Fusion-io An Acquisition Target?

Nov.25.13 | About: Fusion-io, Inc. (FIO)

Analysts estimate the enterprise PCIe SSD (Peripheral Component Interconnect Express Solid State Drives) based flash storage market to be worth $4 billion this year. The flash storage market is projected to grow 70% this year, making it a very attractive space for bigger technology players.

Fusion-io's Financials

Fusion-io (NYSE:FIO) saw revenues fall 27% over the year to $86.3 million, compared with the market's projections of $85 million. Loss per share of $0.07 also managed to surpass market expectations of a loss of $0.10 per share for the quarter.

For the current quarter, Fusion-io projected revenues to be marginally higher than the previous quarter's revenues. The market was disappointed as it was looking for revenues of $114 million. Fusion-io's stock has fallen nearly 25% since the announcement of its results.

During the quarter, Fusion-io also announced several senior management changes. The CFO and head of sales are both leaving the organization. It did announce new hires of a chief strategy officer, VP of research & development, and a chief information officer, but given Fusion-io's continuing losses, the exodus of old hands is a matter of concern. In May of this year, Fusion-io's founder, David Flynn, had stepped down from the position of the CEO to give way to Shane Robinson. This has been a year when several founders have stepped down from the position of their organization's CEO to let the organizations strive to higher growth.

Fusion-io's Worries

Fusion may be offering some of the best products within its segment, but its financials still remain a big concern. Fusion-io's biggest worry has been its dependence on Facebook (NASDAQ:FB) and Apple (NASDAQ:AAPL). Till earlier this year, half of Fusion's revenues came from these two customers. Fusion has been diversifying its customer base, but things have not been easy. Aggressive marketing efforts and price wars from competitors, including bigger players like EMC and recently listed peers like Violin Memory, have troubled the company.

Meanwhile, Fusion-io continues to expand its product portfolio. It recently announced a tie-up with software provider Sqrrl to deliver acceleration for secure big data workloads. Big data platform Sqrrl Enterprise is powered by Apache Accumulo and Hadoop and offers a secure and scalable NoSQL database for real-time big data applications. The tie-up between the two players will help database architects to simplify development and scale up an Accumulo big data system to accelerate performance while maintaining cost targets.

The stock is trading at $10.31 with a market capitalization of $1.09 billion. It touched a high of $25 in November 2012. Some analysts believe that Fusion-io may be the right candidate for an acquisition by players like EMC as they strive to get the competition out of the market.