Violin Memory sold off its fledgling PCIe flash business to SK hynix for $23 million this week as it tries to dig out of the financial hole it fell into late last year.
The sale gives Violin much-needed cash while allowing it the focus on its all-flash array platform. It was a priority for new CEO Kevin DeNuccio when he took over the company last February, two months after the board fired his predecessor Don Basile following Violin’s rocky start as a public company.
The PCIe sale accompanied layoffs as Violin moved to reduce expenses last quarter. The expense reduction worked, although the reduction and reorganization of Violin’s sales team played a role in a huge revenue drop.
Violin Thursday reported $18.1 million in revenue last quarter, down 35 percent from the previous quarter and 27 percent from last year. Violin also lost $30.1 million in the quarter.
The loss was actually an improvement over the previous quarter when Violin lost $56.5 million. DeNuccio said Violin cut expenses by about $8 million last quarter.
“This will be a transitional year for Violin,” he said on a conference call. “There will be a lot of moving pieces. We made dramatic financial improvements during the quarter.”
Of the $10 million sequential drop in revenue, $4 million came from the fall in PCIe revenue from $5 million to $1 million
DeNuccio did not give any revenue guidance but said he expects it to begin growing in the second half of the year. As for the drop last quarter, he blamed it on the sales reduction and “not a reflection of demand for our products or the flash market in general. It’s the results of changes we made to position the company for long-term success.”
He also said Violin will have a significant new product launch over the next few months.
“It’s been our cash burn rate, not our technology that has caused concern,” he said.
Burn rate remains a concern. Pointing to Violin’s $87 million in cash and recent losses, Sterne Agee financial analyst, Alex Kurtz wrote in a note to clients today: “Without a bounce back in [second half] growth as management has outlined, liquidity concerns would become a significant issue, especially as new competitors enter the market and pricing pressure becomes more acute.”