"Whether you broke or rich you getta get biz
Having' money's the everything that having' it is."
-Kanye West
In another case of investment banking underwriting or investor demand, Fusion-io went public today on the NYSE under the ticker FIO, with pricing initially at $19/share (above the targeted $13-15) and it opened trading at $25, reaching $27 at some point today as well. What is Fusion-io? The Utah based company uses flash memory for data hardware and software, which supposedly improves data center efficiency. Stocks surged nearly 32% from its original IPOed price and according to the Wall Street Journal, their revenue has increased to 125.5 million the past nine months and gross profit has quadrupled to $65.7 million. Fusion-io has 1,500 customers and is selling 10.8 million shares in the public offering. They will use the offering money to expand its sales force, diversify its clients, and possibly even make some acquisitions.
Facebook, which helps social gaming companies like Zynga and Digital Chocolate generate large revenues, also accounts for 47% of Fusion-io's revenue. Apple accounts for roughly 30% of the revenue. Fusion-io has roughly 8 other clients to whom they provide this data storing software. Because of the reliance on so few customers it may be hard for Fusion-io to generate profits. "Fusion-io also has a short operating history and has never been profitable. It was founded in late 2005 and began selling its first products in April 2007," adds the WSJ. Any fluctuation in Facebook's financial doings will affect Fusion-io in a big way.
The man pictured at the top of this post is Steve Wozniak, co-founder of Apple. He joined Fusion-io's board as an investor and chief scientist in 2008. There has been a pattern in this tech cycle of big companies hiring important role models and supporting cast members to help them go public or get acquired. I'm referring to Starbucks CEO Howard Schultz being on the board at Groupon, he would be a terrific mentor for young CEO Andrew Mason. EA founder Bing Gordon is an early investor in Zynga and has been integral part of CEO Marc Pincus's growth in recent years. Sheryl Sandberg left Google and became COO of Facebook, another savvy veteran who will only help prepare Facebook before their supposed IPO in April of 2012. Former White House Press Secretary Robert Gibbs, has been rumored to join Facebook to help them battle against privacy issues. Gibbs left his duties in Washington in February of this year.
Fusion-io isn't as sexy as LinkedIn, and most likely it won't be as much of a long-run catalyst as LinkedIn. The fact that Fusion-io is connected in a significant with some big tech companies, namely Facebook, has lead to the price offering increase. Investors are confident that any connection to Facebook and Apple can only be a good thing. What was originally valued at $1.4 billion is now worth close to $2billion. Marc Andressen made an interesting point on "The Big Interview" on WSJ TV: if you add up all the valuations (based on Secondmarket) of all the hot private tech companies, they will still be valued less than Google. That's one company who's P/E of 10, he considers very low and says Google (and Apple too) are undervalued on Wall Street. Google's P/E is actually 20, which pretty high considering financials are trading at a P/E of 12-15 (Citi, Morgan Stanley, etc.) Since 2000, Wall Street hasn't been sold on tech stocks. LinkedIn and Fusion-io's success can be seen as an investor's desire to get a piece of growth companies, particularly ones in the hyped up tech sector.
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