Flash storage vendor, Violin Memory, falls on IPO

Shares of solid-state storage vendor Violin Memory plunged more than 17 percent on the company's first day of trading, but analysts said the market for flash storage remains hot.

Violin raised just over $US160 million in an initial public offering (IPO) on the New York Stock Exchange, which the company will use primarily to expand its global sales and marketing capabilities. But the shares, which the company had priced at $US9 per share, started trading far below that and closed at $US7.11, down $US1.89, or 21 per cent. The weak result came on a gloomy day overall, with the Dow Jones Industrial Average and the tech-heavy Nasdaq both down.

The market's lukewarm response to Violin's IPO doesn't spell gloom for flash storage, which is still a young and fast-growing technology, industry analysts said. Enterprises are buying flash to speed up access to their data, and the price premium for the solid-state media versus spinning disks is shrinking.

Violin makes all-flash arrays for enterprises, designed to accelerate applications such as databases and online transaction processing. The market for those products is growing by about 60 percent per year, IDC analyst Jeff Janukowicz said.

"The flash market's still very hot," Janukowicz said. "Flash hasn't really gone mainstream in the enterprise."

Violin CEO, Donald Basile, said the company is focused on the long term.

"What the market does in a given day, whether the market trades up or down, is certainly something we don't have control over," Basile said.

Violin's IPO comes under very different conditions than another flash vendor, Fusion-io, faced when it had a strong opening day in 2011, said Taneja Group analyst Arun Taneja. Fusion-io started with essentially no competition, and Violin is up against the largest storage vendors, he said. Giants including EMC, NetApp, IBM, Hewlett-Packard, Dell and Hitachi Data Systems have already developed all-flash technology or bought startups, he said.

"All the major players have been placing their bets," Taneja said. "Violin was not one of the ones that got picked up through an acquisition." That leaves Violin as a standalone rival to the companies that sell most of the storage gear in enterprises, he said. "I think people perceive that as a greater risk, and no question, it is a greater risk," Taneja said.

Violin is focused on competing as a stand-alone public company, with its main rival being EMC, though its board would have to consider any buyout offer, CEO Basile said. The company, based in Mountain View, California, was formed in 2005 and released its first products in 2009.

Violin formed a distribution partnership with HP in 2011, but HP switched to an internal strategy after CEO Leo Apotheker left the company less than a year later, Basile said. Violin has since signed on Dell and Fujitsu as partners and is selling joint solutions with SAP and Microsoft, he said.

There's still room for some smaller all-flash array makers, a group that includes Nimbus Data Systems, Pure Storage, Kaminario and other players in addition to Violin, Taneja said.

"As long as those companies can demonstrate a differentiation, they have a shot in the marketplace," Taneja said. Violin excels in performance while falling short on some software capabilities, which the company has filled in through a partnership with Symantec and is probably creating for itself now, he said.

"I think Violin has a reasonable shot at the market," Taneja said.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com