Violin, which trades under the symbol VMEM, has been largely under fire since it went public in September, 2013 at $9 per share. Shortly after the company found itself battling a potential class action lawsuit over disclosure of sales data regarding government contracts that were cancelled. Things haven't improved for the company as investor Clinton Group Inc. last summer launched an effort to engage with the company on how best to go forward. Apparently Violin didn't align with the Clinton Group and now both the Clinton Group and shareholder Imation are trying to do something about it by nominating three new board members at the company's 2016 annual meeting to address the sub $1 stock price and market capitalization of just $70 million.
Violin, which trades under the symbol VMEM, has been largely under fire since it went public in September, 2013 at $9 per share. Shortly after the company found itself battling a potential class action lawsuit over disclosure of sales data regarding government contracts that were cancelled. Things haven't improved for the company as investor Clinton Group Inc. last summer launched an effort to engage with the company on how best to go forward. Apparently Violin didn't align with the Clinton Group and now both the Clinton Group and shareholder Imation are trying to do something about it by nominating three new board members at the company's 2016 annual meeting to address the sub $1 stock price and market capitalization of just $70 million.
The duo have proposed three industry veterans to help:
- Ralph Schmitt, veteran chief executive of innovative technology companies and a turnaround expert, most recently leading the sale of OCZ Technology Group to Toshiba
- Michael Wall, veteran chief executive in the technology space with extensive storage industry experience and a turnaround expert, who most recently lead the sale of Amplidata, N.V to Western Digital Corporation
- Alex Spiro, an attorney at Brafman and Associates, faculty member of Harvard Law School, and member of the board of directors of Imation, a publicly-traded global data storage and information security company
The Clinton Group and Imation are hoping the company will be sold ahead of that meeting to a strategic buyer, supplanting the need for the board battle. "We continue to believe that the Company's technology is exceptional and essential to a number of potential large strategic buyers." This is where it gets tricky for Violin though. While the Clinton group goes on to cite all of the recent good events surrounding flash vendors, Violin is very different from Pure Storage, Solidfire and so on, Violin's technologies are extraordinarily specific. Their bread and butter VIMM flash modules are highly specialized and not something that are of immediate value to others in the space. While Pure for instance can benefit in advances in SSD technologies with little capital investment of their own, Violin has to create their own solutions, which is expensive regardless of the intellectual property they create along the way. Violin does offer some of the best performance in the industry as we saw even with their older Windows array, but looking around at the likely acquirers, it's hard to see where Violin would be a good fit in each one's portfolio.
Violin was bound to make a public response as a result of the Clinton Group/Imation letter and they've done so today:
“Violin’s management team and board collectively own six percent of the company and are aligned with our shareholders in our desire to create value for the company’” said Kevin DeNuccio, President and CEO Violin Memory. "We are focused on improving our execution and completing our product transition to the Flash Storage Platform, while also pursuing strategic alternatives to accelerate our opportunity. Our BOD currently consist of 6 current or former CEO/COO’s and senior executives from storage industry legacy leaders from IBM, NetApp, and 3Par, which provide critical leadership to create value for all of our stakeholders.”
It remains to be seen if DeNuccio can orchestrate the turn around he wants, the way he wants, without shareholders getting involved. Violin's fiscal fourth quarter concludes this month.
