    
    
    
    
    
    (117
    )Net cash provided by (used in) financing activities
    
    
    5
    
    
    
    (101
    )Net decrease in cash and cash equivalents
    
    
    (5,902
    )
    
    
    (1,421
    )Cash and cash equivalents, beginning of period
    
    
    82,382
    
    
    
    15,106Cash and cash equivalents, end of period
    
    $
    76,480
    
    
    $
    13,685Supplemental non-cash disclosure:Issuance of common stock for services provided
    
    $
    
    
    
    $
    18Vesting of restricted common stock
    
    $
    32
    
    
    $
    Unrealized gain on available-for-sale investments
    
    $
    68
    
    
    $
    
  5




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COMPELLENT TECHNOLOGIES, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Business Description
   2. Unaudited Interim Financial Information
   3. Summary of Significant Accounting Policies and Estimates
 Revenue Recognition
 Software Revenue
Recognition, Modification of SOP 97-2, Software Revenue
Recognition with Respect to Certain Transactions 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 as title
transfers to the end user, with the channel partner acting as a
broker. 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 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.
    
    Collectibility 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 collectibility is probable based upon its
review process, revenue is recognized upon cash receipt.
  6




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COMPELLENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Modification of SOP 97-2 Software Revenue Recognition
with Respect to Certain Transactions Revenue Arrangements with Multiple
Deliverables
   How Taxes Collected from
Customers and Remitted to Governmental Authorities Should be Presented In the Income Statement
(That Is, Gross Versus Net Presentation),
 Use of Estimates
  Recent Accounting Pronouncements
 Fair Value Measurements
 
    
    Level 1  quoted prices in active markets for identical
assets and liabilities;
    
    Level 2  observable inputs other than quoted prices in active markets for identical
assets and liabilities; and
    
    Level 3  unobservable inputs in which there is little or no market data available,
which require the reporting entity to develop its own assumptions.
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COMPELLENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Effective Date of FASB Statement No.
157
 The Fair Value Option for Financial Assets and
Financial Liabilities, including an amendment of FASB Statement No. 115
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of Accounting Research Bulletin No. 51
 4. Investments
  5. Inventories
  March 31,
    
    
    December 31,2008
    
    
    2007(unaudited)Component materials
    
    $
    414
    
    
    $
    489Finished systems
    
    
    2,159
    
    
    
    2,049$
    2,573
    
    
    $
    2,538
 8




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COMPELLENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 6. Property and Equipment
  March 31,
    
    
    December 31,2008
    
    
    2007(unaudited)Computer equipment
    
    $
    603
    
    
    $
    541Office furniture and equipment
    
    
    4,382
    
    
    
    3,953Computer software
    
    
    456
    
    
    
    423Leasehold improvements
    
    
    1,065
    
    
    
    1,0386,506
    
    
    
    5,955Accumulated depreciation and amortization
    
    
    (3,459
    )
    
    
    (3,206
    )$
    3,047
    
    
    $
    2,749
 7. Line of Credit
  8. Stock-Based Compensation
 2007 Employee Stock Purchase Plan
  2002 Stock Option Plan
  2007 Equity Incentive Plan
  9




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COMPELLENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   WeightedAverageNumber
    
    
    Exercise Priceof Shares
    
    
    Per ShareBalance at December 31, 2007
    
    
    1,217,424
    
    
    $
    3.16Granted
    
    
    991,644
    
    
    
    8.72Exercised
    
    
    (10,982
    )
    
    
    0.42Cancelled
    
    
    (4,600
    )
    
    
    1.25Balance at March 31, 2008 (unaudited)
    
    
    2,193,486
    
    
    $
    5.69Options exercisable at March 31, 2008 (unaudited)
    
    
    308,928
    
    
    $
    0.44
  Stock-Based Compensation Expense
 Share-Based Payment
  Three Months EndedMarch 31,2008
    
    2007(unaudited)Risk-free interest rate
    
    
    2.93
    %
    
    
    4.50
    %Expected life (years)
    
    
    5
    
    
    
    5Expected volatility
    
    
    50.60
    %
    
    
    66.98
    %Expected dividend yield
    
    
    
    
    
    
    
  10




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COMPELLENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Three Months EndedMarch 31,2008
    
    
    2007(unaudited)Cost of product
    
    $
    34
    
    
    $
    12Sales and marketing
    
    
    192
    
    
    
    142Research and development
    
    
    88
    
    
    
    25General and administrative
    
    
    139
    
    
    
    34Stock-based compensation expense before
income tax benefit
    
    
    453
    
    
    
    213Income tax benefit
    
    
    
    
    
    
    Total stock-based compensation expense, net
of tax benefit
    
    $
    453
    
    
    $
    213
   Stock Options Exercised for Unvested Restricted Common Stock
   Numberof SharesBalance at December 31, 2007
    
    
    272,144Stock options exercised for unvested restricted shares
    
    
    Vested
    
    
    (31,581
    )Balance at March 31, 2008 (unaudited)
    
    
    240,563
 11




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COMPELLENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9. Net Loss Per Common Share
   Three Months EndedMarch 31,2008
    
    
    2007(unaudited)Net loss
    
    $
    (1,616
    )
    
    $
    (2,130
    )Weighted-average common shares outstanding
    
    
    30,600
    
    
    
    4,489Weighted-average common shares with vesting
restrictions
    
    
    (256
    )
    
    
    (312
    )Weighted-average common shares used in
computing net loss per share, basic and diluted
    
    
    30,344
    
    
    
    4,177Net loss per common share, basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.51
    )
  March 31,2008
    
    2007(unaudited)Options to purchase common stock
    
    
    2,193
    
    
    
    1,196Common stock with vesting restrictions
    
    
    241
    
    
    
    282Convertible preferred stock (as converted)
    
    
    
    
    
    
    18,939
 10. Income Taxes
  11. Commitments and Contingencies
 Indemnification Obligations
  12




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COMPELLENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Legal Proceedings
   12. Segment and Geographic Information
 Disclosures about Segments of an Enterprise and Related Information
  Three Months EndedMarch 31,2008
    
    
    2007(unaudited)RevenueUnited States
    
    $
    15,439
    
    
    $
    8,194International
    
    
    2,874
    
    
    
    667Total
    
    $
    18,313
    
    
    $
    8,861
 
 13




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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 anticipated cash needs and our estimates regarding our capital requirements and our
need for additional financing;
    
    our ability to protect our intellectual property rights; and
    
    Pricing and availability of our suppliers products.
 In some cases, you can identify forward-looking statements by terms such as anticipate,
believe, can, continue, could, estimate, expect, intend, may, plan, 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 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, 2007, filed with the SEC on March 27, 2008.
 Overview
   Critical Accounting Policies and Estimates
  14




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Results of Operations
  Three Months EndedMarch 31,
    
    
    Change2008
    
    
    2007
    
    
    $
    
    
    %(unaudited)RevenueProduct
    
    $
    14,876
    
    
    $
    7,426
    
    
    $
    7,450
    
    
    
    100.3
    %Product support and services
    
    
    3,437
    
    
    
    1,435
    
    
    
    2,002
    
    
    
    139.5Total revenue
    
    
    18,313
    
    
    
    8,861
    
    
    
    9,452
    
    
    
    106.7Cost of revenueCost of product
    
    
    7,347
    
    
    
    3,821
    
    
    
    3,526
    
    
    
    92.3Cost of product support and
services
    
    
    1,408
    
    
    
    942
    
    
    
    466
    
    
    
    49.5Total cost of revenue
    
    
    8,755
    
    
    
    4,763
    
    
    
    3,992
    
    
    
    83.8Gross profit
    
    
    9,558
    
    
    
    4,098
    
    
    
    5,460
    
    
    
    133.2Operating expensesSales and marketing
    
    
    7,953
    
    
    
    4,198
    
    
    
    3,755
    
    
    
    89.4Research and development
    
    
    2,348
    
    
    
    1,552
    
    
    
    796
    
    
    
    51.3General and administrative
    
    
    1,745
    
    
    
    701
    
    
    
    1,044
    
    
    
    148.9Total operating expenses
    
    
    12,046
    
    
    
    6,451
    
    
    
    5,595
    
    
    
    86.7Loss from operations
    
    
    (2,488
    )
    
    
    (2,353
    )
    
    
    (135
    )
    
    
    (5.7
    )Interest income
    
    
    872
    
    
    
    223
    
    
    
    649
    
    
    
    291.0Net loss
    
    $
    (1,616
    )
    
    $
    (2,130
    )
    
    $
    514
    
    
    
    24.1
    %
 15




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Comparison of Three Months Ended March 31, 2008 and 2007
 Revenue
  Three Months Ended March 31,2008
    
    
    2007%
    
    
    
    
    
    
    %of Total
    
    
    
    
    
    
    of Total
    
    
    Change$
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    
    $
    
    
    %(unaudited)RevenueProduct
    
    $
    14,876
    
    
    
    81.2
    %
    
    $
    7,426
    
    
    
    83.8
    %
    
    $
    7,450
    
    
    
    100.3
    %Product support and services
    
    
    3,437
    
    
    
    18.8
    
    
    
    1,435
    
    
    
    16.2
    
    
    
    2,002
    
    
    
    139.5Total revenue
    
    $
    18,313
    
    
    
    100.0
    %
    
    $
    8,861
    
    
    
    100.0
    %
    
    $
    9,452
    
    
    
    106.7
    %
 Product Revenue.
 Product Support and Services Revenue.
 Cost of Revenue and Gross Margin
  Three Months Ended March 31,2008
    
    
    2007%
    
    
    
    
    
    
    %of Related
    
    
    
    
    
    
    of Related
    
    
    Change$
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    
    $
    
    
    %(unaudited)Cost of revenueCost of product
    
    $
    7,347
    
    
    
    49.4
    %
    
    $
    3,821
    
    
    
    51.5
    %
    
    $
    3,526
    
    
    
    92.3
    %Cost of product support and services
    
    
    1,408
    
    
    
    41.0
    
    
    
    942
    
    
    
    65.6
    
    
    
    466
    
    
    
    49.5$
    8,755
    
    
    
    47.8
    %
    
    $
    4,763
    
    
    
    53.8
    %
    
    $
    3,992
    
    
    
    83.8
    %Gross margin
    
    
    
    
    
    
    52.2
    %
    
    
    
    
    
    
    46.2
    %
 Cost of Product Revenue.
 Cost of Product Support and Services Revenue.
 Gross Margin.
 16




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Operating Expenses and Interest Income
  Three Months Ended March 31,2008
    
    
    2007%
    
    
    
    
    
    
    %of Total
    
    
    
    
    
    
    of Total
    
    
    Change$
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    
    $
    
    
    %(unaudited)Operating expensesSales and marketing
    
    $
    7,953
    
    
    
    43.4
    %
    
    $
    4,198
    
    
    
    47.4
    %
    
    $
    3,755
    
    
    
    89.4
    %Research and development
    
    
    2,348
    
    
    
    12.8
    
    
    
    1,552
    
    
    
    17.5
    
    
    
    796
    
    
    
    51.3General and administrative
    
    
    1,745
    
    
    
    9.5
    
    
    
    701
    
    
    
    7.9
    
    
    
    1,044
    
    
    
    148.9Total operating expenses
    
    $
    12,046
    
    
    
    65.8
    %
    
    $
    6,451
    
    
    
    72.8
    %
    
    $
    5,595
    
    
    
    86.7
    %Interest income
    
    $
    872
    
    
    
    4.8
    %
    
    $
    223
    
    
    
    2.5
    %
    
    $
    649
    
    
    
    291.0
    %
 Sales and Marketing Expense.
 Research and Development Expense.
 General and Administrative Expense.
 Interest Income.
 Liquidity and Capital Resources
  17




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Cash Flows
  Three Months EndedMarch 31,2008
    
    
    2007(unaudited)Net cash used in operating activities
    
    $
    (139
    )
    
    $
    (569
    )Net cash used in investing activities
    
    
    (5,768
    )
    
    
    (751
    )Net cash provided by (used in) financing activities
    
    
    5
    
    
    
    (101
    )Net decrease in cash and cash equivalents
    
    $
    (5,902
    )
    
    $
    (1,421
    )
 Operating Activities
   Investing Activities
   Financing Activities
  Operating and Capital Expenditure Requirements
   18




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Risk Factors
  
    
    the revenue generated by sales of Storage Center;
    
    our ability to control our costs;
    
    the emergence of competing or complementary technological developments;
    
    the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual product rights, or
participating in litigation-related activities; and
    
    the acquisition of businesses, products and technologies, although we currently have no commitments or agreements
relating to any of these types of transactions.
 Contractual Obligations
 Managements
Discussion and Analysis of Financial Condition and Results of Operations  Contractual Obligations
 Credit Facility
  Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 Quantitative and Qualitative Disclosure About Market Risk,
 19




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Item 4T. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting:
  Inherent Limitations of Internal Controls
  20




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
   
 Item 1A. Risk Factors.
 We have identified the following risks and uncertainties that may harm on our business,
financial condition or results of operations. 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. In assessing these risks, you should also refer to the other information contained in this
Quarterly Report on Form 10-Q , including our consolidated financial statements and related notes.
 Risks Related to Our Business
 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.
  21




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
    
    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;
    
    reductions in end users budgets for information technology purchases and delays in their purchasing cycles;
    
    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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Aggressive business tactics by our competitors may reduce our revenue.
  
    
    selling at a discount;
    
    offering bundled software at no charge;
    
    announcing competing products combined with extensive marketing efforts;
    
    offering to repurchase our system from existing end users;
    
    providing financing, marketing and advertising assistance to customers; and
    
    asserting intellectual property rights irrespective of the validity of the claims.
  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.
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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.
   We may not sustain our percentage growth rate, and we may not be able to manage any future growth
effectively.
  24




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
    
    increase our channel partners and end users in the small to medium size enterprises, or SME 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;
    
    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.
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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.
  We may not be able to maintain existing channel partners or grow our business to include more
channel partners and large enterprise end users.
  If our channel partners give higher priority to our competitors storage products we may be unable
to grow our revenue and we may continue to incur net losses.
  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.
  26




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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.
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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.
  As we enter new markets we may encounter longer sales, payment and implementation cycles, which
could have an adverse effect on the size, timing and predictability of our revenue.
  
    
    our end users budgetary constraints;
    
    the timing of our end users budget cycles and approval processes;
    
    our channel partners and end users credit risks;
    
    our end users willingness to replace their current storage solutions;
    
    our or our channel partners need to educate end users about the uses
and benefits of our products and services; and
    
    the timing of the expiration of our end users current license
agreements or outsourcing agreements for similar services.
 28




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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;
    
    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;
 29




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
    
    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.
  
    
    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.
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Any significant impairment of our intellectual property rights from any litigation we face could
damage our reputation, impair our ability to compete and increase our expenses.
  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.
  If our products do not interoperate with our end users networks, servers or software applications,
installations would be delayed or cancelled.
  We cannot predict our future capital needs and we may be unable to obtain additional financing to
fund our operations.
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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.
  We are subject to governmental export and import controls that could subject us to liability or
impair our ability to compete in international markets.
  We incur significant costs as a result of operating as a public company and our management devotes
substantial time to new compliance initiatives.
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If we fail to maintain effective internal control over financial reporting in the future, the
accuracy and timing of our financial reporting may be impaired.
    We expense stock options, which will reduce our net income or increase our net losses in future
periods.
 Share-Based Payment Accounting for Stock Issued to Employees.
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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.
  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.
  34




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The price of our stock could decrease as a result of shares of common stock being sold in the
market.
    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;
    
    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 and the
inability of stockholders to take action by written consent in lieu of a meeting; and
    
    the required approval of at least a majority of the shares entitled to vote at an election of
directors to remove directors without cause.
  35




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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.
 ExhibitNumber
    
    Description of Document3.1
    (1)
    
    Amended and Restated Certificate of Incorporation of Compellent Technologies, Inc.3.2
    (2)
    
    Amended and Restated Bylaws of Compellent Technologies, Inc.4.1
    
    
    Reference is made to Exhibits 3.1 and 3.2.4.2
    (3)
    
    Specimen Common Stock Certificate.10.17
    (4)
    
    Letter Agreement with Dennis R. Johnson, dated February 19, 2008.10.18
    (4)
    
    2008 Management Incentive Plan.10.19
    (5)
    
    Non-Employee Director Compensation Policy.31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended.31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended.32.1
    *
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.
 36




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##### Table of Contents



(1)
    
    Filed as Exhibit 3.1 to our Current Report on Form 8-K (No. 001-33685), dated October 15,
2007, and filed with the SEC on October 16, 2007, and incorporated herein by reference.(2)
    
    Filed as Exhibit 3.4 to our Registration Statement on Form S-1 (No. 333-144255) filed with
the SEC on July 2, 2007, as amended, and incorporated herein by reference.(3)
    
    Filed as Exhibit 4.2 to our Registration Statement on Form S-1 (No. 333-144255) filed with
the SEC on July 2, 2007, as amended, and incorporated herein by reference.(4)
    
    Filed as a similarly described exhibit to our Current Report on Form 8-K (No. 001-33685),
filed with the SEC on February 19, 2008, and incorporated herein by reference.(5)
    
    Filed as Exhibit 10.19 to our Annual Report on Form 10-K for the year ended December 31, 2007
(No. 001-33685), filed with the SEC on March 27, 2008, and incorporated herein by reference.*
    
    The certification attached as Exhibits 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. 37




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SIGNATURES
   Compellent Technologies, Inc./s/ John R. JuddJohn R. JuddChief Financial Officer 38




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description of Document3.1
    (1)
    
    Amended and Restated Certificate of Incorporation of Compellent Technologies, Inc.3.2.
    (2)
    
    Amended and Restated Bylaws of Compellent Technologies, Inc.4.1
    
    
    Reference is made to Exhibits 3.1 and 3.2.4.2
    (3)
    
    Specimen Common Stock Certificate.10.17
    (4)
    
    Letter Agreement with Dennis R. Johnson, dated February 19, 2008.10.18
    (4)
    
    2008 Management Incentive Plan.10.19
    (5)
    
    Non-Employee Director Compensation Policy.31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended.31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended.32.1
    *
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.
 
 (1)
    
    Filed as Exhibit 3.1 to our Current Report on Form 8-K (No. 001-33685), dated October 15,
2007, and filed with the SEC on October 16, 2007, and incorporated herein by reference.(2)
    
    Filed as Exhibit 3.4 to our Registration Statement on Form S-1 (No. 333-144255) filed with
the SEC on July 2, 2007, as amended, and incorporated herein by reference.(3)
    
    Filed as Exhibit 4.2 to our Registration Statement on Form S-1 (No. 333-144255) filed with
the SEC on July 2, 2007, as amended, and incorporated herein by reference.(4)
    
    Filed as a similarly described exhibit to our Current Report on Form 8-K (No. 001-33685),
filed with the SEC on February 19, 2008, and incorporated herein by reference.(5)
    
    Filed as Exhibit 10.19 to our Annual Report on Form 10-K for the year ended December 31, 2007
(No. 001-33685), filed with the SEC on March 27, 2008, and incorporated herein by reference.*
    
    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.