Four crucial deals to pluck Violin Memory away from the trash can

Major OEM deal could be signed by end of March

Analysis During the Violin Memory quarterly results earnings call on Thursday, CEO Kevin DeNuccio talked about his company's strategic review with investment banker Jefferies LLC.

The review "included both inbound and outbound inquiries of over 40 companies" that might benefit from using or selling "the technology and value proposition that Violin offers in the marketplace."

We might imagine this would mean any established company selling or wishing to sell into the enterprise external storage array market and not having a Violin FSP-class product.

For example, and rejecting startups and most software-only suppliers: Broadcom, Cisco, Cray, DataDirect Networks, Fujitsu, HDS, IBM, Imation (Nexsan), Lenovo, Microsoft, NEC, NetApp (maybe), Oracle, Quantum, Riverbed, SanDisk, Seagate, SGI, Veritas, WDC, and X-IO Technologies – 21 named suppliers – could have been on the list of 40.

Others might have been telcos or capable and substantial system integrators.

That list shrank down to "more than 15 companies engaged at various levels of evaluation and exploration." Not one of them has made "a formal offer to fully acquire the company at this time." That could mean that one or more of them made an offer to buy a piece of Violin's business technology assets but not the whole shebang.

There is hope

What did result from the review were potential "multiple strategic relationships that will be an essential part of our strategy going forward." These "new strategic relationships with industry players" could be "fundamental in the company's return to growth."

They are with "some of the biggest technology companies in the world, [who] now see the strategic advantage of Violin's technology, [and] will combine [it] with their strategies and products, even though they do not take the step of offering an all-out acquisition of the company at this time."

There may still be hope of an acquisition, therefore. So we have multiple suppliers looking at incorporating Violin's technology in their strategy (ie, sell it) and products (ie, incorporate it).

Four potential deals

DeNuccio said: "One of these relationships has reached the MOU [memorandum of understanding] stage, with one of the largest technology bellwethers."

That suggests a company of the stature of IBM, Cisco, or HPE.

We are told: "We think this will be a broad and important strategic relationship that we hope will include financial tie-ins, R&D collaboration and an OEM relationship. We hope to announce this first relationship during the quarter."

Which means before the end of April.

Then, "there are three more relationships in various stages of development that will give us a fundamentally different footprint and go-to-market capability around the globe, to resell OEM and support our FSP technology."

That suggests regional suppliers, perhaps in three of its successful market geographies: Russia, Turkey and Korea.

That's it, the formal review process has been concluded, with one major OEM deal possible and three lesser, and we think, regional deals that may have OEM elements to them; four potential partnerships in all, focussed on "both technology and go-to-market relationships."

He talked about how "the important market position and capability of these strategic relationships, we believe, will give our technology and value proposition" a validation in the market. The CEO explained that "Our future vision is to incorporate this leading FSP technology, with networking and compute partnerships."

Violin is "streamlining the organization for better efficiency, to line up with our new partnerships."

Glimmer of hope

DeNuccio thinks and hopes that "these new strategic relationships ... can ... give us substantial revenue lift in the market, hopefully in the back half of this year, but certainly into our next fiscal year."

If the CEO can announce a major OEM deal with one of the largest technology bellwethers before the end of April, then this would be a bright and shining glimmer of hope to present to Violin's investors, and would help to retain their belief in the face of aggressive overtures from The Clinton Group. ®

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