Weaker Sales Expected by STEC in 4Q08

STEC, Inc. announced that due to the cancellation of previously-anticipated orders, it is revising its revenue guidance for the fourth quarter of 2008 to approximately $55 million to $59 million from its earlier guidance ranging from $69 million to $72 million. This will negatively affect the Company’s operating results including its previous Non-GAAP diluted Earnings Per Share guidance issued on November 10, 2008. The revenue revision is comprised of approximately $20 million of previously-forecasted orders for its legacy DRAM and CompactFlash card products by various customers. The Company expects that the cancelled orders will be partially offset by increased orders for its Solid-State Drive (SSD) products used in Ultra-Mobile Personal Computer applications.

Enterprise Business Continues to Ramp
In contrast to the Company’s legacy DRAM and CompactFlash markets where multiple competitors exist who are experiencing similar setbacks, its emerging high-performance SSD business — tailored to OEM customers in the Enterprise-Storage and Enterprise-Server markets — continues to ramp up. Qualifications for its first-to-market, and still without rival, ZeusIOPS products have continued at an aggressive pace despite the economic slowdown and the Company expects to surpass the $50 million revenue goal that it had previously set for the ZeusIOPS product line for the full-year 2008. The Company expects revenue from sales of all of its SSD product lines to exceed $70 million for the full-year 2008. This will be an increase from $13 million in SSD revenue for the full-year 2007.

The Company added that qualification samples of the its recently-announced ZeusIOPS-SAS SSDs are now being shipped. Qualifications for the Company’s Mach8/IOPS products — ideal for the full spectrum of Enterprise-Server applications — continue to progress.

Guidance
The Company currently believes that due to poor visibility in its lower-margin DRAM business and the severity of the current economic downturn, its revenue for the first quarter of 2009 is expected to range from $42 million to $50 million. The Company expects revenue for full-year 2009 to be under pressure and to range from $200 million to $240 million. However, the Company expects to counter-balance the challenges faced by its legacy product lines with significant growth — in its ZeusIOPS-SAS SSDs, ZeusIOPS-Fiber Channel SSDs, and its Mach8/IOPS SSDs — in 2009 which should result in an overall positive shift in product mix.

In addition, the Company is currently taking measures to reduce costs by $4 million to $8 million on an annual basis, centered primarily around its continued transition of significant operations to Malaysia. The Company expects to start realizing these savings beginning in the second quarter of 2009.