Fusion-io Continues to Stumble

Not only did big names like Facebook, Groupon, and Zynga fare badly when they released their IPOs last year, but few other product-based technology companies have also seen a similar downfall since listing. Data storage, and server acceleration services provider, Fusion-io’s (NYSE: FIO) IPO did not do much better. After putting the stock up for sale at $19 a share and seeing it grow 108% on the opening day, the company has seen the stock crash. During the current year, its value has fallen 37% as it continue to trade below the list price. The recent quarter’s result announcement has not helped Fusion-io, either.

Fusion-io’s Financials

Despite Fusion-io’s recording a 21% increase in revenues for their Q4 to $106.1 million, the company was significantly short of the market’s projections of $110 million. Loss of $0.03 per share was, however, in line with the Street’s projections for the quarter.

The company ended the year with revenues growing 20% to $432.4 million. Non-GAAP net income per share fell from $0.35 a year ago to $0.21 for fiscal 2013. Increased spending on sales and marketing and R&D efforts contributed to the declining margins.

The situation doesn’t seem to be improving soon. For the current quarter, Fusion projects revenues of $80 million-$90 million, compared with the market’s estimates of $124 million. It expects to end the year with revenues of $519 million, missing the Street’s projections of $564 million.

Fusion’s Growth Plan

Fusion is focused on a three-pronged strategy to get it out of its current slow growth. First, it is enhancing its go-to-market strategy. As part of this focus, it has been working with OEMs and showcasing the capability of Fusion’s products when delivered in collaboration with products like Cisco’s C-series Rack servers, HP’s servers and Microsoft SQL Servers, to name a few.

Besides helping with sales, collaboration with OEM vendors is also helping the company to achieve its second area of focus – streamlining of product road maps and launch process. Through these collaborations, the OEMs and Fusion-io are able to bring new products to the market at a faster pace.

Finally, Fusion-io is investing in R&D efforts to maintain their leadership in technology. It is focusing on initiatives that will help accelerate the adoption of flash-aware applications, such as the use of the Atomic Writes API by a major MySQL database.

Fusion-io’s Product Expansion
Fusion continued to grow its product portfolio and recently introduced an upgrade to its ioTurbine software. ioTurbie is the among the first unified virtualization software solutions that now also enables customers to select from several caching options across IT architectures. Customers can select the ability for hypervisor caching, virtualization-aware caching in the guest VM, and dynamic reallocation of cache memory during live migration of virtual machines.

According to an IDC report, Fusion-io is operating in a $25 billion industry. Surely there is opportunity for the company to perform. But for now, the company seems to be delivering growth rates smaller than what the market expects. The stock is trading at $10.85 with a market capitalization of $1.07 billion. It touched a high of $32.63 in October 2012.