Fusion-io Lands a Big One

I told you Fusion-io (NYSE: FIO  ) was on to something.

The company announced today that it has landed a juicy OEM contract with networking giant Cisco Systems (Nasdaq: CSCO  ) to include its ioMemory offerings directly into the architecture of Cisco's Unified Computing System, or UCS, server to boost the performance of its blade servers. That adds Cisco to Fusion-io's list of OEM partners that already includes bigwigs like Dell, Hewlett-Packard, and IBM, among others.

This is a solid win for the small company and serves as additional confirmation of the compelling value proposition in its approach to flash implementation in data centers. Integrating Fusion-io's ioMemory2 platform will cut down latency and boost storage performance. The new blade servers will ship later this year.

Interestingly, storage behemoth EMC (NYSE: EMC  ) is also a partner for Cisco's UCS offerings and recently introduced its own response to the disruptive threat that Fusion-io poses in its VFCache technology. So far, VFCache hasn't received a warm welcome, and this Cisco deal is continued evidence of that, especially considering that EMC and Cisco are already partners and it still couldn't win the spot.

Piper Jaffray even thinks that Cisco could soon become a 10% customer for Fusion-io from this deal, which would mean more than $30 million when you consider Fusion-io's current trailing-12-month sales of about $324 million.

I also see this as further fuel to the speculation of an eventual buyout. EMC is known for its acquisitive ways, and if unable to successfully create a compelling in-house offering in an important and emerging technology, it just swoops in and buys the best in breed. It realizes that Fusion-io's approach to flash is worth duplicating, but its VFCache isn't stacking up.

It may not happen for a while, but add this deal to the list of reasons EMC may one day consider acquiring Fusion-io.

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Fool contributor Evan Niu holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Cisco Systems, EMC, IBM, and Fusion-io. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On August 02, 2012, at 2:28 PM, michdun12 wrote:

    Evan,

    I agree with you that the Cisco deal is goodness for FIO and FIO investors. I am curious, though, how you reach your conclusion on market acceptance of EMC's VFCache. Can you share why you think VFCache hasn't received a warm welcome?

    Thanks,

    Mike Dunn (EMC employee)

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