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Value Line has initiated coverage of Fusion-io, Inc. (FIO) in its flagship product, The Value Line Investment Survey. The company was incorporated in December of 2005 as Canvas Technologies, changed its name to Fusion Multisystems in June of 2006, sold its first products in April of 2007, and changed its name to Fusion-io in June of 2010. The initial public offering occurred in June of 2011. Fusion-io is headquartered in Utah and has operations in California and Colorado. It had 669 employees as of June 30, 2012. Among the management team is the chief scientist, Steve Wozniak, the co-founder of Apple (AAPL).

The company states that it “delivers the world’s data faster.” Storage was originally designed more for capacity than performance, and Fusion-io integrates hardware and software in a way that decentralizes and accelerates data. This has become especially important as more devices, such as smart phones, are connected with the Internet. The company helps its customers (numbering over 2,500) improve the performance and efficiency of their data centers.

Fusion-io is a fast-growing company and has increased its top line almost tenfold from fiscal 2010 through fiscal 2012. (Fiscal years end June 30th.) For the current fiscal year, management is targeting a revenue growth rate of 45%-50%. The acquisition of IO Turbine, a provider of caching solutions for virtual environments, in August of 2011 helped in this regard. Another source of growth is partnerships with other companies. Fusion-io entered into an original equipment manufacturer relationship with Cisco Systems (CSCO - Free Cisco Stock Report) in June of 2012, and announced a collaboration with a storage industry leader, NetApp (NTAP), in July of 2012. The company’s balance sheet is debt-free, as it has not borrowed to fund its growth thus far.

Despite the high revenue advances, profitability has been elusive. Fusion-io posted a small loss in fiscal 2012 and was only marginally profitable in the September quarter of the current fiscal year. Not surprisingly, the company does not pay a dividend, and the stock has had wide price fluctuations in its brief history as a publicly traded entity.

There are some risk factors that investors must take into consideration. The company’s three largest customers (Facebook (FB), Apple, and Hewlett-Packard (HPQ - Free Hewlett-Packard Stock Report)) accounted for 30%, 25%, and17% of revenues, respectively, in fiscal 2012. Clearly, the loss of any one of these customers would have a large negative impact. Also, Fusion-io relies on contract manufacturers and a small number of suppliers, so any hiccup in the relationship between the companies might well be problematic. Moreover, some patent infringement suits against Fusion-io are pending. And companies involved in the ever-changing technology industry face the risk that a competitor will come up with a better product or service.

For a more thorough look at Fusion-io’s business prospects, and the particular investment merits of its stock, subscribers should examine our full report in The Value Line Investment Survey.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.