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Fusion-io Shares Refusing to Flop

This recent IPO is still pleasing investors

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Hype can be a double-edged sword. It can generate a lot of free publicity, as it did when Internet startups Pandora (NYSE:P) and Renren (NYSE:RENN) went public. But it can also wear off and lead to something of a backlash.

So after much attention in the press ahead of their IPOs, the stocks of Pandora and Renren are flagging. Music-streaming service Pandora is trading 18% below its $16 offering price, while Renren – the Facebook of China — is more than 50% below its $14 offering price. Others, like LinkedIn (NYSE:LNKD) and Yandex (NASDAQ:YNDX), are above their offering prices but well below the highs they posted on their first day in the public markets.

Then there’s Fusion-io (NYSE:FIO). The Utah-based company makes a storage memory platform that’s hardly as sexy as a top-selling music app or a site that combines the buzz of Facebook with the economic growth of China. But its stock keeps on rising, reaching as high as $26.28 Wednesday, or 51% above its $19 offering price (the stock was off 1.6% on Thursday amid the market’s broad selloff).

Fusion-io flew into the public markets under the radar. At the time, the company was noted foe for two things. One was its chief scientist: Apple (NASDAQ:AAPL) co-founder Steve Wozniak, who joined the company in 2008.

The other was Fusion-io’s biggest customers: Facebook’s purchases of Fusion-io’s storage technology made up 52% of its revenue last quarter, and Apple’s secret data center in North Carolina accounted for another 20%. Other revenue comes through reseller agreements with Hewlett-Packard (NYSE:HPQ) and IBM (NYSE:IBM) — not a bad client base for a startup.

But the real reason for Fusion-io’s post-IPO success has less to do with Facebook or Apple and more to do with the technology those companies are buying. Talk about “cloud storage” to the average investors and their eyes will soon cloud over. But Fusion-io has found a better, more efficient way to manage and retrieve data for web sites and mobile apps, and some of the smartest companies in the tech industry have taken notice.

Fusion-io stands out from other storage companies in the way it approached the so-called data supply problem. The problem arose after server technology evolved much faster than the centralized databases that stores a company’s data.

Let’s say a Facebook user is checking up on an old high-school girlfriend. That’s one of many real-time requests Facebook is making from its stored data. The traditional storage system meant a Facebook server would retrieve the girlfriend’s updates and photos from a data center. But the data center was such a dinosaur that 80% of servers were idle half of the time, which means a lot of money spent unnecessarily on servers.

Article printed from InvestorPlace Media,

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