Fusion-IO Has Growth Potential, But...
While I do believe the company has incredible growth potential, I worry that macro headwinds may soon add some restraint to the incredibly high expectations its current valuation presumes. While the company deserves credit for having avoided these setbacks up to this point, I think it is prudent for investors to wonder how much longer that can last.
An Impressive First Quarter
For the period ending Sept. 30, the company reported net income of $3.9 million, or 4 cents per share, on revenue of $118.1 million. Sales surged almost 60% year over year and 11% sequentially, while also exceeding analysts' estimates by 7%. Although net income declined from the year-ago quarter, the company continues to do well in terms of profitability. Operating income surged upward by 79%, while gross margins also improve sequentially by two points to 59.5%, beating the company's own projections.
Improvements in margins was attributable to better product mix and cost improvements on its higher-configuration products. Likewise, expenses also showed considerable improvements, declining by 5% sequentially or saving the company slightly over $2 million. As a result, the company was able to generate 19.5% in operating margin.
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Similarly, sales and marketing expenses declined during the quarter, coming in at $23 million and shedding almost $2 million sequentially.
Execution such as this would ordinarily be cause for celebration but the company's flat guidance for the second quarter didn't allow that to happen. Disappointment was the immediate reaction by investors. However, flat revenue projections still represent 40% year-over-year growth.
What's more, investors can expect increased revenue to come from some of the Fusion-IO's largest customers, which includes Apple (AAPL) , Salesforce.com (CRM) and Facebook (FB) .