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(FIO) is rising on a buyout rumor -- yet again. Frankly, I think these rumors cause more short-term damage to the stock than they help it as it brings in a weak handed and/or merger arb buyer. Generally, these are like bringing diseased cattle into the herd as they can infect many of the healthy. The point here is that I'm standing by my point that FIO doesn't want to be sold. That doesn't mean they won't get buyout offers in the meantime. However, I do think expecting a quick hit is the wrong way to look at this name.
That said, here is the latest -- FIO is rumored to being close, or I should say, IBM
is close to making a $3.4B offer for Fusion-io. In this "chatter", there is also talk that SAP
is interested in making a competing/higher offer.
So wheat from chaff time. IBM already has an OEM reseller arrangement that is doing quite well. They certainly could gain from having FIO in house, but are clearly already deploying the solution. Now SAP is an interesting wrinkle in that as far as I know, they are not one of the FIO OEM's. Right now I have HPQ
as a maybe for the FIO resellers, though it's possible I've missed one or two. The biggest last quarter was still HPQ, but as written, I think CSCO will become the largest reseller in time.
Thus as I see it, SAP is the wild card that might lend a little more credence to this rumor.
Bottom line, I'm in this one as my next AAPL/GOOG/QCOM
name. I intend to own and trade around it for some time as the potential for FIO to become "the Wintel of storage" certainly exists. I will also note that a $3.4B offer likely would not get a deal done. The stock has been there already and given that FIO is only 1.5-2.0 years away from doing a billion revenue run rate or greater, that would put the name at just roughly 3X forward Sales on the out-year valuation. I would think that at least 4-5 times forward sales would be needed for FIO to consider leaving a lot of money on the table if they stay solo.
Position in FIO, CSCO, NTAP.