Miami Police Relief & Pension Fund v. Fusion-io, Inc.

Court: United States District Court, Northern District of California
Case Number: 5:13-cv-05368
Judge: District Judge Lucy H. Koh
Case Contacts: Gerald H. Silk, Avi Josefson

Securities fraud class action filed by the Miami Police Relief & Pension Fund, on behalf of purchasers of Fusion-io, Inc. (“Fusion-io” or the “Company”) common stock during the time period from August 10, 2012 through October 23, 2013, inclusive (the “Class Period”), alleging claims pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against Fusion-io and certain of its senior executives (collectively, “Defendants”).

Fusion-io is a computer hardware and software systems company that designs and manufactures memory storage solutions using flash memory technology.  Since the Company’s initial public offering in 2011, a limited number of what the Company calls “strategic” customers—including Facebook, Inc. and Apple, Inc.—have accounted for a significant portion of the Company’s revenues.

Throughout the Class Period, Defendants misrepresented to investors that the Company was a market leader in large-scale flash memory applications and was not facing any competitive pressure or risk from the commoditization of flash memory products.  Defendants also issued positive revenue guidance and misrepresented that the Company was able to anticipate the demand from its strategic customers based on its years of experience as their flash memory supplier.  In truth, however, Fusion-io’s flash memory products had become increasingly commoditized, which allowed the Company’s strategic customers to seek out lower cost alternatives from the Company’s competitors.

On January 30, 2013, after the market closed, the Company announced that it no longer anticipated achieving its previously issued earnings guidance for fiscal year 2013.  Fusion-io’s revised fiscal 2013 revenue guidance represented revenue growth of about 17% to 22%—a far cry from the 45% to 50% growth the Company had previously told investors they could expect.  Following this announcement, when the market reopened on January 31, Fusion-io stock dropped from $20.09 per share to $17.48 per share, or 13%.

Despite the disappointing guidance revision, the Company told investors that the change in guidance was due to a temporary shift in the timing of purchases from Fusion-io’s strategic customers.  Specifically, the Company stated that the change in its guidance represented a two-quarter shift in the timing of Facebook’s and Apple’s bulk purchases.

On May 8, 2013, Fusion-io made a shocking announcement that the Company’s co-founders were leaving the Company.  Following this announcement, Fusion-io stock dropped from $18.00 per share to $14.60 per share, or 18.9%.

Then, on October 23, 2013, Fusion-io revoked its prior revenue growth guidance and announced that its expected gross margin in 2014 would decline significantly during the upcoming fiscal year.  The Company also announced that its Chief Financial Officer and Chief Sales Officer were leaving the Company.  Despite Defendant’s assurances that Facebook and Apple had only temporarily reduced their purchases of Fusion-io products, and would resume purchasing at their pre-January 30 levels, the Company finally revealed that these strategic customers were decreasing their purchases of Fusion-io’s products.  Following this disclosure, Fusion-io stock fell from $12.98 per share to $9.82 per share, or 24%.

If you wish to serve as Lead Plaintiff for the Class in this action, you must file a motion with the Court on or before January 21, 2014.  Any member of the proposed Class may move the Court to serve as Lead Plaintiff through counsel of their choice, or may choose to do nothing and remain a member of the proposed Class.

If you wish to discuss this action or have any questions concerning your rights or interests, please contact Avi Josefson (212-554-1493);