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Fusion-io IPO may be coming

Good Q4 and incorporation HQ change

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Two birds flew over and dropped hearsay and rumour presents on my head today.

The rumours were about Fusion-io, the privately-held, solid state storage start-up company building product from PCI-e-connected ioDrive flash modules, and with OEM deals with HP and IBM. Both came from birds who knew other birds inside Fusion-io.

Rumour one is that Fusion earned $40 million in its fourth quarter. Rumour two is that it is changing its incorporation headquarters from Nevada to Delaware. What do we make of that and does one plus one add up to anything?

Let's assume Fusion-io earned $10m in its Q1, $20m in its Q2, $30m in its Q3 and $40m in the fourth quarter, giving it fy2010 revenues of $100m. I know, it's a tidy little model, too tidy maybe, but I have also heard Fusion revenues have been growing very fast indeed and that the fourth quarter revenues could be relatively very large compared to the preceding three quarters.

A hundred mil annual revenue seems not too faraway from being profitable, even for a hardware startup. A forty mil quarterly revenue also seems as if it might be close to profitability, might even be profitable. Set that thought aside for a moment.

Why change incorporation from Nevada to Delaware?

My information is that Delaware corporations are much friendlier to shareholders. Nevada corporations are said to be preferred by privately-held corporations because the directors have more rights and can, for example, keep more corporate information private and set up anti-hostile takeover provisions. Directors can have exclusive rights to change corporate bylaws and exclude shareholders from doing so.

Delaware corporations give more rights to shareholders.

I've been told that Nevada corporations don't pay corporation tax whereas Delaware ones do. These things would indicate that a Nevada corporation would have to have good reasons for changing its incorporation to Delaware. One reason could be that it is considering an IPO and wants to remove obstacles to people buying shares.

Okay, now let's return to the revenue point and the closeness to profitability I've suggested. We'll add one (revenue close to profitability) and one (incorporate change to shareholder-friendly Delaware) to get two (IPO possibility), and suggest that if, a big if, the two birds' presents were true, then Fusion-io could be thinking about an IPO next year.

Fusion-io couldn't immediately answer questions about this.

This is a blog; there is no reporting here, personal opinions are allowed, and that's all this is, an opinion to take home for the weekend. It could be a house of cards, a castle of sand, or a heap of brown stuff. It might be true though. Have a good one. ®

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