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Violin Memory Acquired by Quantum Partners

Private investment fund managed by Soros Fund Management

Violin Memory, Inc. announced the completion of the restructuring and sale process it initiated in December, and its acquisition by Quantum Partners LP (Soros), a private investment fund managed by Soros Fund Management LLC (SFM).

Violin retains its proprietary technology, customer base and innovative team of professionals.

Ebrahim Abbasi, the newly appointed CEO and president of Violin, stated: “Soros’ acquisition of Violin recognizes the value of Violin’s world-class customers which include Fortune 500 companies, as well as the tradition of innovation and dedication demonstrated by its team. As the pioneer in the all-flash array market, Violin is the market leader in high performance, low latency data services for private, public and hybrid cloud environments. I am honored to lead the new company into the future and focus on product innovation and customer excellence.”

Eric Carey, the CIO, Valley Health System, an US healthcare provider, also stated: “Throughout the reorganization process, Violin continued its enterprise customer support enabling us with a seamless operation of Violin’s flash storage platform deployed in our mission critical Meditech application. This commitment to customer success is what we have come to experience with Violin.

We are excited to welcome Violin to our portfolio of businesses and continue our long relationship with the company. We are committed to support Violin in its tradition of customer excellence and product innovation,” said Nicholas Esayan, principal, SFM Private Equity.

Violin will continue to offer customers a suite of professional and support services that help customers transition to all-flash in their data centers. The company is committed to enabling customers to meet their business and technical objectives with Violin’s high performance and low latency all-flash arrays. Customers can rely upon Violin’s technical experts and best practices to optimize deployments, migrate data, and access support resources 24x7x365 that provide customers peace of mind in running mission critical operations.

Comments

Sad story than that of Violin Memory even if it was a true pioneer in all-flash array market (for tier 1), currently one the - fastest - if not the fastest - storage business. But then almost every storage company in the world has become a competitor by adding their own all-flash arrays to portfolio.

Founded in 2005, Violin is headquartered in Santa Clara, CA, and got $186 million in financial funding including:

  • - $10 million in 2010
  • - $35 million and then $40 million in 2011
  • - $80 million in 2012

Among investors there are Samsung, Toshiba, Jupiter Networks, SAP and Imation

It acquired assets (NAS and web caches) of Gear6 in 2010 and GridIron Systems in SAN application accelerator appliance in 2012.

The first signs of the difficulties began when the start-up falls on $162 million IPO in 2013 by more than 17% on opening day. Then the stock never performed the way it expected. Ultimately, the stock went essentially worthless a year ago.

Two months after the IPO, CEO Don Basile was fired.

In 2014, the firm reduces workforce by 103 or 21%.

During an interview published in storagenewsletter.com in 2014, Kevin De Nuccio, president and CEO, told us: "Profitability is achievable at end of next year." It never happens.

Also at the question: "You don't have de-dupe or compression a must-have features considering high price of SSDs. Why not?", he answered: "I think there is a place for de-duplication. In the space where we penetrated the market, flash has been adopted early, it's mostly about performance in databases. You don't do de-duplication in databases because it takes to much power away."

Another error was to try to design and manufacture its own SSDs. About no all-flash player did that because it's a complete different activity. Per comparison, did you see any HDD subsystem company manufacturing disk drives? Violin Memory finally sold is PCIe product line to SK for $23 million in cash in 2014.

The same year, it was obliged to offer $105.0 million of convertible senior notes in private placement to qualified institutional buyers.

Being in financial trouble, unhappy stockholder Clinton Group with Imation threatens to change board of directors the following year and later to sell the company.

In 2016, Violin was obliged to submit a plan to restore compliance with New York Stock Exchange continued listing requirement and proposed reverse stock split ratio of 1:4.

After being suspended by NYSE and under Chapter XI, common stock began trading on OTCQX.

For 2FQ17, it recorded ugly financial results with worst revenue ($7.5 million) and continuing huge net loss since the 15 former quarters.

Following bankruptcy auction, it finally finds a buyer, Soros Fund Management (behind VM Bidco), in a deal valued at a mere $14.5 million, and retains its IP, customer base and professional team.

Ebrahim Abbasi, has just been appointed CEO and president. He was COO of the company since 2014 and  replaces Kevin De Nuccio having the same positions for three years and three months.

Conclusion
The acquisition by a private investment fund means that:

  • - no storage company wanted to buy Violin
  • - it's better for Violin to find an acquirer than to perish -  price was very low
  • - there will be a lot of restructurations before Quantum Partners will try to sell the acquired firm

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