Fusion-io swapped its CEO, caused doubt about the company's outlook and installed a new leader with more enterprise heft. For the company pushing Flash-based data centers the near-term future could be quite a mixed bag.
Wall Street shot Fusion-io shares and may ask questions later, but it's doubtful. Shares fell 21 percent or so.
Fusion-io positioned the Robison addition as a way to propel the company's "next phase of growth and development." Robison also knows how to work with large companies and grow international operations. Translation: Robison is better suited to court large enterprise companies than Flynn, who was billed as too wonky by some observers.
So now what?
Analysts were mixed on the CEO swap. After all, just a few days ago Flynn delivered a so-so quarter and promised that a revenue rebound was ahead. When a CEO provides an outlook and then runs for another venture, it's best to assume that guidance is toast.
Barclays analyst Ben Reitzes noted:
Today’s announcement is quite a surprise and raises concerns on timing since Flynn just gave guidance for an aggressive rebound in revenues after some major disappointments. Given Robison’s background at HP, it would seem that he could help with international and enterprise expansion long-term. We think Fusion-io still needs to gain greater traction among CIOs of traditional enterprises to offset volatility at Apple and Facebook, as well as increased competition.
Piper Jaffray analyst Andrew Nowinski worried that Fusion-io could lose Facebook as a key strategic customer. Fusion-io has suffered in recent quarters because Apple and Facebook, two companies that accounted for a large chunk of revenue, pared back spending. Nowinski said:
We believe the management transition was a necessary step needed to drive further enterprise penetration, as Fusion-io needs a leader with more “large company” experience. That said, we are concerned with the potential reaction from the company’s strategic customers, specifically at Facebook, given management’s prior comments that the exclusivity Fusion-io enjoyed resided on a personal relationship with management.
Apple wasn't seen as a defector because its dealings with Fusion-io were less personal and more business, said Nowinski.
Given the moving parts let's assess Fusion-io's standing going forward:
Risk: Fusion-io will become fear uncertainty and doubt fodder. Everyone---EMC, IBM and a bevy of others with more storage accounts---is gunning for Fusion-io. Flash storage is the future. Fusion-io blazed a path, but may have only annoyed the big guns. Rest assured a CEO change will be used against Fusion-io in the field.
Reward: Robison has real enterprise knowhow and CIO relationships to leverage. Nowinski noted:
We welcome the change in management and believe it was a necessary step needed to drive further penetration of the enterprise market.
Risk: Fusion-io could lose its Facebook show pony. Facebook is known for its data center prowess. Fusion-io got to ride along on that bleeding technology edge. Facebook could diversify its Flash-based data center gear.
Reward: The CEO swap may not be an Armageddon situation. Flynn and White will remain advisors for the next 12 months and that may smooth out the management transition.
Risk: Fusion-io could miss its numbers next quarter. Fusion-io is expected to report a non-GAAP fourth quarter loss of 3 cents a share on revenue of $110.2 million. The problem? Fusion-io is swapping leaders roughly two months before the end of the quarter. That reality could hurt sales. On April 24, Fusion-io reported a third quarter net loss of $20 million, or 21 cents a share, on revenue of $87.7 million, down 7 percent from a year ago. The company noted it had a healthy pipeline of hyperscale storage customers.
Reward: If Fusion-io navigates the leadership changes, hits its numbers, entices CIOs and gains a few enterprise accounts, this CEO swap will be put aside quickly. Fusion-io has a big trend in Flash storage to ride and has a bit of a cushion to recover.