Clinton Group Letter To Violin Memory
July 30, 2015
Violin Memory, Inc.
4555 Great American Parkway
Santa Clara, CA 95054
Attention: Board of Directors
We have been stockholders in Violin Memory, Inc. ("Violin" or the "Company") for almost two years and have followed the Company's progress since its initial public offering. Additionally, since the Company's last earnings release, we have increased our ownership of the Company's stock. We continue to believe that the Company has leading edge technology and are convinced that the Flash Storage Platform ("FSP") addresses the significant enterprise demand for all-flash arrays at a performance level and cost superior to legacy disk systems.
As you know, we requested a meeting with a subset of the Board of Directors to discuss a number of topics germane to creating shareholder value. We believe that a productive meeting benefiting the Company's shareholders can be held without your stated need of a nondisclosure agreement. Your refusal to hold a meeting with an interested shareholder like us in the ordinary course is disappointing. Also disappointing is your insinuation that our motivations for shareholder returns are short-term in nature. Truth be told, our first purchase in the common stock of Violin months after the IPO came at a 50% premium to today's prevailing market prices. Our 2014 settlement agreement pursuant to our proxy contest is further evidence of our willingness to let the Board and new management execute their business plan for a period of time.
The Company's most recent letter to Clinton Group, dated July 14, 2015, notes the following:
"FSP is a breakthrough product with extensive capabilities our competitors still need as many as four or five different product lines, architectures and operating systems to perform what FSP can do with only one."
"The number of Violin's FSP customers increased 100% in the first quarter of fiscal year 2016, and FSP sales represented nearly 50% of product revenue. In addition, our FSP pipeline has increased more than 100% from the fourth quarter of fiscal year 2015."
"Our financial results for recent periods clearly establish our ability to control expenses while making necessary investments."
"As a public company, Violin and its assets, in effect are always for sale any interested purchaser can make an offer at any time and the offer will be considered carefully by the board to determine whether it is in the best interests of Violin's stockholders."
The confidence reflected in your letter does not seem to be shared by the market as the stock price is down 24% since the last quarterly earnings report. Furthermore, the stock price today is down 48% since the beginning of the year and down 33% since Mr. Denuccio was named CEO.
We believe that we have made a credible attempt to have a constructive dialogue with you about our ideas to create shareholder value. We hope the Company will take us up on our offer. If the Company's sales execution does not materially improve and our voice continues to remain unheard, we will have to seriously consider seeking the election of replacements to the Company's Board of Directors at the next annual meeting. We would be happy to take our case to shareholders and put the Company's record up for debate.
We are available at (212) 825-0400 should you wish to discuss further.
Joseph A. De Perio
Senior Portfolio Manager