Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Fusion-io, Star of Enterprise Storage, Files for an IPO, Cites Facebook Relationship

Remember when I said to keep a close eye on Fusion-io, the enterprise startup that uses flash memory to speed up data storage? I hope you were paying attention. Today it filed for an IPO. And here’s a news flash: Its biggest customer is Facebook.

Facebook’s new data center in Prineville, Oregon, is full of Fusion-io technology, and the one planned for Rutherford County, North Carolina will be as well. Fusion-io CEO David Flynn told me in an interview some time ago that servers running Fusion-io technology constitute about 80 percent of the hardware footprint inside the Facebook building. If you ever wondered what kind of secret sauce Facebook might have in its data center infrastructure, make no mistake: Fusion-io’s flash memory-based technology is it.

The close links between Facebook and Fusion-io have a lot to do with a mutual relationship. Venture capitalist Marc Andreesen sits on Facebook’s board and is an investor in Fusion-io. Goldman Sachs and Morgan Stanley are leading the offering with JP Morgan and Credit Suisse. The filing doesn’t say how much the company expects to raise in the offering.

Along with Facebook, Fusion-io’s hardware partners Hewlett-Packard, and IBM also account for more than 10 percent of revenue.

This filing is a surprise, because as recently as December, Flynn told me the company was in no hurry to go public. It had just raised a $45 million C-round from Meritech Capital Partners, with Accel Partners, Andreessen Horowitz, New Enterprise Associates, and Triangle Peak Partners also invested. Plus it has strategic investments from Samsung, the South Korean electronics and semiconductor giant–which also happens to be the world’s biggest supplier of the flash memory chips key to Fusion-io’s technology–and Dell Ventures.

But from the looks of the numbers, it appears the company needs to raise the kind of cash that an IPO can provide. The company finished 2010 with $36 million in revenue and a $31.5 million net loss despite a gross margin of 59 percent in the latest quarter. Operating expenses were nearly $52 million, led by $24 million in sales and marketing expenses. The balance sheet shows $3.5 million in cash and cash equivalents plus another $39 million in working capital. That’s not enough to fund operating expenses assuming they remain at the same level, which they won’t, given how fast the company is ramping up.

And ramping up it is. Fusion-io just last week announced a relationship with its fourth major server manufacturer, the white-box manufacturer Supermicro, and on the same day, IBM doubled the number of servers that include Fusion-io as an option. Before that, it scored a rare public disclosure from Credit Suisse that its technology was being used to speed up trading, and there are certainly more financial companies buying the technology and simply not talking about it.