Why Fusion-io Shares Plummeted

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Fusion-io  (NYSE: FIO  ) plunged more than 26% during intraday trading after the company issued weak guidance after beating estimates with its fiscal first quarter 2014 earnings. 

So what: Quarterly revenue fell nearly 27% to $86.3 million, which translated to a GAAP net loss of $27.9 million, or $0.28 per diluted share. On an adjusted basis, however, Fusion-io's net loss came in at $0.07 per share. For reference, both numbers actually beat estimates considering analysts were expecting an even larger adjusted loss of $0.11 per share on revenue of $84.73 million.

However, Fusion-io also stated it expects revenue "to be up slightly sequentially" for the fiscal second quarter, which is a far cry from analysts who were modeling next quarter's revenue to come in at $114.26 million. Meanwhile, Fusion-io also stated second-quarter non-GAAP gross margin is expected to deteriorate to a range of 52% to 54%, or down from 59.4% in Q1, while non-GAAP operating margin will worsen to negative 15% to negative 20%, down from negative 13.3% this quarter.

Now what: Even worse, the company also announced its chief financial officer will soon be leaving to pursue other opportunities, while its chief sales officer is also retiring from the company. And though Fusion-io simultaneously named three separate recent executive hires -- including a new chief strategy officer, new VP of research and development, and a new chief information officer -- that's hardly any consolation for nervous investors who are wondering whether management has what it takes to stop the bleeding.

Now that doesn't mean Fusion-io is automatically doomed, especially considering it still has around $225.3 million in cash remaining. However, no matter how you slice it, the company's future is far from certain, and I can't blame investors for jumping ship today.

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