UPDATE: Monness Crespi Hardt Downgrades Fusion-IO on Multiple Negative Factors

In a report published Thursday, Monness Crespi Hardt analyst Jeffrey Fidacaro downgraded Fusion-IO (NYSE: FIO) from Buy to Neutral.

In the report, Monness Crespi Hardt noted, “Our rating change is based on: 1) Worse than expected revenue guidance for 1QFY14 (down 28% y/y versus +5% consensus) with both Facebook (FB/Not Rated) and Core revenue expected to decline q/q; 2) Risk of meeting required 2HFY14 revenue ramp – particularly from two large pending customers – to above 40% y/y in order to meet the company's 20% FY14 revenue growth target; 3) More competitive pricing environment in both the Hyperscale and Enterprise environments are putting greater than expected pressure on Gross Margin – FY14 guidance of only 52-54% vs. 57.6% consensus and the company's long-term target of 56-58%; and 4) Decreased operating leverage to offset the approximately $65 mln per quarter in operating expenses including a 16% increase in quota-carrying sales representatives and increased R&D to over $20 mln this quarter. Since we launched coverage earlier this year, we noted about a 6 to 9 month lead-time on Fusion-io's technology. While we continue to believe FIO has industry-leading products and software, the competition is putting increased pressure on FIO's fundamentals, therefore we are moving to a Neutral for the reasons listed above. However, we believe the reset in guidance, industry data points suggesting continued adoption of PCIe Flash solutions, a potential increase in Facebook capex spending over the next few quarters, and valuation keeps us from a Sell rating.”

Fusion-IO closed on Wednesday at $14.90.