Fusion-io Files for Up to $150 Million IPO

Fusion-io, Inc. has filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission (SEC) for a proposed initial public offering of shares of its common stock.

The number of shares to be offered and the price range for the offering have not yet been determined.

Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated are acting as lead active joint book-runners for the proposed offering, and J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC are acting as passive joint book-runners.

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After raising $111.5 million since its inception in December 2005, Fusion-io needs more money to continue to expand and filed an IPO for up to $150 million.

This start-up with 348 employees was growing very fast recently with revenues more than tripling in last fiscal year ended June 30, 2010 at $36.2 million, and with sales reaching $58.3 million for the next six months ended December 31, 2010.

The firm sold its first PCIe SSDs in April 2007, its ioDrive product families combining one or more ioMemory modules with its VSL software. It said to have shipped solutions aggregating over 20PB of enterprise class storage memory to more than 1,000 end-users. Main customers are OEMs with IBM and HP accounting for more than 10% of its revenue in fiscal 2010, but also Dell, an early investor, as well as Tokyo Electron Device and Super Micro Computer. Facebook is currently its largest direct customer, also representing more than 10% of its sales.

Fusion-io relies on two contract manufacturers for its products, AlphaEMS Manufacturing and Jabil Circuit.

To convince Wall Street, this firm can prove exponential sales on the SSD booming market and the presence of Apple co-founder Steve Wozniak as its chief scientist could help.

But some facts and figures will have a negative impact:

Never profitable: Fusion-io has accumulated deficit of $77.1 million. Net loss was $31.7 million for FY2010 even if this figure is decreasing rapidly: $8.2 million for the following six months

Sales down in calendar June 2011 quarter: it expects revenues for the three months ending June 30, 2011 to be below the three months ending March 31, 2011.

OEMs = smaller margin: though the company had a 59% gross margin during its fourth financial quarter of 2010, OEMs means smaller margin that direct sales. These customers represented 92% of revenues for the six months ended December 31, 2010.

Competition: There is now a lot of public and private companies competing with Fusion-io in SSDs, the only public one entirely on SSDs being OCZ Technology, founded in 2002 and listed on Nasdaq.

IPO, a rarity in storage: Wall Street is not a big fan of storage. Since 1995, we have counted no more than 21 successful initial public offerings in the storage industry. Mainly in HDD but also in SSD, Hitachi GST was preparing an IPO of its stock but the operation was canceled following its acquisition by WD. In storage but in other activities, Nexsan postponed last April its $55 million IPO because of "market conditions", after another one collapsed in 2008. GlassHouse filed IPO papers in December 2007, looking for $100 million and reiterated the operation last year for $75 million.