Violin Memory has been plagued with problems on the stock market since they went public in 2013. Just recently it had a fairly rough third quarter, one of its investment groups nominated 3 new board members in an effort to turn the company around, and the NYSE has informed the company that they risk being delisted if they can’t get their stock price above $1/share. Violin released their fourth quarter and fiscal year earning this week and their prospects went from bleak to abysmal.
Violin Memory has been plagued with problems on the stock market since they went public in 2013. Just recently it had a fairly rough third quarter, one of its investment groups nominated 3 new board members in an effort to turn the company around, and the NYSE has informed the company that they risk being delisted if they can’t get their stock price above $1/share. Violin released their fourth quarter and fiscal year earning this week and their prospects went from bleak to abysmal.
Image courtesy of Yahoo Finance
Looking at revenue, Violin reported $10.9 million for the fourth quarter, down from $20.5 million for the same time last year and $50.9 million for the year, down from $79 million for the previous year. For a bit of perspective, another all-flash vendor, Pure Storage, just reported a fourth quarter revenue of $150.2 million, about three times that of Violin’s for the year. On a somewhat brighter side, Violin reported a quarterly net loss of $25.5 million, which was higher than the previous quarter, $22.8 million, but lower than this same time last year $46.8 million. It’s fiscal year net loss was $98.9 million and again was better than this time last year, $108.8 million. Violin’s non-GAAP loss per share was $0.20, which is better than expectations of a loss of $0.21/share.
Violin has issued a restructuring plan that involves laying off 25% of its workforce aligning its expense structure with revenue expectations. The company states that this plan will lower its cash burn rate to less than $10 million per quarter beginning with its fiscal second quarter ending July 31, 2016. Violin CEO, Kevin DeNuccio, seemed optimistic stating that "We have also concluded the formal review process, thereby returning the company's focus to growth and profitability. In support of this, Violin has reset its cost structure to provide a pathway to profitability over the next 18-24 months without the need to raise additional capital."
Violin’s stock looks less optimistic dropping as low as $0.4803 per share after the earnings were released. Violin has until June 8, 2016 to get its stock above $1/share for an average of 30 days to avoid being delisted. These recent stock prices and earning reports make a path to the goal seem unlikely. Violin floated the idea of using a reverse split to increase the value per share, for example taking two $0.50 stock and making them one $1 stock (or more likely in their case, take three $0.50 stock and making them one $1.50 stock). But they would need investors’ approval, and then the stock would have to contend with the stigma of the reverse split, which could lead large investment firms and mutual funds to not want to pick up the stock. This attitude could in turn push the stock price right back down.
Aside from avoiding being delisted, Violin may have to worry about bankruptcy. Violin has about $115 million in assets and though their goal is to get under $10 million cash burn per quarter they are expecting $16-$18 million in the first quarter. They also noted total liabilities at the end of this fiscal year at $170 million, including $120 million in notes.
This news seems dire enough for the company but one other aspect for them to contend with is the amount of all-flash arrays that are entering the market. EMC has declared 2016 as the year of all flash and while this announcement followed a much larger VMAX all-flash they have plenty of products in their portfolio to directly compete with Violin. HPE hasn’t made any declarations of naming this year after flash but they too are pushing more all-flash arrays out including their new 3PAR 20840. Violin’s upper hand in the all-flash market is fading away as quickly as the attractiveness of their stock.
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