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Violin Memory's latest quarter to forget

With time and money running out, Violin Memory next week will take another shot at launching a successful all-flash array. It might be its last shot – Violin  doesn’t have enough money to last another year at its current losses.

Violin on Wednesday will launch its next family of Flash Storage Platform (FSP) arrays as it tries to stay relevant in the all-flash market it helped create. Full details of the product won’t be available until launch day, but CEO Kevin DeNuccio teased it Thursday night during Violin’s earnings call. The new FSP is a key piece of Violin’s survival strategy, along with reduced spending and a raising of capital.

DeNuccio said the new FSPs will double the IOPS (input/output operations per second) performance of its current FSP systems and cut latency by five times. Violin will allow customers to run its Concerto operating system in a public cloud, enabling customers to use the cloud for backup, disaster recovery and data that does not require flash performance.

Violin will also add encryption software across all of its arrays in the latest Concerto update.

DeNuccio said the cloud enhancements “will position the Violin’s Flash Storage Platform as the best product line for building private, hybrid, and public clouds. While enterprises have been migrating data to the cloud over the last several years, the coordination, management and retrieval challenges of data have been very difficult. The Concerto in the cloud solution will address this customer pain point.”

The new system follows Violin’s 2015 launch of its FSP 7300 and 7700 arrays, which added the data management and protection features missing from its earlier flash systems. Those FSP arrays never caught on with customers.  Violin reported revenue of $7.5 million last quarter, down from $9.7 million the previous quarter and $15.3 million in the same quarter last year.

Product revenue of $2 million last quarter came at the cost of $7.5 million that Violin spent on sales and marketing.

FSP sales have been a big disappointment, failing to come close to Violin’s projected revenue growth of 25% to 35%.

To put Violin’s revenue in perspective, all-flash competitor Pure Storage raked in $163 million in revenue last quarter. Nimble Storage sold 133 all-flash arrays in their first full quarter on the market. Among legacy vendors, Dell EMC’s XtremIO all-flash array will hit close to $2 billion in revenue this year and NetApp sold $194 million in all-flash arrays last quarter.

So while the all-flash market is booming, Violin Memory is going bust.

“This quarter’s performance is obviously frustrating and disappointing,” DeNuccio said. “We still have many challenges to return to growth and complete our turnaround.”

Violin lost $20.6 million last quarter, burned through $13 million and has $36 million in cash remaining. Violin executives said they are cutting expenses and looking for outside financing to stay afloat.

“We believe our existing cash balance is insufficient to operate the business for the next 12 months even as we continue to restructure our operations and reduce spending even further,” CFO Cory Sindelar said.

To cut expenses, Violin is outsourcing much of its development work to GlobalLogic. Sindelar estimated the outsourcing will save Violin $5 million a year. Violin is also putting COO Ebrahim Abbasi in charge of sales and marketing to take “a layer out of management out of our senior rank,” according to DeNuccio. DeNuccio said his goal is to reduce quarterly expenses to under $11.5 million by the start of 2017, which means it would require $70 million to $80 million in annual revenue to break even.

Violin executives have not said how the changes will affect headcount. Violin Memory has already gone from 318 employees at the start of the year to 235 at the end of last quarter, and now stands about 200.

“We learned a lot over the last couple of years,” DeNuccio said. “We are learning from our mistakes and making the necessary adjustments.”

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