FIO POST-IPO ANALYSIS: MUST READING

(repost from bobdark @ seeking alpha)

Regarding your comment:

“And yes, it’s true that FIO has sold 12,000 server cards in the last two years, at $3,000 per card. And it’s true that Dell (DELL), IBM (IBM) and HP (HPQ) ship nine million servers per year, but that’s a different business”

Dell and HP both provide the Fusion-io cards as options for most of their server offerings. I think you are underestimating the revenue that this will generate as companies increasingly will opt for the built-in cards.

Its tempting to think that all IPOs are overpriced like Linked-In and don’t have a future, but before making a call on this, it is important to investigate the technology involved with this and the direction for data storage and what Fusion-io will be able to do in terms of research and moving ahead of the competition with this cash injection. There is an awful lot of potential here when considering the inevitable replacement of millions of platter-based storage in Enterprise data centers as the Infiniband and ISCSI networking along with the energy costs will make traditional storage obsolete in the same way that LCDs made monitors obsolete – the price/performance/space curve for flash is moving faster than mechanical disk storage.

Unlike Linked-In and many of the “tech” IPOs, Fusion-IO is a hard-core technology company based on sophisticated engineering rather than just an Internet store front with clever marketing. This means that the bulk of retail investors probably don’t understand the implications of the technology as it is not simple to understand the differentiation of Fusion-IO from the other SSD vendors who are mostly encumbered by a much slower bus architecture (i.e. SATA III at 6 Gbps (0.75 GBps) vs PCIE-at up to 16 GBps for an Octal card (over 20 times faster). It’s a good thing in that it keeps the IPO from being a bubble due to lack of interest, although it does mean it may take some time before it really takes off.

The most successful IPOs are not necessarily the most well-known when launched, just the most innovative and the most profitable over the long-haul. The focus of Fusion-io to this point has not been on profitability but on gaining market share and building a reputation. I speak from experience as a database developer that they have established a reputation for amazing performance with very large databases enabling real-time simulation and data-analysis applications with a few cards that simply are not possible with hundreds of mechanical disks.

No doubt in mind that they will be extremely profitable and more large customers will come. I suspect that Google may be looking at Fusion-IO as they utilize a distributed database architecture using thousands of servers like MySpace and Facebook. Fusion-IO is also developing technology to leverage the higher speed PCIE SSD across Infiniband which will support high-availability network storage for large database servers and virtualization data centers in the Cloud.

Fusion-IO has established a very good reputation and is the leader in PCIE-SSD, with the capital from the IPO, they have a good chance of staying one step ahead of the competition and their partnership with the hardware and storage vendors also gives them an edge.

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