Last week Violin announced it was going into Chapter 11 – no one was surprised.
Since then we have seen many commentators and vendors speculating on whether this is a warning sign for other high profile flash vendors and whether they are inevitably doomed to the same fate.
The question here is whether the market for these maturing Flash startups has been over estimated and all are going to fail or get consumed or whether some of the dynamics of Violin contributed to their failure where others might still succeed.
We do not have the answer, but we have been able to speak to a few ex-employees of violin and some partners and ex partners across the ASEAN region and we feel that there are lessons to be learned here.
No-one we spoke to had anything bad to say about the technology or the product, in fact it seems to be generally accepted that the product is strong. This being the case, we must consider how the company’s leadership has steered the company.
Per one principle at reseller that tried to work with Violin in Singapore about 3 years ago(who preferred to remain off the record). He found that the US leadership undermined the good efforts of the people that were trying to build the business locally. This particular reseller explained that they brought a deal to Violin and were working it with the local team when they were introduced to visiting execs from the US.
In short, the US execs didn’t feel the partner in question was “big enough” to carry the deal, and instead of rewarding them for bringing the opportunity they tried to take the deal away and work it through a different larger reseller. The outcome. This reseller convinced their customer to take a different technology and Violin lost the deal. But much more than this, these Violin execs lost the trust of reseller, and undermined and undervalued their local team and reputation started to form.
In a region were trust needs to be earned and real trust is about the most important business commodity people have, it seems the Violin leadership played the game wrong.
The other major issue we came across when we spoke to ex-violin employees who prefer to remain “off the record” is that the leadership lack patience, they expected results from Asia too quickly and when they didn’t come, took a fire and hire mentality. The facts seem to back this up as we saw several short-term tenures amongst the Violin team in Asia. This also points to the fact that the leadership probably didn’t appreciate that in this part of the world, business is built on trust and people are evaluating whether they can trust the company leadership itself, lack or patience in the region will erode that trust.
We can only guess, but if the Violin management made hasty and ill informed decisions in ASEAN, it may well be that this also happened in wider Asia and even Europe, this is of-course speculation but seems plausible.
Ultimately, we don’t know the dynamics that led to Violin hitting chapter 11, but in the small market we cover in ASEAN, the leadership made wrong moves. We believe that the market for the Flash vendors is tough, but we also sense that if the likes of Pure and Nimble navigate more smartly there is no reason to assume they will suffer the same fate of Violin.
The full Violin announcement from the 14th of December follows.
Business Operations Continue while Violin Memory Pursues Chapter 11 Operational and Financial Reorganization and Sale Process
Dec 14, 2016
Filing provides opportunity for renewed value creation given company's deep patent portfolio, broad customer base, $20 Million recurring revenue stream and strong flash storage products
SANTA CLARA, CA -- (Marketwired) -- 12/14/16 -- Violin Memory®, Inc. (OTCQX: VMEM) announced today that it has commenced a process to streamline its operations and balance sheet, while simultaneously pursuing a sale of its business to a buyer committed to supporting its core customer base.
To facilitate this restructuring, Violin Memory has filed a voluntary petition for reorganization under chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court for the District of Delaware, and is seeking to hold an auction in early January for the business.
Violin Memory, founded in 2005, is credited with being the creator of the flash storage market. Over the past eleven years, Violin Memory has built a strong franchise through ongoing innovation by serving the needs of the most exacting enterprises. Violin Memory continues to have core strengths that it believes can lead to value creation, including leveraging the company's:
Kevin A. DeNuccio, Violin Memory's President and CEO stated: "We are taking this action, which should conclude by the end of January 2017, to bolster Violin's ability to serve the needs of its customers. Violin intends to continue to sell solutions to customers and prospects as well as service and support customers during this restructuring."