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Lazard Keeps Fusion-io (FIO) at Buy; Western Digital Pays Premium for Virident

September 9, 2013 11:03 AM EDT Send to a Friend
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Price: $9.41 --0%

Rating Summary:
    10 Buy, 15 Hold, 3 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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Lazard Capital maintains a Buy rating and $17 price target on Fusion-io (NYSE: FIO) following news that Western Digital/HGST (Nasdaq: WDC) will acquire Virident in a $685 million deal.

Analyst Edward Parker thinks the purchase price for Virident is high, commenting, for perspective, Fusion-io's enterprise value is $740M and FIO likely has at least 5x more revenue. Our recent checks with suppliers and resellers suggest substantial hyperscale design win activity in 2014, with Fusion-io and Virident both at the top of a short list of participants. Growth expectations must be significant to drive this valuation. Therefore, we view this development as speaking directly to the scope of the activity around PCIe-based storage at a time when there is acute fear that the Fusion-io story is over.

Though a combination of Virident's products with HGST's scale and distribution might mean more competition for Fusion-io, Parker thinks investors are already assuming the worst in the stock regarding competitive marginalization.

Finally, Parker commented, We believe that competition remains at bay, large strategic customers are continuing to deploy Fusion's products, and the core business is demonstrating strong growth. While the recent management transition and business outlook is unsettling, the stock is at all-time lows and trades at less than 1.5x EV/sales.

For an analyst ratings summary and ratings history on Fusion-io click here. For more ratings news on Fusion-io click here.

Shares of Fusion-io closed at $10.83 yesterday.




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