Violin Memory, Inc.NYSE
Violin Memory: Interesting, Tempting... But Not Quite Worth The Risk
Vince Martin • 69 Comments
Vince Martin • 69 Comments
Turnaround Should Tune Up Violin Memory's Sound And Make It Sing; A Buyout Is The Coda
Contrarian Analysis • 36 Comments
Contrarian Analysis • 36 Comments
Thu, Mar. 10, 4:37 PM
- "The review of strategic alternatives, which Violin conducted with Jefferies, has produced multiple strategic go-to-market and technology relationship opportunities, which we intend to pursue," says CEO Kevin DeNuccio in Violin's (NYSE:VMEM) FQ4 report. "We have also concluded the formal review process, thereby returning the company's focus to growth and profitability."
- Violin originally announced a strategic review in December within its FQ3 report. With no buyer apparently found, the flash array vendor is launching a new restructuring that it promises will provide "a pathway to profitability over the next 18-24 months without the need to raise additional capital." Headcount has been reduced by 25% from where it stood as of Oct. 31.
- FQ4 details: Product revenue fell by $2M Y/Y to $4.3M; service revenue rose by $0.4M to $6.6M. Non-GAAP gross margin fell to 48% from 56% a year ago. GAAP operating expenses (about to drop due to the job cuts) rose by $0.2M to$27.8M. Violin ended FQ4 with $76M in cash (down from $95.9M at the end of FQ3) and $133.4M in debt ($120M convertible).
- Shares haven't yet moved after hours. Violin went into earnings $0.09 above a 52-week low of $0.60.
- Violin's FQ4 results, earnings release
Dec. 23, 2015, 12:06 PM
- Hard-luck Violin Memory (VMEM +6.5%) has rallied towards $1 during a week that has seen NetApp announce it's buying flash array vendor/Violin rival SolidFire for $870M. The deal could be fueling hopes Violin, which currently sports a $98M market cap, will also find a suitor.
- Violin announced three weeks ago (along with an FQ3 miss) it has launched a strategic review. Maxim Group later estimated Violin's IP is worth ~$2/share, while adding Hitachi is the most logical acquirer.
- Shares still -79% YTD.
Dec. 4, 2015, 12:45 PM
- Two days after Violin Memory (VMEM -10.5%) posted an FQ3 miss, declined to provide sales guidance, and stated it has begun a strategic review, Maxim Group's Nehal Chokshi estimates the flash array vendor's IP is worth ~$2/share (for reference, Violin currently trades below $0.90). However, he also thinks Cisco and SanDisk, two firms seen as potential suitors, "have probably moved on by now," leaving Hitachi as the most likely buyer.
- Chokshi: "[W]e continue to believe there is value in Violin’s IP, as it is the only flash-optimized asset that has: 1) logical unit number (LUN)-selectable data-efficiency capabilities; and 2) high-end array data availability/durability capable of continuous data protection and stretch clusters ... the customer set between Violin and Hitachi meshes well, and the spend for Hitachi would be easily manageable."
- Shares are now down 34% since the FQ3 report came out, and 82% YTD.
May 29, 2014, 5:01 PM
- Korea's SK Hybix (HXSCL) will be buying Violin Memory's (VMEM) PCIe server flash module product line for $23M in cash and the assumption of $500K in liabilities.
- Violin had already stated it plans to exit the market. News of the deal comes shortly after Seagate announced it's buying Avago's PCIe/flash controller unit for $450M.
- Violin hasn't yet moved AH following the news, and the posting of FQ1 results that included a sizable revenue miss. (PR)
- The company hasn't provided revenue guidance. Its FY15 (ends Jan. '15) gross margin and opex guidance is being reiterated.
Feb. 20, 2014, 4:39 PM
- Violin Memory (VMEM), under new management, coming off a rough 2013, and reportedly talking with suitors, says it has implemented job cuts that have lowered its headcount to 380 employees from an Oct. 31 level of 483.
- The company also says it's exploring options for its PCIe server flash memory module ops (the product of the Velocity acquisition) to focus on "markets where Violin has proven technology leadership and significant growth opportunities." Violin expects to finish its review by the end of FQ1 (ends in April), and achieve annual opex savings of $10M/year as a result.
- Violin's final decision for its PCIe business stands to have implications for Fusion-io (FIO), the most prominent independent player in this space.
- Violin's FQ4 report is due on March 6.
- VMEM +2.3% AH
Feb. 11, 2014, 11:33 AM
- A source tells The Deal Violin Memory (VMEM +8.1%) "had suitors knocking at the door prior to its September IPO -- and still does." Moreover, interest is said to have grown since Violin fired CEO Don Basile and replaced him with the seasoned Kevin DeNuccio.
- Violin has reportedly held talks with Seagate, H-P, IBM, Samsung, and EMC. At least one company provided a term sheet, albeit while hedging it with conditions and due diligence requirements.
- Activist investor Clinton Group stated two weeks ago Violin, which remains 56% below its $9/share IPO price thanks to bad earnings news, has received informal interest from five potential buyers.
Jan. 29, 2014, 12:40 PM
- Clinton Group's Gregory P. Taxin tells Bloomberg beaten-down Violin Memory (VMEM +7.3%) has received informal interest from five potential suitors. He adds Violin (current market cap of $297M) may have received offers in the $700M-$1B range prior to its September IPO.
- Clinton, an activist investor in Violin, called for the company to sell itself last month.
- Violin's shares remain down 60% from their $9 IPO price, thanks in large part to bad earnings news. Its recent management changes could help facilitate a sale, as might the fact the enterprise flash storage space has seen a flurry of M&A activity from the likes of Cisco, EMC, IBM, and Western Digital. Potential buyers include NetApp, Dell, and Oracle.
Sep. 30, 2013, 2:37 PM
- A Bloomberg column discusses the possibility of Seagate (STX +1.3%) acquiring Fusion-io (FIO +1.9%) in response to Western Digital's acquisition of Fusion-io server flash module rival (and Seagate partner) Virident. M&A hopes, together with the steep multiples paid by Western, led Fusion-io shares to fly higher when the Virident deal was announced.
- No new information is provided in the Bloomberg column. Earlier this month, Seagate CEO Steve Luczo admitted Seagate "[needs] some technology .... on the software side" to flesh out its cloud storage offerings (many Web/cloud firms are embracing flash), but added valuations "[seem] a little frothy."
- Meanwhile, Fusion-io rival Violin Memory (VMEM +5%) is bouncing a bit after tumbling post-IPO on Friday; shares are still down 18% from their $9 IPO price.
- Violin CEO Don Basile, who was once Fusion-io's CEO, has been busy defending the company. He asserts Violin tops IDC and Gartner's rankings of flash array vendors, and that the company's proprietary flash controller ICs help it stand out (Fusion-io's module also use proprietary controllers). Regarding the wind-down of the H-P reseller deal, Basile declares the IT giant hasn't been a "meaningful" revenue contributor for seven quarters.