SANTA CLARA — Violin Memory’s sad opening song as a public company reached a crescendo Monday, as the data-storage company fired CEO Don Basile and replaced him with its chairman, Howard Bain III.
Violin executed a $162 million initial public offering less than three months ago, selling 18 million shares for $9 apiece to establish an initial valuation of nearly $900 million. The stock declined immediately upon hitting Wall Street, however. Shares have yet to hit even $8 since its Sept. 27 debut, and closed Friday at $2.69, a decline of more than 70 percent from its IPO price.
“The board believes this leadership change is necessary to enhance the management team’s operational focus and ability to execute the company’s plans for profitable growth,” board member and Bridgescale venture partner David Walrod said in a news release announcing the move Monday morning.
Violin’s lagging stock price took a big hit in November, when the Palo Alto company released its first quarterly earnings report since going public, which showed a loss of $34.1 million, or 85 cents a share, on revenue of $28.3 million. The 8-year-old company has suffered since Hewlett-Packard (HPQ) severed its contract with the firm — Violin noted in its IPO prospectus that HP’s purchases accounted for 65 percent of its revenue in the 2012 fiscal year and less than 10 percent in 2013.
Violin now faces investor lawsuits accusing it of not disclosing enough information about the business ahead of the IPO, and Chief Technical Officer for software Jonathan Goldrick left the company last week, ahead of Basile’s dismissal.
Basile came to Violin after leading Salt Lake City data-storage company Fusion-IO, which has also suffered as the data-storage industry changes, hurting companies that focus solely on flash memory. Fusion-IO’s market capitalization has been cut more than in half in 2013, while San Jose’s Nimble Storage — which utilizes a hybrid technology involving hard disks and flash — raked in $168 million at a valuation of $1.48 billion, then saw those shares zoom more than 60 percent higher in Friday’s market debut.
“Nimble is playing in 100 percent of the (enterprise) storage market, … but the segment of the market that is available to Violin or Fusion-IO is actually much smaller because they are at the very high end of delivering capacity and performance,” Arun Taneja, founder and consulting analyst of independent storage-industry analysis firm Taneja Group, explained Friday.
“Violin is between a rock and a hard place,” Taneja said, adding, “they’ve made a lot of errors.”
Violin’s interim CEO, Bain, replaces an executive who received total compensation of nearly $19 million in its most recently completed fiscal year; Violin did not immediately provide any information about a severance package for Basile. Bain has four decades of experience, mostly as a chief financial officer, a role he once filled at Mountain View software company Symantec, which provides the software that runs Violin’s data-storage solutions.
Toshiba is Violin’s largest investor, controlling 14 percent of the company. The Japanese technology giant recently reached a deal to buy the assets of San Jose solid-state drive company OCZ Technology, which is entering bankruptcy.
Violin stock, which was halted ahead of Monday’s announcement, jumped as high as $3.35 in Friday trading before closing with a 21.6 percent gain at $3.27.
Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.
