Solid-State Storage Maker Violin Memory Slips in IPO Debut
Solid-state storage hardware maker Violin Memory became a publicly traded company Sept. 27, but its first day on the New York Stock Exchange didn't quite turn out as well as it was hoping.
The Mountain View, Calif.-based storage hardware and software maker priced its stock in the middle of the range it expected at filing time, activating 18 million shares for $9 apiece on Sept. 26, which would have valued the company at $898.4 million while transferring $162 million into its bank accounts.
However, Violin Memory stumbled out of the box, opening 18 percent lower than the price for its initial public offering. When the stock came up for sale the morning of Sept. 27 under the ticker symbol VMEM, buyers balked; the stock opened at $7.41 and didn't see traction the rest of the day.
VMEM closed at $7.02, down $1.98, or 22 percent, on volume of 19.8 million shares, on the day. But it's only Day 1, and storage—especially NAND flash-based storage—is one of the hottest sectors in IT and has been for years.
Perhaps investors were looking critically at Violin Memory's most recent balance sheet, in which the company showed a net loss that more than doubled the previous year's, from $44.8 million to $109.1 million.
The 8-year-old company had been seeking a valuation of about $2 billion when it originally filed confidentially for an IPO. However, on Sept. 26, it settled for a valuation of about $800 million, close to the one it earned from its previous financing round in April 2012.
Violin's NAND flash and dynamic RAM-based storage arrays are ideal in environments that need fast processing and analyzing of large data sets. In 2011, Violin was one of the first storage companies to offer NAND flash arrays as Tier 1 storage, which is mostly still in the domain of hard disk drives.
One of Violin's early customer wins was with Hewlett-Packard, which had no real solid-state storage story until it partnered with Violin several years ago. Violin used its large contract with HP to record substantial revenue gains in 2012, with its sales jumping from $11.4 million to $53.9 million.
That all ended, however, when HP bought another new-gen storage maker, 3PAR, in 2010—following a bidding war with Dell—for $2.35 billion. Even though 3PAR wasn't a big NAND flash player, the move nonetheless pushed Violin to the sideline without a central customer. But by then Violin's products were established in the market, and the company survived and moved on.
Violin CEO Don Basile noted in the company prospectus that HP's purchases accounted for 65 percent of its revenues in 2012 and less than 10 percent in 2013.
In its decade of business, Violin has banked a total of $186 million from investors that include Toshiba (which owns 14 percent of the company), Juniper Networks and SAP Ventures.