Disappointing Earnings Crush Fusion-io Shares
Utah-based computer flash memory provider Fusion-io saw its shares flip Wednesday, after a second fiscal quarter earnings report showed its net loss widened and its gross profit margin declined. The company’s stock was down almost 16 percent on Wednesday, closing at $25.50 per share on the New York Stock Exchange.
Fusion-io reported earnings that marginally beat estimates and revenue that exceeds market analysts’ estimates. The company’s December quarter revenue stood at $84.1 million (beating estimates at $76 million), up by 169 percent from a year ago. Non-GAAP profits reached five percent a share but gross margin fell to 51.1 percent from 58.8 percent a year ago.
Fusion-io CEO David Flynn revealed to Allthingsd that the company’s new IO Drive 2 product, including ioCache and Atomic Writes, has cost the company more to build the set up. The company has also tried to grab more market share due to fact that SSD drives are now priced more competitively compared to traditional drives.
“Enterprise customers who buy the new stuff are always conservative and take longer to decide whether they want to buy it or not,” said Flynn. “We intentionally sacrificed some margin to get broader adoption and replace more disk drives.”
The new version of its ioDrive hardware runs substantially faster than the original. The company has also invested on the new Auto Commit Memory (ACM) software architecture, which allows servers to produce 1 billion I/O operations per second.
Another trend for gross margin is being negatively impacted because of customers buying lower-margin products. Flash memory storage provider OCZ Tech (OCZ) has been growing faster is gaining market share by providing competitive margins to customers.
For further growth and to build positive sentiments among investors, the company is expanding its customer base – Salesforce.com is now a Fusion-io new customer. Apple and Facebook are among Fusion top customers who procured more than a million dollars products this quarter. It is also banking on the mid segment businesses as the enterprise software marketing is inclining more towards SAAS cloud based software.
“By helping those companies, we are indirectly driving business in the mid-range of the market. Apple and Facebook are in the SAAS business too, it’s just that their customers are consumers,” said Flynn.
The year 2011 has been very successful for Fusion-io. The company went public on June 9 last year. Fusion is expecting more market share for the year 2012 as growth for Small Data – analytics databases under 10 terabytes is growing.
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