Segment Information

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Segment Information

Segment Information

Prior to the first quarter of 2014, our Chief Operating Decision Maker, or CODM, who is our President and Chief Executive Officer, managed our business as one reportable operating segment that included the design, manufacture and marketing of a range of software and hardware storage systems for the entry and midrange storage markets. Beginning in the first quarter of 2014, due to the growth and significance of our vertical markets, our CODM is managing our business in three reportable operating segments. Hence, we changed our reporting segments accordingly. Therefore, beginning with the first quarter of 2014, we have reported in the following three segments: Server OEM, Vertical Markets, and Corporate.

The Server OEM segment consists primarily of large Original Equipment Manufacturers who purchase products from us to sell along with their server products. Our products are typically sold in server led sales into their end-user customers' corporate information technology infrastructure. Major Server OEM customers include HP, Lenovo, Stratus, Dell, and AMD.

The Vertical Markets segment consists of strategically selected Vertical Markets, that have a propensity for high data growth. Some of our target Vertical Markets include Media & Entertainment, Telecommunications Infrastructure, Oil and Gas, Big Data Analytics and Digital Imaging, among others. These customers typically embed their products into their customer solutions which quite often generate revenue for their end-user customers. We sell to these customers through both Vertical Markets OEM partners or embedded solutions integrators, as well as through channel partners. Major Vertical Markets customers include Teradata, CGG, Motorola, Tektronix, Samsung, Concurrent, Autodesk, and Nokia Siemens.

The Corporate segment consists primarily of “platform costs” that support both the Server OEM and Vertical Markets segments.

Segment information for all periods presented has been reclassified to conform to fiscal 2014 presentation.

Net revenues by segment are as follows (in thousands):

	Three Months Ended March 31,
	2013		2014
Net revenue:
Server OEM	$	30,383	$	25,854
Vertical Markets	14,097		22,353
Corporate	$	—	$	—
Consolidated net revenue	$	44,480	$	48,207

Operating income (loss) is as follows (in thousands):

	Three Months Ended March 31,
	2013			2014
Operating income (loss):
Server OEM	$	7,848		$	5,122
Vertical Markets	4,077			7,407
Corporate	(12,443		)	(12,932		)
Consolidated operating income (loss)	$	(518	)	$	(403	)

The segments use many of the same assets. For internal reporting purposes, we do not allocate assets by segment and therefore asset, depreciation and amortization, or capital expenditure by segment information is not provided to our CODM.