Contact: Scott Denne Tim Stammers
Before its IPO paperwork was made public, Violin Memory was expected to be the next enterprise tech knockout. The sensationalism subsided, however, when the company’s financials became public and potential investors noticed it was bleeding cash. Now, after its first-ever quarterly conference call showed worse-than-expected results, Violin is obviously in need of a tune-up.
The flash storage vendor reported past and future revenue numbers below what the Street was expecting. In the just-closed quarter, the company put up $28m in sales, below what analysts were anticipating, and projects revenue of just $30-32m in the fourth quarter – nearly 40% less than the $43m benchmark analysts were forecasting. Violin’s shares plummeted 50% on the news, erasing more than $200m in market value.
Management blames a slowdown in federal spending for the weak results – the company began the quarter tracking toward $10m in federal revenue and finished with just $2m. While blaming the federal government, which accounted for about one-fifth of its sales last year, is convenient, it’s not the only problem. Based on its projections for next quarter, Violin isn’t expecting much growth in other verticals, either, and tempered expectations for its PCIe product, saying revenue from that would only be about $1m.
Violin was early to the all-flash market. Now that the space is quite contentious, the absence of certain core technologies exposes the company’s weakness against rivals that had more time to build table-stakes storage functions such as de-duplication, compression, snapshots and thin provisioning. Violin’s focus should be on promoting the products that other all-flash providers don’t have, including its Windows-powered server incorporating flash and its GridIron-originated caching appliance.
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