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.