News Stay informed about the latest enterprise technology news and product updates.

Fusion-io fumbles again

This has been a tough year for server-side flash pioneer Fusion-io, and it probably has yet to hit bottom.

Fusion-io Wednesday reported disappointing sales for last quarter, and expects things to get worse this quarter. This comes after it revealed in January a slowdown of buying from its largest customers Facebook and Apple, and then CEO David Flynn suddenly resigned and was replaced by board member Shane Robison in May.

On Wednesday, Fusion-io reported $106 million in revenue for last quarter, which was about the same as a year ago and about $4 million below Wall Street expectations. Fusion-io lost $23.8 million in the quarter. The guidance for this quarter was even worse: Fusion-io now expects $80 million to $90 million in revenue compared to $118.1 million in the same quarter last year and a consensus expectation of $123 million from financial analysts.

Several factors are hampering Fusion-io. The main problem is Apple and Facebook, which made up most of its revenue in its early days, have not picked up spending on Fusion-io product as fast as expected. Robison said Facebook bought more than expected last quarter and made up 36% of total revenue, but will fall off again this quarter. Apple accounted for less than 10% of revenue last quarter, and Fusion-io has no clear expectation for when or if it will pick up. When Fusion-io first reported the slowdown in spending by Facebook and Apple in January, it claimed they would resume spending in the second half of this year.

Fusion-io is trying to get other large customers on board to make up for the Facebook and Apple slowdowns. Robison mentioned LinkedIn, Pandora, Spotify, Alibaba, Alipay, Salesforce, China Mobile and U.K. National Health as newer customers the vendor is focusing on.

“Because of the way people build out their big data centers, this is by definition a lumpy business,” Robison said on the company’s earnings call. “The best way for us to sort of dampen the lumpiness is to have a dozen of these [large] customers instead of just two or three.”

Fusion-io also is selling arrays it acquired from NexGen at a slower rate than expected. When Fusion-io picked up NexGen for $119 million in April, Flynn claimed it would have meaningful sales this quarter. But Robison said the NexGen hybrid arrays, now called ioControl, are not expected to account for much revenue this quarter.

Other problems include conflict with its server OEM partners around pricing and the timing of its ioScale high-density PCIe card release in January. Robison said Fusion-io announced that product before its OEM partners were ready for it, and it is being qualified now.

There is also much more competition in the PCIe flash market than when Fusion-io began. EMC is pushing its XtremSF caching software with cards from Virident and Micron, and its marketing revolves mostly around how those cards are better than Fusion-io’s. Another rival, LSI, claims an unidentified leading social networking company is using its PCIe flash cards.

Robison downplayed the competition, saying the market was large enough for several vendors and not all PCIe flash companies are direct competitors in Fusion-io’s markets.

“We’re the leaders,” he said. “And if we can just get a few of our execution things lined up well here, well, I think we’ll be in good shape.”

Fusion-io shareholders aren’t convinced of that. The stock price dropped more than 20% in pre-market trading today. The more important issue is how its customers and partners will react.

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.