Violin Memory falls through basement in first day of trading Violin Memory's hotly-anticipated IPO fizzled on the first day of trading. The flash-array company had raised some $162m by selling its shares at $9, but on the first day of trading the stock opened below $8 and fell from there. The stock closed at $7.02 on Friday, down 22 percent. Violin Memory has posted a loss for the last …
"Of a company, of a management team, and of a CEO. What more can be said?"
Actually, completing an IPO at price higher than the price the market is currently willing to pay is actually an indication of a skilled management team and CEO. If a the price spikes after an IPO, it means the company left money on the table. Usually, the CEO will face a lot of pressure to under price the IPO, in order to generate some profit for the initial investors who just want to make a profit the first week. But those aren't really investors, just profiteers.
I agree with what you're saying but it's also bad PR if your share price drops immediately after IPO. A rising share price also creates a positive buzz around the company. The human brain tends to operate in the opposite way to stock markets. People's instincts are to buy into a company when the share price is going up and sell when it's going down, but buying high and selling low doesn't make much money.
What with me being a poor lowly mathematician and all, I think the reason could be summed up by anyone with a brain in the line:
"Last year, the company posted a $109m loss on revenues of $73.7m. It had hoped to raise $2bn with its IPO."
You lost a shed-load of money. Then expected people to give you 20 times more money than you'd lost.
I don't claim to understand the stock markets at all (even when I assume everyone there is just out to scam prices to their advantage, I still don't get how they operate), but surely it's quite simple Alan Sugar / Dragon's Den type maths from there on?
"I don't claim to understand the stock markets at all (even when I assume everyone there is just out to scam prices to their advantage, I still don't get how they operate), but surely it's quite simple Alan Sugar / Dragon's Den type maths from there on?"
Growing company's lose a lot of money. R&D eats up tons of capital. So early stage company need a lot of money, because they need to build something, before they have something to sell. If the R&D and business expansion was done already, they wouldn't need investment or an IPO.
I can see why they got clobbered. It looks like it will take years (at best) to reach profitability, and their sales growth is not going to get them to billion dollar revenues for years beyond that.
I wouldn't buy at par value either.
Companies pull their IPO's if they can't get at least $10 per share as most institutional investors have rules against buying shares in companies whose share price is below $10. So the fact they went public at $9 would have been a huge red flag that this company is headed for the pink sheets.
"Companies pull their IPO's if they can't get at least $10 per share as most institutional investors have rules against buying shares in companies whose share price is below $10."
Kinda not true, as the issuing company can just reduce the number of shares issued, to make the issued price $10.
Just playing Devil's advocate here you understand.
Remember folks this is what stock markets were designed to do.
Pay back early investors.
Put more money into the company coffers, if people think it's worth investing in.
The market has spoken, and it does not like them very much.
JAFAs: "Hey, let's make a small array with just Flash in it and sell it on the promise of really freaky IOPS figures! The server vendors will have to work with us. Then we can sell the company and make meeeeeelions!"
Array vendors: "Pffft, we'll just add a layer of Flash to our arrays, bring it all under our superior management and tiering software, and pound your niche product into the sand"
Violin: "Crap, we didn't sell ourselves in time." <Insert sound of toilet flushing>
Would have to disagree with you here:
Violin 1 Million IOPS: http://www.violin-memory.com/news/press-releases/violin-1010-delivers-1-million-iops-to-a-server-over-a-single-interface-an-industry-first/
Violin 1 Million IOPS from a single VM: http://cormachogan.com/2012/09/24/violin-memory-1-million-iops-from-a-single-vm/
Violin 2 Million IOPS: http://www.storage-switzerland.com/Blog/Entries/2013/8/21_2_Million_IOPS_-_It_Takes_A_Flash_Village.html
I've heard all sorts of stories about Violin and their sales in the EMEA market for the last few years, and the S1 filings / first-week Wall Street figures back up said stories. Good tech (although limited in it's software), but very niche target market.
-Disclosure NetApp Employee-
I'm not sure what data you're using to support your assertion that "they have always focused on latency which the other vendors are still nowhere near matching", but if you've got hard data I'd love to see it, especially at the "500K IOPS per array" performance level touted by the Violin literature (and even that seems to be for configs with built in single points of failure).
For example, in most of the high IOPS customer POC and benchmark testing I've been made aware of, an HA configured NetApp EF540 matches, and in many use cases outperforms Violin's 3000 and 6000 systems in terms of latency.
It's not just NetApp, I'm reasonably familiar with the performance characteristics of other vendors offerings, and the fact of the matter is that regardless of the geek-cred of the internal architecture, when it comes to serving high performance data to applications, the violin gear simply isn't that special or differentiated in its results.
I can just imagine the traders dialogue now ...
Hey Dad ... how about an all flash array company without any significant data management software or performance differentiation ?
How much ... ?
2 Billion ...
Tell 'im he's dreaming ...
http://www.youtube.com/watch?v=dik_wnOE4dk
"the lack of imagination continues." Actually I think it was very imaginative to think that a product based on flash alone could compete over time with the big array vendors. In an incredibly stupid kind of way. What you needed was a more rounded product, like Compellent had, which led to them being snapped up by a big vendor (Dell in Compellent's case). Flash-only companies like Violin are now trying to flog a "premium" all-flash array in a market that has plenty more flash options than even only two years ago, and will shortly be completely swamped with cheap, Chinese-manufactured, "me-too", all-flash arrays. Does Violin have an answer that will differentiate their offerings and keep them ahead of the commodity flash wave? Not by the looks of it, their recent branching out into PCIe cards looks more like a re-tread of the old ideas from ex-FusionIO bod Don Basile. TBH, I thought their best option was being bought out by Toshiba, but that option seems to have gone with the IPO.
"....Does the company make money?....." Well, if it looked like they had an opportunity to make oodles of money in the near future, maybe by bringing a revolutionary new product to the market, then I'd take a punt on them, but it looks like the analysts don't think that is going to happen. The bottom seems to have fallen out of the Violin boat when EMC, Dell, hp, Oracle and IBM all showed no interest in buying them.
every specialised element is rapidly becoming commoditised and a significant base of potential customers are cost focussed (Facebook wants it high-density, fast and CHEAP - Google puts as much as it can in whiteboxes, etc.).
I wouldn't short the stock but it isn't likely to be going up until one day it might get acquired.
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