Based in Salt Lake City, Utah Fusion-io (proposed FIO) is scheduling a $172 million IPO with a market capitalization of $1.1 billion at a price range mid-point of $14 for Thursday, June 9, 2011

FINANCIAL SUMMARY

FIO provides data decentralization through memory storage platforms

. For the nine months ended March 31, 2011 revenue was up 394% to $125 million from $25 million.

. Losses dropped to $1 million from a $20 million loss for the nine months ended March 31, 2010.

Valuation Ratios	IPO Mrkt	Price /	Price /	Price /	Price /	% offered
Annualizing last 2 quarters*	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	in IPO
Fusion-io (FIO)	$1,092	5.5	109	6.1	6.1	16%
*because March qtr not expected to recur

Short term purchases & customer concentration are both problems for FIO

. With a short-term equipment upgrade, Facebook decided to implement FIO’s memory storage platform and for the mine months ended March 31, 2011. Facebook accounted for 47% of FIO’s revenue for the nine months ended March 31. 2011.

. For the March 2011 quarter Facebook accounted for 52% of sales and Apple accounted for 20% of sales.

. That implementation is almost complete and FIO expects sales to Facebook will decline significantly in the June 2011 quarter. Apple may be gearing up purchaes. In technology for a hot product often it's one big customer, then two then many. But what's the encore? For example, looks like after the Facebook equipment upgrade there is no expectation of follow-on orders or recurring revenue.

FIO’s record March 2011 quarter produced sales of $67 million, with a gross profit of 53% and a net profit of 10%. But that is the first quarterly profit ever for FIO.

Quarterly results	Dec 2009	Mrch 2010	June 2010	Sept, 2010	Dec, 2010	March, 2011
Revenues ($mm)	$7	$13	$11	$27	$31	$67
Gross profit %	62%	59%	47%	43%	59%	53%
Sales & Marketing % of rev	68%	46%	80%	33%	36%	22%
Operating income %	-89%	-50%	-107%	-21%	-6%	11%
Net income (loss)	-$6	-$7	-$12	-$6	-$3	$7
Net income (loss) %	-89%	-50%	-109%	-21%	-8%	10%

CONCLUSION

FIO expects a big revenue drop for the June quarter, as sales to Facebook decline. Unless Apple steps in with large orders then FIO may revert to showing quarterly losses.

Annualizing the last two quarters (to even out the bulge in the March 2011 quarter) FIO at the price range mid-point expects to sell for 109 times earnings and 6.1 times book value.

It is highly likely that FIO will jump to an IPO premium, even above 109 times annualized earnings for the six months ended March 31, 2011.

But unless large orders can be confirmed to replace Facebook, it seems that FIO will be walking a high wire tightrope that could be risky if significant competition emerges (see competition below).

BUSINESS

Data decentralization through memory storage platforms

MARKET

Based on IDC data, FIO estimates that $52 billion will be spent in 2011 on high performance storage and networking and memory-rich servers, excluding related spending on software and services.(1)

SHORT TERM PURCHASES

Many customers make concentrated purchases to complete or upgrade specific large-scale data storage installations.

These concentrated purchases are short-term in nature and are typically made on a purchase order basis rather than pursuant to long-term contracts.

As a result, FIO’s quarterly revenue and operating results are likely to fluctuate in the future and will be difficult to estimate.

FACEBOOK REVENUE EXPECTED TO DECLINE

Consistent with the short-term nature of customers’ purchases, FIO expects that revenue from sales to Facebook will decline significantly for the three months ending June 30, 2011 as it completes its planned deployments.

FACEBOOK, APPLE & CUSTOMER CONCENTRATION

Quarter ended March 2011

Revenue from sales to Facebook and Apple, through a reseller, accounted for 52% and 20% of revenue, respectively, for the three months ended March 31, 2011.

Nine months ended March 2011

Facebook, Inc. is currently FIO’s largest customer and accounted for 47% of revenue during the nine months ended March 31, 2011, up from 12% of revenue for the nine months ended March 2010.

In addition, two other customers accounted for 14% and 13% of revenue, respectively, for the nine months ended March 31, 2010 and two other customers each accounted for 13% and 11% of revenue for the nine months ended March 31, 2011.

Revenue from customers with a ship-to location in the United States was 70% and 82% of revenue for the nine months ended March 31, 2010 and 2011, respectively.

During fiscal 2010 and the nine months ended March 31, 2011, sales to the 10 largest customers in each period, including the applicable OEMs, accounted for 75% and 91% of revenue, respectively.

During fiscal 2010 and the nine months ended March 31, 2011, sales to two OEMs accounted for 23% and 22% of revenue, respectively.

INTELLECTUAL PROPERTY

SIO has 4 issued patents and 63 patent applications in the United States and 85 corresponding patent applications in foreign countries, as of April 30, 2011 relating to non-volatile solid-state storage, non-volatile solid-state memory, software acceleration, and related technologies.

SIO generally controls access to and use of its proprietary software and other confidential information through the use of internal and external controls, including contractual protections with employees, contractors, customers and partners, and SIO software is protected by U.S. and international copyright laws

COMPETITION

FIO competes with various traditional datacenter architectures, including high performance server and storage approaches.

These may include the traditional data storage providers, including storage array vendors such as EMC Corporation, Hitachi Data Systems and NetApp, Inc., which typically sell centralized storage products as well as high performance storage approaches utilizing solid state drives, or SSDs, as well as vertically integrated appliance vendors such as Oracle.

In addition, FIO may also compete with enterprise solid state disk vendors such as Huawei Technologies, Co., Intel Corp., LSI Corporation, Marvell Semiconductor, Inc., Micron Technology, Inc., Samsung Electronics, Inc., OCZ Technology Group, Inc., Seagate Technology, STEC, Inc., Toshiba Corp. and Western Digital Corp.

FIO’s directCache data-tiering software competes with products from suppliers of software-hardware cache solutions, including LSI Corporation and Adaptec, Inc., as well as several open source software solutions and other software-based hardware cache solutions being developed by privately held companies.

Although FIO’s ioSphere platform management software is specifically designed to manage solid state storage, it competes with products of developers of general-purpose distributed management and monitoring software solutions, including HP, IBM, CA, Inc. and Nagios Enterprises, LLC.

A number of new, privately held companies are currently attempting to enter FIO’s market, some of which may become significant competitors in the future.

VENTURE CAPITAL FUNDED

New Enterprise Associates and Lightspeed Venture Partners

USE OF PROCEEDS

Shareholders intend to sell 1.5mm shares. FIO expects to sell 10.8 million shares for $137 million, allocated to working capital and general corporate purposes

Fusion-io	FIO, C+, 7					Post IPO shares: 78mm
Memory storage platform			June fiscal	March 9 mos	March 9 mos
Salt Lake City, UT	2008	2009	2010	2010	2011	IPO Mkt
Revenues ($mm)	$1	$10	$36	$25	$125	Cap (mm)
Gross profit %	42%	51%	56%	60%	52%	$1,092
Sales & Marketing % of rev	441%	133%	65%	58%	28%	@$14
Operating income %	-1528%	-245%	-87%	-78%	0%
Net income (loss)	-$10	-$25.60	-$32	-$20	-$1
Net income (loss) %	-1543%	-252%	-88%	-79%	-1%
Quarterly results	Dec 2009	Mrch 2010	June 2010	Sept, 2010	Dec, 2010	March, 2011
Revenues ($mm)	$7	$13	$11	$27	$31	$67
Gross profit %	62%	59%	47%	43%	59%	53%
Sales & Marketing % of rev	68%	46%	80%	33%	36%	22%
Operating income %	-89%	-50%	-107%	-21%	-6%	11%
Net income (loss)	-$6	-$7	-$12	-$6	-$3	$7
Net income (loss) %	-89%	-50%	-109%	-21%	-8%	10%
COMPARE
Valuation Ratios	IPO Mrkt	Price /	Price /	Price /	Price /	% offered
Annualizing last 2 quarters*	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	in IPO
Fusion-io (FIO)	$1,092	5.5	109	6.1	6.1	16%
*because March qtr not ex[ected to recur
SCORECARD		Mgt	Market	Market Do-	Proprie-	Total
1-5, 5 is high			Growth	mination	tary	rating
20 is perfect		2	2	1	2	7