Fusion-io Surges on Takeover Rumors.. Who Could Be Interested?

Shares of enterprise SSD company Fusion-IO (FIO) are up more than 13.64% on speculation that they could be a ripe takeover target.  Volume is up more than 2x the normal trading volume and investors are clearly reacting to these rumors.

Since Fusion-IO is a recent IPO (see my original research report here), it raises the question of why these suitors didn’t step in before the company went public.  Either way, Fusion-IO obviously has an immense value to a variety of blue-chip tech companies.  I have been bullish on this company for quite a while, as they are a pioneer in the enterprise SSD space and they’re showing no signs of slowing down.

So why exactly is Fusion-IO so valuable?  The company has invented a new way of approaching storage/memory in the datacenter that enables breakthrough performance for their customers.  Not only can their drives me configured as fast-performing hard-drives, but they can be configured as memory as well.  As more data builds up in the cloud, there is a need for high-performance storage solutions that can process these immense datasets without breaking a sweat . That’s where Fusion-IO comes into play.

The breakthrough technology and versatility has attracted interest from tier-1 customers in the technology industry. Their best-in-class SSD’s are used by tech giants like Facebook, Apple ($AAPL), and Salesforce.com ($CRM).

Here is a list of potential suitors and why they could be interested in Fusion-IO.

Dell Inc ($DELL) – Michael Dell was an early investor in Fusion-IO and Dell maintains an active partnership with the company.  Dell lost out in the bidding war with HP for enterprise storage company 3PAR, so they are obviously interested in this sector as a growth area.  $DELL has rapidly shifted their focus from consumers to the enterprise space, so this would fit in with their currently corporate strategy.  With tons of cash accumulating on their balance sheet, Dell could easily finance an acquisition without any issues.

EMC Corporation ($EMC) – Although EMC is now a competitor to Fusion-IO with EMC’s project lightning announcement, don’t let that fool you.  Industry experts opined that $EMC ‘s VFCache solution is still about 2 years behind in terms of competitiveness.  This enterprise giant knows that Fusion-IO is a fast growing company in the enterprise market and could threaten them in the future.  For now it’s a David/Goliath battle that David is winning.

NetApp Inc ($NTAP– As EMC’s arch rival, you can bet that NetApp is also hungry to get a piece of the Enterprise SSD storage market.  NetApp still does not have a solid enterprise SSD product and it might make more sense to look at buying Fusion-IO, rather than developing their own in-house product like $EMC did with VFCache.  I think they are a relative dark horse candidate who could swoop in and snatch up Fusion-IO.

Intel Corporation ($INTC) – Intel is one of the top SSD companies in terms of delivering solid products to the consumer segment, however, they are still trying to hit paydirt in the enterprise SSD market.  The skillsets involved in creating a consumer drive do not necessarily translate into the enterprise segment (as requirements are very different), so I think Intel could be a strong suitor.  Fusion-IO is a company rich with engineering talent in the enterprise SSD space, which could be another  reason why Intel might go down this path.  Intel could essentially buy their way into this highly coveted SSD market and they could load up on a ton of strong engineering talent in the process.

At the time of this writing, Rob currently has a long position in $FIO.  Rob formerly worked at Intel Corporation.



The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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