Violin Memory in spotlight amid flash storage consolidation, sources say
Violin Memory (NASDAQ: FIO), a maker of flash array systems, has been placed in the spotlight as a potential target following the sale of flash storage company Fusion-io (NYSE: FIO) to SanDisk (NASDAQ: SNDK) earlier this month, said industry sources.
The Salt Lake City-based company, which has a USD 404m market cap, has put a new management team in place in the last four months in an effort to stem losses and position the company for growth.
Mark Peters, a storage analyst at Enterprise Strategy Group, said Violin shares similarities with Fusion-io: both were once regarded as the darlings in enterprise storage, but their weak financial performance following their IPOs led to steep stock slides and management changes. “The spotlight is now on Violin to see if they can turn themselves around,” said Peters.
A second analyst agreed, and named Micron Technology (NASDAQ: MU), whose CEO Mark Durcan on 23 June said it is looking at making acquisitions of storage technologies, as one possible buyer.
Besides Micron, other makers of raw NAND flash memory chips, such as SanDisk, Toshiba, SK Hynix, Intel (NASDAQ: INTC) and Samsung, have been looking to offer more complete flash storage systems that include controllers, software and greater end-user functionality, noted Peters and the analyst.
Fusion-io achieved greater functionality through its purchase of NEXGEN, while Violin now has that through its joint venture with Microsoft (NASDAQ: MSFT), dubbed Windows Flash Array, noted Peters.
With Windows Flash Array, Violin’s product can be used as a storage server in data centers and provide enterprise-class data services, such as replicating data to remote locations or taking data snapshots that can be used for more efficient storage backups.
Eric Herzog, who in March joined as chief marketing officer and senior vice president of business development, said Violin’s new management team intends to grow Violin as a standalone, independent company. Among the management changes, Kevin DeNuccio became Violin’s CEO and Tom Mitchell became SVP global field operations in February. In March Ebrahim Abbasi became SVP operations and Said Ouissal became SVP product management and strategy.
Violin earlier this year sold its PCIe business to SK Hynix for USD 23m in a bid to focus on all flash storage arrays. “We were doing too many things. We’re a small company with a tight budget and you have to choose your battles,” said Herzog.
The divestiture will also help Violin achieve profitability, said Herzog. Violin has shrunk its losses and the company expects to start growing again in 2H14, he said. Violin posted a net loss of USD 30.1m in its first quarter ended 30 April, a little more than the USD 28.5m net loss in the prior year, but down sequentially from the USD 56.5m net loss in the prior quarter. First quarter revenue was USD 18.1m, 27% less than the USD 24.8m from the same quarter a year earlier.
Flash-based PCIe cards are designed to attach to a server, while all-flash arrays can be shared by multiple servers, providing better economics and workloads, argued Herzog. Also known as shared storage, the market for that is projected to be a USD 30bn industry, per year, over the next couple of years, said Herzog.
Violin’s major competitors in the shared storage space include IBM (NYSE: IBM), NetApp (NASDAQ: NTAP), EMC (NYSE: EMC), Hewlett-Packard (NYSE: HPQ) and Dell. Violin also competes against offerings from ventured-backed flash players Pure Storage, SolidFire and Kaminario.
“Our stated goal is to continue to grow as an independent company, expand market share, product breadth and solutions,” said Herzog.
Shares in Violin closed Friday at USD 4.48, down from a high of USD 7.98 reached shortly after its IPO last September. Violin shares reached a low of USD 2.50 last December.