Violin Memory Inc. tumbled 48 percent after the maker of high-speed data storage systems burned through about half its cash and forecast sales that may fall short of analysts’ estimates.
The stock plunged to $3.11 at yesterday’s close in New York, leaving it down 65 percent since the company’s initial public offering two months ago. The market value sank to $254.5 million.
Operating expenses are growing faster than sales as Violin Memory struggles to convince customers that its faster technology is worth the price. Only one in three sales representatives are acquiring a new customer for the company’s memory arrays, according to Alex Kurtz, an analyst at Sterne Agee & Leach.
“Market adoption is still not at the levels we would expect at this point in the company’s life cycle,” Kurtz wrote in a report yesterday. He has the equivalent of a hold rating on the stock. Expenses and cash burn are “becoming more acute issues,” he said.
Violin Memory’s operating expenses jumped 41 percent in the fiscal third quarter through Oct. 31, and the net loss widened to $34.1 million, or 85 cents a share, from $25.4 million, or $1.79, a year earlier, the Santa Clara, California-based company said after the close of regular trading on Nov. 21.
Revenue in the fiscal fourth quarter will be $30 million to $32 million, which trailed the average analyst estimate of $43 million, according to data compiled by Bloomberg. Sales in the third quarter increased 37 percent to $28.3 million. Sterne Agee’s Kurtz wrote that the company’s U.S. government business missed internal forecasts by $7 million to $8 million.
Violin Memory reported cash and equivalents of $82.43 million at the end of the period, after raising $145.8 million in net proceeds from its IPO on Sept. 26.
The company competes in the data-center storage market with NetApp Inc., EMC Corp., Dell Inc. and a host of emerging startups.