Worst IPOs #2: Violin Memory (VMEM)
The company, which develops Flash memory systems, reported a loss of 85 cents on $28.3 million in revenues for the third quarter. While the company hit its revenue expectations, the net loss was well off the 44-cents-per-share consensus estimate.
But the outlook was even worse. For Q4, VMEM put out a forecast for revenues of $30 million to $32 million, which fell far short of analysts’ $44 million estimate. On the news, VMEM stock plunged 46% to $3.25. Keep in mind that the company went public in late September at $9 per share.
VMEM faces some tough issues ahead. One is the heavy customer concentration: Five companies account for 37% of VMEM’s total revenues. The competition is also intense, with rivals like Dell, EMC (EMC), IBM (IBM), Oracle (ORCL), NetApp (NTAP) and Hewlett-Packard (HPQ) all competing for VMEM’s revenues. Not to mention a spate of venture-backed startups gunning for the market opportunity.