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Large customer slowdown bites Fusion-io

Fusion-io has greatly benefitted from Facebook and Apple for more than two years, with those companies buying tens of millions of dollars’ worth of Fusion-IO PCIe flash cards almost every quarter. Now Fusion-io is seeing the downside of having two customers make up most of its business.

Fusion-io dropped its revenue forecast for this quarter to $80 million from a previous estimate of around $137 million because Apple and Facebook won’t make any meaningful purchases this quarter or next. Fusion-io expects to lose from $10 million to $15 million this quarter after making $13.9 million last quarter. Its stock price fell 22 percent Wednesday after it revealed the forecast drop, and fell another 13 percent today.

Last quarter, Facebook bought $41 million of Fusion-io products and Apple bought $19.3 million, making up a little more than half of the Fusion-io’s $120.6 million in total revenue. In the previous quarter, Facebook and Apple bought $33 million worth of Fusion-io products apiece.

Now the spigot has been turned off, at least temporarily. Fusion-io CEO David Flynn spent a lot of his earnings call Wednesday assuring analysts that Apple and Facebook will return to their status of prolific flash buyers after the six-month lull.

“This is really about the timing of when they put in new infrastructure, not whether or not Fusion-io is a key part of that infrastructure,” Flynn said.

He said Fusion-io has proven its value to those companies, adding “when the pull the trigger for deploying is not in our control.”

Fusion-io could have other problems in the coming months. EMC is pledging more PCIe-based flash products following its VFCache caching software launched in 2012. And Seagate this week invested $40 million and signed a reseller deal with Fusion-io rival Virident Systems. Seagate will sell Virident PCIe flash products through its OEM partners and channel partners.

Flynn shrugged off the Seagate-Virident news, saying “the business is not driven at the OEMs. The business is driven at the end-user customer. So having companies that build components, really they won’t be at the point where the competition is actually happening, and that’s with the end users.”

On a more optimistic note, Flynn said the ioScale cards Fusion-io launched this month are off to a good start. The high-density low-cost ioScale cards scale to 3.2 TB and are aimed more at cloud providers and telcos than enterprise’s mission-critical apps. Flynn said ioScale products were involved with five of the vendor’s 10 $1 million-plus orders last quarter.

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