Stec: Fiscal 4Q09 Financial Results

STEC, Inc. announced financial results for the fourth quarter and full-year ended December 31, 2009.

Revenue for the fourth quarter of 2009 was $106.0 million, an increase of 86.3% from $56.9 million for the fourth quarter of 2008.

GAAP gross profit margin was 50.9% for the fourth quarter of 2009, compared to 27.8% for the fourth quarter of 2008. GAAP diluted earnings per share from continuing operations was $0.47 for the fourth quarter of 2009, compared to $0.00 for the fourth quarter of 2008.

Non-GAAP gross profit margin was 51.0% for the fourth quarter of 2009, compared to 32.3% for the fourth quarter of 2008. Non-GAAP diluted earnings per share from continuing operations was $0.51 for the fourth quarter of 2009, compared to $0.05 for the fourth quarter of 2008. GAAP results in the fourth quarter of 2009 included employee stock compensation, restructuring costs and class action securities and shareholder derivative litigation expenses.

Revenue for full-year 2009 was $354.2 million, an increase of 55.8% from $227.4 million for 2008. GAAP gross profit margin was 47.7% for 2009, compared to 31.3% for 2008. GAAP full-year 2009 diluted earnings per share from continuing operations was $1.41, compared to full-year 2008 diluted earnings per share from continuing operations of $0.08. Non-GAAP gross profit margin was 48.4% for the full-year 2009. Non-GAAP diluted earnings per share from continuing operations was $1.61 for the full-year 2009.

On February 22, 2010, the Company’s Board of Directors reaffirmed its plan to proceed from time to time, depending on market conditions and other factors, with repurchases of up to $80 million of the Company’s common stock under previously authorized share repurchase programs. Share repurchases will be made in open market or privately negotiated transactions in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. There is no guarantee as to the exact number of shares, if any, that will be repurchased by the Company and the Company may discontinue purchases at any time that the Company determines that additional purchases are not warranted.

Business Outlook
"During 2009 we achieved the highest revenue, gross profit margin and earnings per share in our Company’s nearly 20-year history," said Manouch Moshayedi, STEC’s Chairman and Chief Executive Officer.

"Among our accomplishments for 2009 were: successfully transferring our manufacturing capacity to Malaysia, resulting in lower overhead and a lower corporate effective tax rate; expanding and advancing the development of our SSD product portfolio and successfully qualifying our SSD products at many of the key original equipment manufacturers (OEM) in the Enterprise-storage markets.

"We believe that the first half of 2010 will be a trough period for our business due to an inventory carryover by our largest customer. Although, we believe the marketing programs that we implemented last quarter have had a positive effect on the sell-through of SSDs, based on our best estimates we now anticipate this inventory carryover to continue to negatively impact our sales to this customer during the first half of 2010, as we do not expect any meaningful production orders from this customer during that time.

"We have been working diligently to increase SSD sales to other major customers by introducing new marketing incentive programs for 2010. We expect to start experiencing the benefits of these efforts during the second half of this year.

"We firmly believe that we are still in the beginning stages of the adoption of SSDs by the Enterprise markets. Despite the near-term challenges, we believe that as the benefits of SSDs become more widely understood, and the growth curve of SSD adoption accelerates, we will be in an ideal position to take full advantage and make significant gains.

"The management and the Board of Directors believe in the long-term value of our Company, and have approved the repurchase of up to $80 million of the Company’s common shares on the open market."

Guidance
"We currently expect first quarter of 2010 revenue to range from $33 million to $35 million with diluted non-GAAP loss per share to range from $0.11 to $0.13."