RSS

Violin Memory’s IPO Lessons: Public Markets Don’t Always Get Cool Technology

04 Oct

Violin Memory, one of super cool players in the flash memory storage space, had a very rough IPO last Friday. With an initial offering of $9 per share, we watched the stock dropped all day up to 22% at $7.02 per share. Since then, the stock has had ups and downs closing at $7.50 last night. This IPO was another example that, when come to highly competitive sectors, public markets care more about revenues and deal flow than about solid technology roadmap.

As a technologist, I always have a hard time reconciling innovation with public market perception. While there are no doubts about the game changing capabilities of Violin Memory technology, the fact of the matter is that solid state flash memory is a very competitive space with incumbents like Dell, HP, EMC and IBM moving in. Like any other utility technology, the expectations are that these types of technologies will be highly commoditized in the near future. The fact that other players in the space such as Fusion.io are going through a bit of a turmoil didn’t get Violin’s IPO either.

In those type of sectors, public markets tend to look for a solid path to profitability and deal pipeline to overcome some of the, sometimes unjustified fears. From that perspective, Violin Memory couldn’t present a great picture either after terminating a deal with its top reseller: HP who have helped to grow the company’s revenues by 500 in the first year. In terms of numbers, Violin posted revenue of $51.3 million in the first half of 2013, up from $30.3 million in the year-ago period. However net loss was $59.2 million in the first half of 2013, up from a net loss of $48.3 million. Not a great picture either from a public sector perspective.

Having said all that, I still feel optimistic about the future of Violin Memory. However, my perception has little to do with an empirical analysis and is more based on the fact that I have a really hard time betting against a super talented team that knows their space better than anyone else in the market. With the right support, Violin Memory will be able to innovate into new areas in the solid state flash memory space and keep differentiating itself from the competition.

About these ads
 
2 Comments

Posted by on October 4, 2013 in Uncategorized

 

Tags: , , , , ,

2 responses to “Violin Memory’s IPO Lessons: Public Markets Don’t Always Get Cool Technology

  1. Ben Protano

    December 10, 2013 at 1:12 pm

    You are correct about general market perception outside of technological circles. When discussing an Initial Public Offering (IPO) it is important to note several factors which almost always result in an immediate decline in stock value. The investment firm/brokerage/promoters, there are several factors woven into the initial stock offer price. The impact of the IPO to the market serves as the ability for a formal or informal payback to those who were instrumental in getting the IPO to market. It would be interesting to research several IPOs to determine the impact of an IPO release with other positive (other than the hype of the new issuance itself) news or releases to determine if an initial drop occurs with the initial offering.

     
  2. chirag

    December 13, 2013 at 9:28 am

    I totally agree

     

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
Follow

Get every new post delivered to your Inbox.

Join 54 other followers

%d bloggers like this: