STEC: Fiscal 1Q08 Financial Results

STEC, Inc. announced the Company’s financial results for the first quarter ended March 31, 2008.

Revenue for the first quarter of 2008 was $50.7 million, an increase of 7.4% from $47.2 million for the first quarter of 2007, and a decrease of 4.3% from $53.0 million for the fourth quarter of 2007.

Non-GAAP gross profit margin was 34.6% for the first quarter of 2008, compared to 30.7% for the first quarter of 2007, and 31.7% for the fourth quarter of 2007. Non-GAAP diluted earnings per share was $0.07 for the first quarter of 2008, compared to $0.05 for the first quarter of 2007, and $0.07 for the fourth quarter of 2007. GAAP results in the first quarter of 2008 included start-up costs related to the Company’s Malaysia facility, global tax restructuring costs and employee stock compensation expense. GAAP results in the first quarter of 2007 included start-up costs related to the Company’s Malaysia facility, global tax restructuring costs, first-year Sarbanes-Oxley implementation costs and employee stock compensation expense. Non-GAAP results are explained and reconciled to GAAP results in tables included in this release.

GAAP gross profit margin was 32.9% for the first quarter of 2008, compared to 30.6% for the first quarter of 2007, and 30.0% for the fourth quarter of 2007. GAAP diluted earnings per share from continuing operations was $0.04 for the first quarter of 2008, compared to $0.04 for the first quarter of 2007, and $0.03 for the fourth quarter of 2007.

During the first quarter of 2008, the Company repurchased 1,669,208 shares of common stock under its previously announced stock repurchase program at an average price, including commissions, of $7.79. Since the inception of the stock repurchase program in July 2006 through March 31, 2008, the Company has repurchased an aggregate of 2,005,055 shares of common stock at an average price, including commissions, of $7.74 per share.

Enterprise-Storage market — ZeusIOPS
"Our signature product line is ZeusIOPS, which we believe to be the fastest SSD in the world,” said Manouch Moshayedi, Chairman and CEO of STEC, Inc. "ZeusIOPS SSDs enable high-end Enterprise-Storage systems to realize outstanding performance — sustainable high-throughput measured by Input/Outputs per second (IOPS) — to relieve performance bottlenecks associated with traditional rotating-media disk drives. Revenues for our ZeusIOPS product line were $7.0 million in the first quarter of 2008. We expect sequential growth of ZeusIOPS revenues in the second quarter of 2008. We believe that the market’s adoption of ZeusIOPS is in its infancy. We have accelerated our qualifications with several new, top-tier Enterprise-Storage customers, and we anticipate that these customers will ramp up production by the end of 2008. We expect to achieve our previous ZeusIOPS revenue forecast of $50 million in 2008."

Notebook and Portables market — Mach8/MLC
Moshayedi continued, "Our Mach8/MLC SSDs represent a breakthrough in that they will reduce the cost per gigabyte of Notebook SSDs by more than 50% compared to SLC-based Notebook SSDs. In addition, our Mach8/MLC SSDs achieve better performance than the SLC-based SSDs currently available in the market. The pace of qualifications of our Mach8/MLC SSDs with several top-tier Notebook customers has accelerated since the beginning of the year. We expect that major notebook OEMs will ramp to sizeable production volumes during the third quarter of 2008."

Enterprise-Server market — Mach8/IOPS
"The Mach8/IOPS SSDs enable our Enterprise-Server customers to achieve high read and write IOPS performance at a very compelling cost. The qualification process for our Mach8/IOPS product line is progressing as planned with several top-tier Enterprise-Server customers. We have several Mach8/IOPS revenue opportunities that we expect to ramp to production late in the fourth quarter of 2008 or early in the first quarter of 2009."

Malaysia Facility
"As forecasted, we moved into our 210,000 square-foot Penang facility in early January of this year. Our new facility has ramped to approximately 20% of our production level and we expect the facility to continue to ramp capacity throughout the year. We expect our investment in this new facility to help reduce average production and administrative costs, improve access to growing markets in Asia and improve supply-chain efficiency. In addition, we expect our Malaysia operations to substantially reduce our long-term effective corporate tax rate in the future. Beginning in the third quarter of 2008, we plan to include the Malaysia facility start up costs in our guidance."

Guidance
"We currently expect second quarter of 2008 revenue to range from $52 million to $54 million with diluted non-GAAP earnings per share to range from $0.07 to $0.08. We are more excited about our future business prospects than at anytime in our 18-year history.”

STEC, Inc.