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Fusion-IO (FIO) Pops After Earnings Win

NEW YORK (TheStreet) -- Fusion-IO (FIO) popped in Thursday trading following a better-than-expected earnings report issued after the bell a day earlier. By mid-morning, shares had soared 12.9% to $10.63.

The big-data solutions company reported a net loss for the December-ended quarter of 6 cents a share, compared to net loss expectations of 10 cents a share according to Yahoo! Finance. Revenue of $94.5 million, though a 21.6% year-over-year decline, beat analysts' expectations by $5.2 million. Total sales jumped nearly 10% from the first quarter's $86.3 million in revenue.

"We delivered 10% revenue growth over the prior quarter while maintaining a healthy gross margin due to a strong mix of enterprise customers in the quarter. We added $19 million in cash during the second quarter, bringing our total of cash and cash equivalents to $244 million. We believe these results underscore a solid foundation from which we can continue to focus on capturing the opportunity flash creates for data center transformation," said chief financial officer Ted Hull in a statement.

The Salt Lake City-based business issued soft guidance for the third quarter, forecasting revenue in-line to slightly up sequentially. Analysts had expected 4% sales growth to $97.85 million for the March-ended quarter.

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In a report released Thursday, Pacific Crest Securities said it saw encouraging signs of a Fusion turnaround. The analyst firm reiterated its "outperform" rating with a price target of $14.

"The March guidance, which indicated revenue would be flat to slightly up from the $94.5 million the company just reported, implies that demand for its PCIe flash cards has begun to stabilize. This implies that revenue should return to growth for the first time in a year. We see revenue stabilization as an encouraging sign that the new management team is executing a turnaround and that the competitive threat over the past year has yet to materially alter Fusion-io's ability to grow the enterprise segment," wrote analysts in the report.

Likewise, Oppenheimer kept its "perform" rating on signs of stabilization.

"We're encouraged by stabilization and come away incrementally more positive. However, FIO's FY3Q14 gross margin guidance implies a mix-shift toward hyperscale customers without any corresponding revenue uptick, meaning the enterprise/SME drive could be short-lived. Operating loss targets (15%-20%) also suggest losses could persist," wrote analst Ittai Kidron.

Credit Suisse allocated an "outperform" rating to Fusion, with a price target of $15.

"With the management team reset, ioScale being qualified, the server OEM and ISV channel aligned, and the three distinct market segments -- hyperscale, enterprise and SMB -- showing opportunity, visibility is improving. Executing on new customer wins, channels, customers and a recovery at strategic accounts could all prove meaningful over the next 12 months, in our view," wrote Credit Suisse analysts.

TheStreet Ratings team rates FUSION-IO INC as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate FUSION-IO INC (FIO) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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