Higher marketing costs crimp Fusion-io profit, shares fall

Reuters News
Posted: Aug 07, 2013 4:16 PM
Higher marketing costs crimp Fusion-io profit, shares fall

By Lehar Maan

(Reuters) - Storage drive maker Fusion-io Inc <FIO.N> reported a bigger quarterly loss as it spent more on marketing and incurred costs related to absorption of employees from a company it acquired in April.

Fusion-io shares fell 20 percent in extended trading after closing at $14.90 on the New York Stock Exchange on Wednesday.

The company said it absorbed about 60 employees of Colorado-based NexGen Storage during the quarter.

Fusion-io employs about 940 people now, up by about 270 from a year earlier.

The company's marketing costs rose by 51 percent, resulting in a negative operating margin of 22.4 percent for the fourth-quarter.

The company, which counts Facebook Inc <FB.O> and Apple Inc <AAPL.O> among its key customers, reported its first quarterly numbers after founders David Flynn, the chief executive, and Rick White, chief marketing officer, resigned in May.

Fusion-io, which makes solid state memory drives using NAND flash technology, has been diversifying its revenue base as it faces intense competition from larger rivals such as EMC Corp <EMC.N>, Micron Technology Inc <MU.O> and SanDisk Corp <SNDK.O>.

The company expects revenue to grow 20 percent for the year ending June 2014, implying sales of about $519 million. It had previously forecast full-year sales of about $435 million.

Analysts were expecting revenue of $564 million, according to Thomson Reuters I/B/E/S.

"If you are looking at the guidance for the full-year and looking at what they have guided for the first-quarter, getting to the full-year number is also going to be a challenge," Craig Hallum analyst Rajesh Ghai told Reuters.

Fusion-io forecast first-quarter revenue of between $80 and $90 million. The company reported a marginal drop in revenue to $106.05 million in the fourth quarter.

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This anticipated quarter-over-quarter decline is primarily driven by lower-than-expected revenue from Facebook, Chief Financial Officer Dennis Wolf said on a conference call with analysts.

Analysts were expecting first-quarter revenue of $123.8 million

Fourth-quarter loss widened to $23.8 million, or 24 cents per share, in the fourth quarter, from $2.4 million, or 3 cents per share, a year earlier.

Excluding items, company posted a loss of 3 cents per share.

Analysts had expected a loss of 3 cents per share on revenue of $110.2 million.

(Reporting by Sruthi Ramakrishnan and Lehar Maan in Bangalore; Editing by Akshay Lodaya and Maju Samuel)