Contact: Brenon Daly
Just eight months after first filing its IPO paperwork and a scant five months after debuting on the NYSE, Fusion-io has already indicated that there will be a lot more of its shares hitting the market in the coming days. The flash memory specialist plans to sell $100m worth of stock in a secondary, with insiders slated to sell another $250m. In its June IPO, Fusion-io raised more than $200m, selling over 10 million shares. In that offering, insiders sold only 1.5 million shares.
Even though other companies often get slammed for insiders ‘running for the exits’ when selling such a large slug of equity so quickly after the offering, Fusion-io stock barely moved when it announced the secondary. If nothing else, that was consistent with the vendor’s overall stunning aftermarket performance. It priced at $19, first traded in the low $20s and was flirting around $36 on Monday afternoon. And although the stock is highly volatile, with some 10% intra-day swings, it only dipped briefly below its offer price in late September. Overall, any investor who bought on the opening day in June is up about 50%, compared to a flat performance during that period on the Nasdaq.
In that way, Fusion-io is rather unique among the other enterprise technology firms that have gone public so far this year. Cornerstone OnDemand, which went public in March, hit the market at about $19. While Cornerstone held that level for its first four months as a public company, it has been underwater for the last four months. It is down about 25% while the Nasdaq has flatlined. Even more dramatically, Responsys has sunk to just half the level it first traded back in April. Although Responsys had been slipping steadily since early September, the online marketing vendor got buried last week when it warned – in just its third report to Wall Street – that sales in the final months of 2011 would increase only about one-third the rate that revenue had been growing.
Contact: Brenon Daly, Henry Baltazar
As Fusion-io continues to bask in the glow of its newly created billion-dollar valuation, Wall Street is already looking for the next solid-state storage specialist. Conveniently enough, Violin Memory popped up earlier this week, announcing a $40m round at a $440m valuation. (It’s pure coincidence, certainly, that Violin – headed by the same guy who used to head Fusion-io – picked the same week as Fusion-io’s debut to trumpet not only the new investment but also the valuation it fetched. Just a fluke of the calendar, of course.)
Whatever the motivation for landing two rounds of funding in just four months, Violin also talked about topping $100m in sales this year, which would certainly put it on track for an IPO of its own. Provided, that is, the company intends to go public. If it should opt to head for the other exit and sell, we suspect that the most interested bidder in Violin may well be Hewlett-Packard.
The two companies have been publishing benchmark results from a combined offering, and HP undoubtedly could use the technology boost to more effectively compete with Oracle, which has been punching HP every chance it gets. (Oracle’s none-too-subtle ‘cash for clunkers’ ad campaign around HP servers comes to mind.) Another possible suitor for Violin would be Juniper Networks, which has already invested in the startup.
-Contact Thomas Rasmussen
The market for solid-state-drive (SSD) technology is heating up. As an increasing number of consumer and enterprise products (including servers, desktops, laptops and netbooks) incorporate the technology, some old-line technology companies are looking to expand their SSD offerings. Western Digital acknowledged that last week by acquiring SSD vendor SiliconSystems for $65m in cash after about a year of on-and-off talks. (It was Western Digital’s first purchase since its $1.14bn acquisition of Komag in mid-2007.) On the other side, SiliconSystems had taken in just $14m in venture capital since its inception in 2002 from Miramar Venture Partners, Rustic Canyon Partners, Samsung Ventures America, Shepherd Ventures and SanDisk.
We understand that SiliconSystems generated about $50m in trailing 12-month (TTM) sales, meaning Western Digital paid about 1.3x TTM sales for the startup. This is in line with historical averages for the space, but comes at a time when the median valuation for venture-backed startups has been nearly cut in half. In the first quarter of 2009, the median valuation in a sale for a VC-backed tech company sank to just 2.1x TTM sales, compared to 3.8x TTM sales during the same period last year. (See our full report on first-quarter M&A.)
SiliconSystems will be re-branded as Western Digital’s Solid-State Storage business unit and will be headed by former CEO Michael Hajeck, who used to run STEC Inc’s enterprise SSD division. The importance of this relatively small acquisition should not be underestimated. Having essentially become a player in the SSD space overnight, Western Digital has taken the first step toward securing its future survival. With $1.4bn in cash, we wonder if Western Digital will continue to use acquisitions to expand in this market. Possible targets are Hajeck’s former employer STEC, which we previously speculated might be on sale, as well as Smart Modular Technologies. There are also a few potentially disruptive startups out there worth looking at such as Pliant Technology, Texas Memory Systems and Fusion-io.
Western Digital M&A
||Price to sales multiple
|March 30, 2009
|June 28, 2007
|July 24, 2003
Source: The 451 M&A KnowledgeBase *451 Group estimate