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5 Dumbest Things on Wall Street This Week: May 10

1. Fusion-io Confusion

Will somebody please clear up all the confusion at Fusion-io (FIO)? We can't get no relief!

The solid state memory drive maker informed investors Wednesday that two of its founders -- CEO David Flynn and CMO Rick White -- were jumping ship to start another venture. Shares of the company, which employs NAND flash technology in its products and counts Facebook and Apple among its key customers, lost 19% on the unexpected departures, finishing the day at $14.60. The company went public in June 2011 and traded as high as $41.69 in November 2011.

Director Shane Robison will succeed Flynn, effective immediately, in the company's corner office. And despite their abrupt exits, Flynn and White will both remain members of the board and will serve in advisory roles to the company for the next 12 months.

In a statement on the company's Web site, Scott Sandell, lead independent director of the Fusion-io Board, said, "What the hell just happened? I turn my back for a second and these jokers are gone quicker than the last beer in the cooler!"

All right, all right. We're kidding. He didn't say that. In all honesty, Sandell took the high road and thanked the pair for their "important role in taking the company public and developing a strong framework from which Fusion-io can grow to the next level."

More important than Sandell's platitudes was the company's announcement that the changes had nothing to do with the "integrity" of the company's financial statements or accounting practices. It also reaffirmed the financial outlook it provided last month for its fiscal fourth quarter.

Unfortunately, none of those reassurances were enough to sway Wall Street's pencil pushers who ran from the company almost as fast as its founders. Analysts at both Sterne Agee and Craig-Hallum cut their ratings on the stock from buy to hold due to the turmoil at the top.

Meanwhile, ABR Investment Strategy's Brad Gastworth hung onto his "Secular Short" rating on Fusion-io shares. Gastworth told Barron's that he wasn't surprised to see a short term shellacking of the stock in reaction to the management change. Furthermore, he believes "there are structural issues facing Fusion-IO longer term" as well as "an onslaught of new competition coming in the second half of 2013 and into 2014."

Upon further thought, maybe that clears up all the confusion.

Flynn and White saw trouble ahead at the flash technology provider and were off in a flash!

-- Written by Gregg Greenberg in New York City.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
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