Arik Hesseldahl

Recent Posts by Arik Hesseldahl

At $13 to $15 a Share, Fusion-IO Will Be Worth More Than $1 Billion

Fusion-IO, the enterprise storage company that uses flash memory to speed up conventional servers, updated the paperwork on its forthcoming initial public offering today. It disclosed that it plans to sell its shares in the price range of $13 to $15 which would give it a valuation just shy of $1.2 billion and would, the company hopes, raise about $212 million in the process.

That’s a considerable increase over the $150 million it initially sought when it filed its first S1 with the U.S. Securities and Exchange Commission in March. Fusion-IO surprised a lot of people with that filing, mainly because it had been so successful raising money from venture capitalists. As recently as December of last year, CEO David Flynn had dismissed the idea that Fusion-IO would go public in 2011.

A few more interesting details from the new filing: It reiterates the disclosure that Facebook is a significant customer and adds Apple to that list. The top three during the 2010 fiscal year were IBM, which resells Fusion-IO products in its own servers, which accounts for 13 percent of sales; Hewlett-Packard, also a reseller at 10 percent; and Facebook, which buys directly at 10 percent.

That changed significantly in 2011: Facebook accounted for 52 percent of sales and Apple for another 20 percent during the first nine months of fiscal 2011, meaning its top two customers account for 72 percent of sales. It also says its ten largest customers amounted to 91 percent of its revenues in the first nine months of the year, up from 75 percent in 2010 and 47 percent in 2009. It further warns that sales to Facebook will decline significantly in the quarter ending June 30, presumably because Facebook will be finished building out its data center. It notably says nothing of the kind about Apple.

Sales were $125 million in the first nine months of the fiscal year, and the company ran a $1.2 million loss amounting to 9 cents a share. It did, however, report a profit in its most recent quarter, its first, of $7 million on $67.2 million in revenue, for the quarter ended March 30.

Assuming the stock prices at $15 a share, Flynn’s holdings will be worth north of $100 million, though he’s putting up 500,000 shares for sale, which at that price would be worth $7.5 million. After the offering he would own a little less than 8 percent of the company.

Other big winners will be the venture capital investors who backed the company. New Enterprise Associates controls a little more than 38 percent of the equity in Fusion-IO, and owns nearly 26 million shares which at $15 a share would be worth nearly $390 million. Lightspeed Ventures owns another 8.8 million shares, which would be worth more than $132 million.

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— Gitesh Pandya of comments on the dreadful opening weekend box office numbers for “The Fifth Estate.”