The Transformative IPO — Really?

While listening to CNBC this morning on my Sirius XM radio I heard the CEO of Fusion-io FIO discussing the IPO. After using the word transformative at least five times to describe his company, I wondered if this was just hyperbole. Of course, with Apple AAPL co-founder Steve Wozniak as chief scientist, the insinuation is obvious; the company must be transformative. Fusion-io, founded in 2007, creates flash memory products designed to make data centers more efficient. In sum, they streamline the data centers by reducing temperatures and servers. According to the company, “Fusion-io has pioneered a next generation storage memory platform for shared data decentralization that significantly improves the processing capabilities within a datacenter by relocating process-critical, or 'active', data from centralized storage to the server where it is being processed, a methodology referred to as data decentralization.” As FIO's price skyrockets on opening day, let's examine these claims more closely.

Will Fusion-io Transform Our Lives?

The internet, electricity, automobile, airplane, and personal computer were transformative. But, their popularity came over time. Apple created a great model, but is it transformative? Maybe. Many technological advances offer solutions, yet are not transformative. FIO provides a useful service, as evidenced by its partners; Hewlett Packard, IBM, and Dell to name a few. And frankly, the services are likely valuable, as are many new technologies. But transformative, I doubt it. As Tyler Cowen purports in The Great Stagnation, "the 'low-hanging fruit' of economic growth: free land, technological breakthroughs, and smart kids waiting to be educated" is over. (Bloomberg Businessweek, The Autistic, Encyclopedic, Economic, Electronic, Idea Engine, May 26, 2011, by Brendan Greeley). There are countless IPO's which have soared on their opening day, only to fall to more sustainable levels over the subsequent months. Be wary of outsized claims and chasing runaway IPO's. If Fusion-io is such a great company, there will be plenty of time to find out over the coming years. Barbara Friedberg, MBA, MS is editor-in-chief MS is editor-in-chief of Barbara Friedberg Personal Finance.com where she writes to educate, inspire, and motivate for wealth in money and life. Learn about personal finance from a real life Portfolio Manager & MBA professor! Stop by the website and download a valuable free eBook, 20 Minute Guide to Investing.