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Fusion-io In The IPO Pipeline

Posted on Tuesday, May 17th 2011

Today, the VC-funded startup market is full of Internet companies that command sky-high valuations without a robust monetization strategy in place. However, there are also organizations such as Fusion-io that are able to support valuations and IPO plans with a sound product strategy. The company, which was ranked Number 2 by The Wall Street Journal out of the top 50 venture-backed companies last year, recently announced plans to go public. Here is a brief review of a company that has, to date, shipped more than 20 petabytes of flash memory to more than 1,000 organizations.

Fusion-IO
Utah-based Fusion-io was founded in 2006 by David Flynn and Rick White. Fusion-io released its flagship ioMemory product in 2007. ioMemory is known to be one of the most efficient and cost-effective media for processing large amounts of data. It claims to contain 100 times the density of RAM and has the capacity of 100 memory modules and the performance of 1,000 disk drives. Fusion’s flash-based solid-state drives provide short-term cache memory to a single server, thus improving processor utilization and reducing latency. Additionally, the company’s offerings are scalable and eliminate expensive storage infrastructure for customers. Fusion-io has OEM relationships with leading vendors including HP, IBM, SuperMicro, and Dell and boasts a client list that includes names such as Credit Suisse and Facebook.

Since inception, Fusion has received $112 million in funding through investors that include the names of Lightspeed Venture Partners, Dell Ventures, Sumitomo Ventures and Accel Partners. Recently, the company also filed for an IPO to raise an additional $150 million. It reported revenues of $36.2 million for the fiscal year ending June 2010 with a loss of $31.7 million. By December 2010, it was recording revenues of $58.3 million with a net loss of $8.2 million.

Analysts seem confident in the megatrend of most infrastuctures in the IT enterprise market migrating to hybrid and private clouds over the next five years. At present, Facebook’s platform is a leading example of such a cloud. Fusion-io contributes 80% of the hardware footprint inside Facebook’s building and counts Facebook as its largest customer, accounting for 10% of sales. Through supporting Facebook’s cloud, Fusion-io has established a strong presence in the IT megatrend for itself. However, some analysts view Fusion’s dependence on Facebook negatively and believe that their valuation will be affected by Facebook’s “halo effect.”

Fusion-io’s International Footprint
Besides innovating on products, Fusion-io has also been expanding its geographical reach. In 2010, it stepped up its EMEA presence by opening an office in the UK to cater to a region that contributes an estimated 10% of its revenues. Earlier that year, it also entered into an agreement with Tokyo Electron Device (TED), a semiconductor and computer network equipment provider and fabless IC design and development supplier in Japan to offer their customers ioMemory-based products.

IDC estimates that spending on high-performance storage and networking and memory-rich servers will reach $52 billion in 2011. Through efficient server-deployed memory solutions and tie-ups with leading OEMs, Fusion-io will surely be able to offer customers a way to accelerate their databases and application infrastructures.

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