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Violin struggles in first public quarter

Violin Memory’s first quarter as a public company was rocky, and the second quarter doesn’t look much better for the flash array vendor.

Violin reported earnings Thursday for the first time as a public company. It’s $28.3 million in revenue increased 37% from last year, but missed analysts’ expectations by $3.4 million. Violin’s net loss of $34.1 million was greater than expected, and $8.7 million more than it lost in the third quarter of 2012.

Its forecast of from $30 million to $32 million in revenue for this quarter fell far below expectation of $43.6 million.

Like executives from other storage vendors that struggled last quarter, Violin execs blamed the federal government shutdown for the revenue shortfall. And the forecast was based on expectations of another lean quarter of federal spending due to continuing political uncertainty.

Violin CEO Don Basile said the company’s PCIe flash card is off to a slow start, with less than $1 million in revenue in the quarter.

When Violin launched its Velocity PCIe card in March, Violin execs hinted there would be an OEM deal with its NAND flash partner Toshiba to sell the cards, but that has yet to materialize.

Violin is also facing more competition now that EMC’s XtremIO is generally available. NetApp also upgraded its E-Series all-flash array this week.

Basile said Violin was hoping for $10 million in booking from the federal government last quarter, and finished with $2.6 million. He said Violin added 32 new customers last quarter, up from 30 in the previous quarter.

Despite the bump, Basile said Violin’s long-term prospects haven’t changed. “The market we serve is large and we are well positioned to take advantage of the long-term trend of flash in the data center,” he said on the earnings conference call. “We have a strong, deep relationship with Toshiba. Fundamentally, our growth drivers remain intact.”

Investors are unconvinced. Violin priced its initial shares at $9 in September, but they opened at $6 per share today.

In a note to customers today, Stern Agee financial analyst Alex Kurtz wrote that Violin’s 32 new customers “is a modest number for a new vendor in the market that should be challenging the incumbents with a better price/performance platform.” He added that EMC’s XtremIO launch could hurt Violin this quarter.

Basile said he is not worried about XtremIO because EMC’s entrance into the all-flash market shows a need for that type of product. As for the array itself, he added, “it appears to be a limited product with a limited set of features.”

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