) reported third-quarter 2013 loss per share of 13 cents,
slightly better the Zacks Consensus Estimate of 15 cents loss per
share. The quarter's loss was worst than 4 cents loss per share
reported in the year-earlier quarter. The year-over-year wider
loss could well be attributed to lower revenues and higher
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Fusion-io's third quarter revenues of $87.7 million decreased
7.0% from $94.2 million in the year-ago quarter and were much
below the Zacks Consensus Estimate of $96.0 million. Despite
having a number of hyper-scale customers such as
) and Dell Inc., the revenue miss was mainly due to fluctuations
in large orders.
Gross profit decreased 1.6% from the year-ago quarter to $48.3
million. Gross margin was 55.1%, up from 52.1% in the year-ago
quarter, mainly due to manufacturing efficiency.
Total operating expenses surged 42.1% year over year, primarily
due to an increase in headcount and addition of employees from
the acquired entities. Operating margin was (32.5%) compared with
(5.2%) in the year-ago quarter.
Fusion-io reported net loss of $20.0 million or 21 cents per
share, compared with a net loss of $4.7 million or 5 cents in the
year-ago quarter. Excluding certain pre-tax one-time items,
adjusted net loss was 13 cents per share compared with 4 cents
loss per share in the year-ago quarter.
Balance Sheet and Cash Flow
Fusion-io exited the third quarter with cash and cash equivalents
of $354.6 million, down from $368.5 million in the previous
quarter. Accounts receivable was $50.5 million. Inventories
decreased $2.9 million sequentially to $71.1 million. Fusion-io
carries no long-term debt burden.
Cash used in operations was $12.4 million compared to operating
cash flow of $6.9 million in the year-ago quarter. Capital
expenditure was $6.3 million compared with $2.2 million in the
For the fourth quarter of 2013, the data storage device
manufacturer expects revenues to be roughly $110.0 million.
Non-GAAP gross margin is expected in the range of 56.0%-58.0%.
The company also expects non-GAAP operating loss of roughly $5.0
million. Diluted share count is likely to be approximately 98
For fiscal 2013, Fusion-io expects revenues of $435.0 million,
non-GAAP gross margin within the 59.0%-60.0% range, non-GAAP
operating margin in the range of 7.0%-8.0% and diluted share
count of 109 million shares.
Acquisition of NexGen Storage
Concurrent with the earnings release, Fusion-io also announced
the acquisition of Colorado-based hybrid storage appliances maker
NexGen Storage for roughly $119.0 million. NexGen's solutions
complement Fusion-io's software-defined storage portfolio of ION
and ioTurbine. With NexGen, Fusion-io's exposure into the small
and medium enterprise (SME) space will get broadened.
Fusion-io expects revenue contribution from NexGen to be minimal
in the coming quarter. Nevertheless, the acquisition is expected
to dilute earnings per share by 1-2 cents in the fourth quarter.
Fusion-io's third quarter results were disappointing with the top
line coming well below the Zacks Consensus Estimate. However, the
loss per share was narrower than expected. Though revenue
guidance was encouraging, continuing operating loss expectation
keeps us concerned.
Fusion-io is confident about increasing demand from its
hyper-scale customers and hence is optimistic about continuing
investments for innovation and market expansion. This shows that
expenses are going to grow again.
Despite long-term growth opportunities, given expected synergies
from the acquisition of NexGen and advanced storage software
solutions providerID7 (acquired in Mar 2013), high value
customers and increasing product demand, we prefer to stay on the
sidelines due to continuous operating loss.
Currently, Fusion-io has a Zacks Rank #3 (Hold).