William Blair Lowers Fusion-io (FIO) to Market Perform; Enterprise Bookings Lagging Views

January 8, 2013 11:11 AM EST
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William Blair downgraded Fusion-io (NYSE: FIO) from Outperform to Market Perform today after checks hinted that consensus estimates might be a little "rich."

According to analyst Jason Ader and the team, recent checks indicated that bookings are growing at a slower-than-expected pace, specifically on the enterprise side of the business. "While sales to the company's Web-scale clients and ramping sales in China could help fill some of the enterprise gaps for the full fiscal year," Ader explained. "[W]e believe that investors should move to the sidelines until visibility improves and estimates are more conservative."

Though enterprise flash is developing faster-than-expected, the same can't be said for PCIe cards. Enterprise sales at Fusion-io are still expected to grow 53 percent for fiscal 2013 (which ends in June), but that level is lower than previous expectations for 66 percent growth. Ader comments, "We are struggling to point our finger at why demand has slowed in recent months, but it is evident that macro pressures affecting the larger storage market are impacting the PCIe segment, resulting in less low-hanging fruit being available."

Key growth areas like software and OEM partnerships are also growing at a slower pace than expected.

Alternative offerings like flash arrays may also give buyers pause as they evaluate alternatives and educate themselves on newer offerings.

Ader notes that Intel's (Nasdaq: INTC) Ramsdale 910 series PCIe card is gaining traction, as the device is substantially less expensive and may even perform better than Fusion-io in "write-intensive" environments. The analyst thinks Fusion-io might introduce a lower-cost PCIe card, but that it might also cannibalize ioDrive sales.

The firm made the following adjustments:
  • FY13 - Revenue expectations lowered from $529.1 million to $512.1 million, EPS lowered by one cent to 37 cents.

  • Sees FY14 revs of $665 million and EPS of 49 cents.

Shares of Fusion-io are down 9.4 percent Tuesday.

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