by Tom Taulli | June 9, 2011 10:59 am
The IPO market keeps showing signs of strong momentum. The latest hot deal is Fusion-io (NYSE:FIO[1]), which saw its price range bumped from $13-$15 to $16-$18 and then priced at $19. So far in Thursday’s trading, the shares are up about 30%.
Founded in 2005, Fusion-io develops next-generation storage memory for data centers. Instead of using disk drives, the company leverages chip-based systems. It’s a transformative approach, which can boost performance by as much as 10-fold and provide for substantially lower energy costs. Keep in mind that that the company’s chief scientist is Steve Wozniak, a co-founder of Apple (Nasdaq:AAPL[2]).
As testament to the technology, Fusion-io has partners like Dell (Nasdaq:DELL[3]), Hewlett-Packard (NYSE:
HPQ[4]) and IBM (NYSE:IBM[5]). In fact, there are more than 1,500 customers that rely on real-time applications, including Apple and Facebook.
As a result, the growth rate has been torrid. For the last nine months, revenue was $125.5 million, up from $25.2 million. The loss also narrowed to $1.2 million from $19.8 million. In other words, the company is benefiting from operating leverage.
Fusion-io does have significant customer concentration, with its largest 10 accounting for more than 90% of revenue (Facebook represents about 47% of this).
What’s more, the valuation is not cheap, coming to about $2 billion. That’s roughly 14 times revenue.
Yet it is certainly much cheaper than LinkedIn (NYSE:LNKD[6]). Besides, when it comes to hyper-growth companies, valuations will nearly always be at a premium.
However, as with any new IPO, it is still a good idea to wait a month or so for the trading to settle down. But Fusion-io looks like a good way to play the some of the hottest trends in tech.
Tom Taulli’s latest book is “All About Short Selling[7]” and he has an upcoming book called “All About Commodities[8].” You can find him at Twitter account @ttaulli[9]. He does not own a position in any of the stocks named here.
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