Posted by: Dave Raffo
One day after a surprising CEO shakeup, the new boss of PCIe flash leader Fusion-io denied the change came because of a failure of the outgoing chief, problems at the company or because it is looking for a buyer.
Shane Robison, a former long-time Hewlett-Packard executive who replaced Fusion-io CEO David Flynn Wednesday, made a statement and took questions during a technology webcast hosted by the vendor.
Fusion-io said that founders Flynn and chief marketing officer Rick White resigned their positions to pursue investing opportunities. The company said Flynn and White will remain on the board and serve in advisory roles for the next year.
The news was poorly received by investors, as Fusion-io’s stock price fell 19% to $14.60 by the end of Wednesday. It dropped slightly to $14.23 today.
There has been speculation that Flynn was pushed out because Fusion-io’s revenue declined last quarter following a pause in spending by its two largest customers, Apple and Facebook. It didn’t help that Fusion-io’s stock already dropped to $17.47 from a high of $39.60 in late 2011 before Wednesday. While at HP, Robison worked on its acquisitions of Compaq, Mercury Interactive, Opsware, EDS, 3Com and Autonomy – leading to speculation that he was brought in to sell Fusion-io.
Robison began his webcast today by saying he wanted to “hopefully clear up some misconceptions.”
He said the move was discussed for “a long time” even if there was no public indication that Flynn would leave. He said the previous leadership team did a great job taking Fusion-io from startup to successful public company but its focus has shifted. The goals now are to move into international markets and make sure it releases quality products on time.
“It’s not unusual as startups evolve to medium-size companies that you need different skill sets as you go through these cycles,” he said.
Robison said Fusion-io did not reveal the CEO change when it reported earnings two weeks ago because the decision was not completed yet.
“Unfortunately, it was a surprise,” Robison said. “And nobody – especially the street – likes surprises. This caused a lot of speculation. A lot of times when these changes happen it’s because there is a problem with the company. I can tell you there is not a problem with the company. The company’s doing very well.
“The company has built a lead, and we need to maintain that lead and invest in R&D and in some cases, M&A.”
Robison said another misconception was that the board “brought me in to dress the company up and sell it. We’re not working on that. This was a decision that was about how we get experienced management in place to take the company to the next level.”
Robison has never been a CEO in his more than 30 years in the IT business. Besides serving as HP’s executive vice president and chief strategy officer from 2002-2011, he also worked for AT&T and Apple. He was blamed by other members of the HP board for not realizing that Autonomy did not have as much revenue that it claimed (a charge that Autonomy leaders have denied) before HP agreed to pay $11.3 billion to acquire it in 2011.
Robison did not discuss the Autonomy deal today. He defended his qualifications by saying that some of the business units that he has run inside of large companies were as big as Fusion-io.
He said his strength is his operational experience and Fusion-io needs to balance good operations with innovative technology.
The move comes as Fusion-io faces greater competition after having the PCIe flash market mostly to itself over its first few years. Intel, Micron, Virident, LSI, STEC, OCZ and Violin Memory have PCIe cards.
Storage giant EMC sells cards from Virident and Micron under OEM deals as its XtremSF brand, and its marketing concentrates on claims that those cards are superior to Fusion-io’s. EMC executives at EMC World this week also revealed plans to bring out MCx flash-optimized controllers for hybrid storage arrays and it has an XtremIO flash array that competes with the NexGen storage systems that Fusion-io acquired last month.
Robison said he spent time Wednesday with key large customers, and their reaction to the news was positive.
Others are wondering if the deal will lead to more changes.
“Surprise management changes usually portend more news in the following days and weeks,” Storage Strategies Now analyst James Bagley wrote in a note today. “As we have reported over the last year, we felt that Fusion-io had a tough future ahead with increasing competitors in its core market. Its recent acquisition of NexGen, a storage array manufacturer and Fusion-io customer, is a good move into a broader market where Fusion’s deep software expertise and larger resources should help revenue expansion.”
Objective Analysis analyst Jim Handy also published a note on the change, maintaining “Fusion-io is in an enviable position” because the company was the first to introduce a PCIe SSD, and early with caching software and the ability to make SSDs appear in memory in virtualized systems.
“This resulted in the company’s competitors always remaining one or two steps behind in their efforts to compete,” Handy added. “It would appear that the two key architects of this strategy have now moved on, so outsiders should carefully watch to see if the underlying strategy, the one that has served the company so well in the past, will continue to be followed, or if a new path will be tried.””