Summary:

Fusion-io missed analysts’ revenue estimates for the second quarter of 2013. But new CEO Shane Robison believes price cuts could entice more hyperscale customers to jump aboard.

Robison. Source: Fusion-io
photo: Fusion-io

Server-side flash pioneer Fusion-io reported revenues Wednesday of $106 million for its fiscal fourth quarter, about 4 percent lower than the $110.01 million figure analysts had expected.

Investors were not pleased. The non-GAAP loss of 3 cents, with a $23.8 million net loss, met analysts’ expectations, although the stock was down more than 18 percent from the closing price of $14.90 in after-hours trading after the call with analysts.

Newly installed CEO Shane Robison acknowledged challenges facing the company, including the arrival of more competitors to the PCI-Express flash market. But he thinks it’s positioned to lead the shift to flash going forward.

“No one really is able to compete with us on performance, because we are direct-attached to the server in a very specialized architecture that has taken years to refine — very highly reliable, very low latency,” Robison told me in an interview after the call with analysts.

During the analyst call he spoke of steps the company must take to grow further. It needs to heal relationships with its original-equipment vendor (OEM) partners — Cisco, Hewlett-Packard and Dell are among them — and make sure prices are what they should be for both direct deals and OEM deals. The company also needs to work on how and when it pre-announces products and be sure not to disturb the process of OEMs qualifying Fusion-io gear for their own deals.

Fusion-io signed up LinkedIn and a large financial services company in the United Kingdom in the fourth quarter, and the company wants to add at least a few more webscale customers. Robison name-dropped several companies operating at that level, including Pandora, Alibaba, Alipay, China Mobile and Salesforce.com. “Over the next 24 to 36 months, a lot of these big scale-out opportunities are going to get deployed,” Robison said. He said the company will be very aggressive on pricing, especially for the ioScale PCI-Express flash cards designed for webscale deployments.

And with a heavier share of hyperscale customers, the company’s gross margins could drop, since these are high-volume deals with lower prices and presumably lower margins. For the entire fiscal year 2013, which ended on June 30, the non-GAAP gross margin was 60.1 percent, and guidance for the fiscal year 2014 was for 52 percent to 54 percent.

Customer mix is an important subject for Fusion-io. Depending as it does on so few companies for such a large share of its revenues, diversification is critical, especially for enterprise customers. The acquisition of hybrid storage company NexGen Storage should help add bring on more companies that want to try out flash but can’t afford full-fledged all-flash arrays. And Robison said after the analyst call that while the company will remain focused on adding webscale customers, he’s eager to go deeper into the enterprise market.

“We want to go after both, but we’re not as big on the enterprise side as we are on the hyperscale, and we want to change that,” he said. “It’s a big opportunity.”

Robison became CEO in May, taking the position from co-founder David Flynn after Flynn left with another co-founder, then-CMO Rick White.

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