Why Violin Memory Shares Skyrocketed

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 Violin Memory  (NYSE: VMEM  ) surged by 22% Monday after the high-speed data storage specialist announced that its board has ousted CEO Donald Basile.

So what: Today's news confirms rumors that began late last week, when shares plunged more than 16% following the resignation of Violin Memory's chief technology officer.

The decision also undoubtedly stems from Violin Memory's weaker-than-expected quarterly earnings report last month -- its first as a publicly traded company, mind you. That report, for its part, caused the stock to plunge 48% after Violin not only revealed a massive $34.1 million loss (on a GAAP basis), but also followed up with disappointing forward guidance, leaving investors to wonder how long the company's $134 million cash pile can last.

Now what: Effective immediately, Basile has been temporarily replaced by current board Chair Howard Bain III, who will serve at the helm until Violin Memory is able to identify a suitable permanent CEO.

According to David Walrod, chairman of Violin's nominating and corporate governance committee, "The Board believes this leadership change is necessary to enhance the management team's operational focus and ability to execute the Company's plans for profitable growth."

That's all well and good, but despite today's jump I feel it necessary to reiterate my previous stance: Until Violin Memory can demonstrate reasonable proof those plans will pan out before it runs out of money, this stock remains a risky bet I'm not willing to take.

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