Feeds

Fusion-io nosedives as Facebook, Apple finish scoffing flash and chips

Shares tumble on weak Q3 outlook

Application security programs and practises

Flash memory maker Fusion-io's revenue is forecast to decline by 30 per cent from last quarter to the next, ending its meteoric growth.

Sales in the company's Q2 of fiscal 2013, which ended on 31 December, rose 43 per cent year on year to $120.6m, an 8 per cent rise on Q1 and a record for the company. Profits of this latest quarter were just 1.4 per cent of revenues at $1.7m. The company is building up its infrastructure and products rather than amassing profit. The year-ago net income was a $5.7m loss so the annual net income comparison is positive.

The kicker is the outcome for the next quarter: revenue of about $80m, a 33.6 per cent fall, in a booming market. There's likely to be a loss, possibly a substantial one, rather than a profit next quarter. Back in the second fiscal 2012 quarter revenue was $84m and Fusion-io made a $5.7m loss.

With more employees now, the loss next quarter could be between $10m and $15m, according to the company's chief financial officer Dennis Wolf. What's going on?

Fusion-io revenues to Q3 fy2013: up, up and oops, off a cliff

Fusion-io revenues and net income to Q2 fiscal 2013 with dismal third quarter outlook added

To reassure us that the long-term picture is good, Fusion-io said it expects full fiscal 2013 year revenues to be between $420m and $440m; they were $359.3m in fiscal 2012. The implication is that the fourth quarter will see a substantial revenue jump back up to somewhere between $101m and $121m.

The problem is that Fusion-io's sales are highly susceptible to order rates from its top customers, namely Facebook and Apple. Wolf referred to this, initially saying how great they were as long-term customers: "Our two largest customers have purchased nearly half a billion from Fusion-io since 2010, representing robust adoption of our technology. There is a lot of potential with these key customers, and the change in our guidance reflects a two-quarter shift in the timing of their bulk purchases."

He added that the flash chip biz has $365m in "cash and equivalents". Investors took heart and the stock initially rose 3.3 per cent overnight to $20.09 a piece - then fell by as much as 24 per cent in extended trading.

The earnings call - a transcription is available from Seeking Alpha - revealed more information as financial analysts quizzed bosses on this forecast growth reversal. Specifically, the callers were concerned that just two customers can cause a 33 per cent quarterly revenue drop by altering their buying patterns.

Co-founder, president and CEO David Flynn talked of "broadening the base of the core business", and said: "We had 10 customers place orders in excess of $1m, including a large Chinese gaming and social networking company, a rapidly growing cloud-based company, and two of the US’s largest telcos. EMEA orders nearly doubled year over year and Asia-Pac orders grew more than 130 per cent year over year."

But Fusion-io is still confident that Facebook and Apple will order lots more Flash NAND gear to keep applications' hot data in faster-than-disk memory and thus earn a performance increase. Flynn said other web companies were facing the same "hyperscale" computing problems and "five of the 10 orders over a million dollars this past quarter were for ioScale," Fusion-io's superdense flash card for dealing with this.

Wolf added that "Facebook, Apple, and HP combined represented 69 per cent of total revenue, and 34 per cent, 16 per cent, and 19 per cent respectively".

Analyst Katy Huby of Morgan Stanley asked a key question: "Is there any risk that those customers are taking a step back and rethinking their architecture and maybe considering or inviting new competitors in to bid for their next round of business?"

Flynn replied: "We don’t see a risk from the competition from that point of view. We see the point where the elasticity tips to where, even for sheer capacity, performance aside, that Flash will ultimately displace disks. And we expect to be at the forefront of that in how we structure our product offerings for this market."

As for Facebook and Apple, Flynn is confident that "when they decide to build new data centres or moving to new apps, that it will be with Fusion-io". ®

Bridging the IT gap between rising business demands and ageing tools

More from The Register

next story
Attack of the clones: Oracle's latest Red Hat Linux lookalike arrives
Oracle's Linux boss says Larry's Linux isn't just for Oracle apps anymore
THUD! WD plonks down SIX TERABYTE 'consumer NAS' fatboy
Now that's a LOT of porn or pirated movies. Or, you know, other consumer stuff
Apple fanbois SCREAM as update BRICKS their Macbook Airs
Ragegasm spills over as firmware upgrade kills machines
EU's top data cops to meet Google, Microsoft et al over 'right to be forgotten'
Plan to hammer out 'coherent' guidelines. Good luck chaps!
US judge: YES, cops or feds so can slurp an ENTIRE Gmail account
Crooks don't have folders labelled 'drug records', opines NY beak
Auntie remains MYSTIFIED by that weekend BBC iPlayer and website outage
Still doing 'forensics' on the caching layer – Beeb digi wonk
Manic malware Mayhem spreads through Linux, FreeBSD web servers
And how Google could cripple infection rate in a second
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.