Howard Marks

Network Computing Blogger

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Fusion-io Leaders Step Down in Executive-Suite Turmoil

Fusion-io last week announced that CEO David Flynn and CMO Rick White, both of whom were founders of the company, were departing to "pursue entrepreneurial investing activities."

Flynn took over the top job after Don Basile, now CEO at rival Violin Memory, left the company in 2009. Former HP exec and Fusion-io board member Shane Robinson is taking over the CEO's office. Both Flynn and White will remain on the board and advise the company for the next 12 months, according to the press release.

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I was flabbergasted by the news. To start with, the phrase "pursue entrepreneurial investing activities" sounds way too much like "spend more time with my family" or "hiking the Appalachian Trail". CEOs of young companies don't up and quit, along with their CMO buddies, in the middle of a quarter because the challenges of running a company are boring and they'd rather sit at home managing their investments.

Analysts who met with new CEO Robinson after Flynn's departure were reported to have said that for months, the board was dissatisfied with Flynn's ability to grow the company.

Even if Flynn wasn't the guy to lead Fusion-io from $400 million to $1 billion in sales, multiple CEO changes remind me too much of HP, where it's been reported that Fusion's new CEO Robinson was a big supporter of HP's Autonomy acquisition, which didn't work out too well.

Just two weeks before all this, Fusion-io acquired NexGen Storage for about 10% of its market capitalization. The day after the acquisition, CEO Flynn flew down to Colorado to chat with the crowd at Storage Field Day, where I and my fellow bloggers got to ask embarrassing questions on live streaming video (which you can watch here).

Flynn's plan to change Fusion-io from a mere provider of flash memory cards (regardless of how good they are) to more of a systems provider with a software bent, was a good direction for the company. That's because the PCIe flash card/SSD market is getting very competitive.

Fusion-io's current sales are dominated by Apple and Facebook, which together account for about $200 of the $400 million worth of PCIe flash cards Fusion sells each year. Much of the rest is through resale deals with server vendors, including Robinson's former employer HP.

Given that my sources report that the vast majority of the Fusion-io cards outside the Web 2.0 space are used as PCIe SSDs rather than through Fusion's unique SDK and APIs, I've been impressed at how well White and his team have maintained brand equity and driven users to ask HP, Dell and the like for Fusion-io cards. Vendors could just as easily get generic PCIe SSDs from Micron, Intel, LSI, Virident or the sever dwarves. Those vendors have experience in the high-volume, low-margin world of OEM sales and could probably sell SSDs to the server vendors cheaper than Fusion-io.

While I believe the company's statements that there's nothing seriously wrong with Fusion-io at the moment, and that Flynn and White weren't ousted because they made significant mistakes, turmoil in the board room is never a good sign, especially for a company facing increased competition. We'll have to stay tuned to see if the board's move was worth it.

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