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Violin Memory Finally Files for IPO

Hoping to raise $172.5 million

Violin Memory, Inc. has filed a registration statement on Form S-1 with the SEC relating to the proposed IPO of its common stock.

The number of shares to be sold and the price range for the proposed offering have not yet been determined. Violin Memory plans to list its common stock on the New York Stock Exchange under the ticker symbol VMEM.

J.P. Morgan Securities LLC, Deutsche Bank Securities, and Bank of America Merrill Lynch will act as lead joint book-running managers for the offering. Barclays is acting as a book-running manager. Baird and Pacific Crest Securities will act as co-managers.

A registration statement relating to these securities has been filed with the SEC, but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time that the registration statement becomes effective.

Comments

(in US$ million)
 2011
 2012
 2013
 6 mo. 12
6 mo. 2013
 Revenue 11.4 53.9 73.8  30.3     51.3
 Growth   373%
   37%       69%
 Net income (loss)
 (16.7) (44.8)
(109.0)
(48.3)    (59.1)

 (Fiscal year ended January 31)


Abstract of SEC filing published by Violin Memory:


Violin Memory, Inc. was incorporated in the State of Delaware on March 9, 2005 under the name Violin Technologies, Inc. The company re-incorporated as Violin Memory, Inc. in the State of Delaware on April 11, 2007.

Employees

As of July 31, 2013, we had 445 employees, including 186 in R&D.

Products
The company introduced flash memory arrays in May 2010. It released 6000 Series flash memory arrays in January 2012, which represents approximately 80% of total revenue for fiscal 2013. PCIe flash memory cards were launched in March 2013.

Revenue
Revenue for the first quarter of FY14 was $24.8 million compared to $22.9 million in the fourth quarter of fiscal 2013.

HP and other Customers
The firm added over 30 new customers, including one of the five largest companies in the world in 4Q13.

As of July 31, 2013, we believe our persistent memory-based storage solutions have been implemented by more than 250 enterprises in diverse end markets, including financial services, Internet, government, media and entertainment and telecommunications.

Historically, large purchases by a relatively limited number of customers have accounted for a substantial majority of our revenue, and the composition of the group of our largest customers has changed from period to period. These concentrated purchases are made on a purchase order basis rather than pursuant to long-term contracts. Our top five customers accounted for 72%, 83% and 37% of our revenue for FY11, FY12 and FY13, respectively and 32% of our total revenue for the six months ended July 31, 2013. In FY012, HP accounted for 65% of our total revenue. During FY13, HP did not constitute a more than 10% customer as its purchases in FY12 represented large stocking orders of our 3000 Series flash memory arrays, and we believe HP had sufficient inventory of such product as of July 31, 2013. To date, HP has not sought to qualify our 6000 Series flash memory arrays, which is a necessary step for HP to be able to resell this product. In FY13 and the six months ended July 31, 2013, HP represented less than 10% of our total revenue.

As a consequence of our limited number of customers and the concentrated nature of their purchases, our quarterly revenue and operating results may fluctuate from quarter to quarter and are difficult to estimate. For example, any acceleration or delay in anticipated product purchases or the acceptance of shipped products by our larger customers could materially impact our revenue and operating results in any quarterly period. We cannot provide any assurance that we will be able to offset the discontinuation or reduction of concentrated purchases by our larger customers with purchases by other new or existing customers. For example, our total revenue declined $11.7 million, or 53%, from $21.9 million for the three months ended January 31, 2012 to $10.2 million for the three months ended April 30, 2012. Nearly the entire decline in total revenue during this period was attributable to a decline in orders in fiscal 2013 from HP. We expect that sales of our products to a limited number of customers will continue to contribute materially to our revenue for the foreseeable future. The loss of, or a significant delay or reduction in purchases by, a small number of customers could materially harm our business and operating results.

Channel
We primarily sell our products and services through our direct sales force and global network to provide a high level of end-customer engagement. We maintain relationships with systems vendors and key technology partners, such as Dell, Fujitsu, Microsoft, SAP, Symantec, Toshiba and VMware.

We work closely with our channel partners to promote and sell our products. As of July 31, 2013, we had over 100 channel partnerships, including CompSec, Dell, ePlus, IBM and Mainline, covering over 30 countries.

Revenue from our five largest customers for fiscal 2013 was 37% of our total revenue, of which revenue from one customer, CompSec, represented 12% of our total revenue. It is our understanding that CompSec purchased our products for resale to the US Federal Government. Revenue from our five largest customers for the six months ended July 31, 2013 was 32% of our total revenue, of which revenue from one customer, Avnet, represented 12% of our total revenue. It is our understanding that Avnet purchased our products for resale to a large global retailer.

Toshiba
In March 2010, we established a relationship with Toshiba, one of the two largest providers of flash memory and our sole supplier of our flash memory components. Through this relationship, we have developed a fundamental understanding of Toshiba's flash specifications at the chip level, which allows us to optimize our hardware and software technologies to unlock the inherent performance capabilities of flash memory and better anticipate future innovations in memory technology.

Although we have historically received competitive pricing from Toshiba, our agreement with Toshiba does not provide us with fixed pricing. We are required to purchase 70% of our requirements of flash memory from Toshiba, subject to specified conditions

Flextronics
We rely on a single contract manufacturer, Flextronics International Ltd., to manufacture all of our products, manage our supply chain and, alone or together with us, negotiate component costs.

Basile
Donald G. Basile, 47, has served as our CEO since April 2009 and as a member of our board of directors since May 2009. Prior to joining us, he served as CEO at Fusion-io, provider of data-centric computing solutions, from February 2008 to February 2009 and its chairman August 2006 to February 2009. Prior to that, he served as VP of UnitedHealth Group Incorporated, a health care company, from January 2006 to February 2008.

In May 2012, we entered into a new employment agreement with Basile. This employment agreement set his base salary at an annual rate of $400,000 and provided that he was eligible to receive an annual bonus targeted at 100% of his base salary.

Shareholders
Basile owns 4.6% shares of the company. As of July 31, 2013, directors and executive officers and their affiliates beneficially owned, in the aggregate, 17.9% of our outstanding capital stock. In addition, a large percentage of our outstanding capital stock is held by only two stockholders, Toshiba and Rationalwave, who together beneficially own an aggregate of 21.1% as of July 31, 2013.


Read also:

Violin Memory Boosts Latest Funding Round to $80 Million

From $50 million

HP Ending Deal With Violin Memory, Bloomberg
Unfortunately in pre-IPO

Violin Memory to File IPO With $2 Billion Valuation
Said Bloomberg

Violin Memory Raised $50 Million
Nears IPO filing.

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