Rackspace Hosting, Inc. (RAX), Aruba Networks, Inc. (ARUN) & Fusion-IO, Inc. (FIO): A Trio Of Tech Stocks for Bottom Fishers

New Management, Same Problems

Fusion-IO, Inc. (NYSE:FIO) is an example of a company whose leadership change hurt its share price. The company saw shares decline 23% when both its CEO and CMO were forced to leave. David Flynn and Rick White were founders of the company. Counting Facebook Inc (NASDAQ:FB) and Apple Inc. (NASDAQ:AAPL) as clients, Fusion-io reported a healthy quarter. Revenue was $87.7 million, while earnings were a loss of $0.03 per quarter.

Fundamentally, Fusion-IO, Inc. (NYSE:FIO) is facing competition for PCIe (PCI express). PCIe is a standard that is used to define the way boards connect with main system boards. The company does not have a large enough enterprise customer base, and is moving towards the 20nm (nanometer) NAND product. Shrinking the production to 20nm is costly, but it also saves company money once it is implemented.

On Wall Street, the company is winning “buy” recommendations. An analyst at UBS upgraded shares to a buy, citing quarterly results and a strong forecast. Fusion-io said that it expects the current quarter revenue will be $110 million, around $3 million higher than consensus.

Valuation Comparison:

The companies all have fairly high price/sales ratios. Liquidity is similar, while Rackspace Hosting, Inc. (NYSE:RAX) is the largest company, as measured by market capitalization:

Source: Yahoo Finance

Foolish Bottom Line

Sometimes a company will go through a rough patch, dragging the share price lower as sellers exit their position. Fusion-io has risks related to new management, while Aruba and Rackspace Hosting, Inc. (NYSE:RAX) are facing higher competition. Investors should not expect much upside in any of these companies in the near-term. Another sell-off is unlikely, even if the general markets fall, too, since the bad news is already priced in. It would be ideal to add these stocks to the watch list for now. Looking for evidence that the business is improving would be suitable for conservative investors. Investors guessing shares have bottomed could start a position at current levels.

The article 3 Tech Stocks for Bottom Fishers originally appeared on Fool.com.

Chris is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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