Violin Memory, Inc. (NYSE:VMEM) Has Not Reached the Bottom Yet

[[tagnumber 0]]On Tuesday, the share price of Violin Memory, Inc. (NYSE:VMEM) hit a new 52–week low while yesterday‘s trading session confirmed the continuation of the long–term downtrend. The company released ts quarterly results last month, showing that its operations are still bringing only losses and destroying value for shareholders.[[tagnumber 1]] [[tagnumber 0]][[tagnumber 3]][[tagnumber 1]] [[tagnumber 0]]VMEM closed with an over 9% drop at $1.38 yesterday. The trading volume was much lower than in the previous session, thus technical indicators did not reflect the plunge in the share price which still remained above the yearly low during the session. Today, VMEM chart looks bearish and the stock could break further down to the lower end of the trading range before investors can expect a reversal of the downtrend.[[tagnumber 1]] [[tagnumber 0]]In the last quarter of 2014, VMEM began its restructuring process which was supposed to optimize sales, marketing and engineering functions and focus all resources to the core segment for the company – the flash–based storage market. Sales do not seem to be improving though, being considerably lower in this year‘s second quarter for both the product revenue and the services segments.[[tagnumber 1]] [[tagnumber 0]] [[tagnumber 10]][[tagnumber 1]] [[tagnumber 0]]The net loss is also still huge and with negative cashflows the cash position of VMEM should get worse in the following quarters. In September last year, the company also raised the dilution risk of its stock which added to the operational and financial risks that support the downtrend of VMEM. Convertible notes in the amount of $120 million were issued and the proceeds served to repay the outstanding amounts of a credit agreement.[[tagnumber 1]] [[tagnumber 0]] [[tagnumber 1]] [[tagnumber 0]]Though the conversion rate of these notes seems unattractive at this point, it could be raised under certain circumstances and the occurrence of some corporate events. The filing of a registration statement should also be a signal that VMEM can soon dilute its shareholders by issuing new shares in order to cover its debt. Shareholders‘ equity already turned negative in the last quarter which is another negative signal.[[tagnumber 1]] [[tagnumber 18]] [[tagnumber 1]]