This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Violin Memory Changes Its Tune

Stocks in this article: VMEMDELLHP

NEW YORK (The Deal) -- Investment bankers figuring out how much to price an initial public offering at usually try to do right by their client, both on the upside and on the potential downside.

It's a question of striking the right balance. Either the range tends toward underpricing, so that the company ends up with less than it should by rights expect; or overpricing, leaving the underwriter with unsold shares and, possibly a damaged image for its client in the market debut, as was famously Morgan Stanley's dilemma in taking Facebook (FB) public.

But if the company and its bankers know offers are already on the table, that might have unintended effects on the newly public company.

Such may have been the case with computer flash storage drive maker Violin Memory (VMEM) which had suitors knocking at the door prior to its September IPO -- and still does, according to someone familiar with the situation. Buyout interest around Violin has increased even more so now that the company has jettisoned its founder and CEO and brought in an executive with all the earmarks of someone well-versed at selling tech companies.

The companies that had been talking to Santa Clara, Calif.-based Violin Memory include some of the biggest in enterprise technology service providers: Hewlett-Packard (HP), Seagate Technology (STX), IBM (IBM), Samsung Electronics Co. and EMC (EMC), an industry source said. At least one had gone so far as to provide Violin Memory with a term sheet, albeit one that was contingent on due diligence and hedged with conditions, the person said.

Violin Memory did not respond to a request for comment. Hewlett-Packard and Seagate said it was company policy not to comment on rumor or speculation. Samsung could not be reached for comment, while IBM and EMC did not respond to requests for comment.

In fact, Hewlett-Packard already had an agreement in place to resell Violin Memory products, but the company ended the arrangement in the fall of 2012, ostensibly in favor of the 3Par products it acquired in 2010 as part of a $2.3 billion deal.

Despite the buyout interest, Violin went public in September. Barely three months later, founder and CEO Donald Basile was let go by his board.

The IPO was rocky. After pricing at $9 per share on Sept. 26 to raise $162 million before expenses, the stock opened at $7.50 and closed at $7.02 on its first day of trading.

Making matter worse was Violin Memory's first earnings report as a public company: a net loss of $34 million for the third quarter of 2013 on revenue that was up 37%, to $28.3 million, year-over-year as compared to a $25 million net loss for the same period a year earlier. (The company has yet to turn a profit.)

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,827.75 +12.81 0.07%
S&P 500 2,072.83 +5.80 0.28%
NASDAQ 4,787.3170 +29.0650 0.61%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs