Stec: Fiscal 2Q10 Financial Results

STEC, Inc.
announced  the Company’s financial results for the second quarter ended June 30, 2010.

Revenue for the second quarter of 2010 was $61.3 million, a decrease of 29.1% from $86.4 million for the second quarter of 2009 and an increase of 58.0% from $38.8 million for the first quarter of 2010.

GAAP gross profit margin was 42.6% for the second quarter of 2010, compared to 50.0% for the second quarter of 2009 and 34.0% for the first quarter of 2010. GAAP diluted earnings per share from continuing operations was $0.06 for the second quarter of 2010, compared to GAAP diluted earnings per share from continuing operations of $0.38 for the second quarter of 2009 and an $0.11 GAAP diluted loss per share from continuing operations for the first quarter of 2010.

Non-GAAP gross profit margin was 42.7% for the second quarter of 2010, compared to 50.1% for the second quarter of 2009 and 34.2% for the first quarter of 2010. Non-GAAP diluted earnings per share from continuing operations was $0.09 for the second quarter of 2010, compared to non-GAAP diluted earnings per share from continuing operations of $0.42 for the second quarter of 2009 and a non-GAAP diluted loss per share from continuing operations of $0.08 for the first quarter of 2010. A reconciliation of GAAP to non-GAAP results is provided in tables included in this release.

Business Outlook
"I am very pleased with our second quarter results," said Manouch Moshayedi, STEC’s Chairman and Chief Executive Officer. "After a challenging first quarter, we have rebounded quite well and surpassed our revenue and EPS guidance for the second quarter. As anticipated, the inventory carryover situation at our largest customer was resolved during the second quarter. In addition, we are seeing increased interest in the use of SSDs in enterprise applications and it is very encouraging to see adoption of SSDs increase not only at our largest customers but also across most other enterprise-storage customers."

Today, STEC’s product roadmap is strong with a variety of SLC- and MLC-based Zeus and MACH products in development and in qualification at the Company’s customers. STEC has remained the sole supplier of enterprise class SSDs to its Enterprise Data Storage customers even though it has been more than three and one-half years since STEC first sold its ZeusIOPS SSD product. STEC’s advantage is due in large part to the complexity of the products and the rigorous specifications that Enterprise-storage customers demand. In order to solidify STEC’s long-term prospects and competitive position, the Company continues to invest aggressively in R&D.

Mr. Moshayedi continued: "We are also encouraged by a growing number of OEM customers that have launched or are in the process of developing Automated Data Tiering Software solutions. This software optimizes SSD performance in storage systems; a factor which we believe will help enable the transition towards SSD technology on a larger scale. We believe future systems shipped by our customers that include such software will most likely also include SSDs as a standard component of the system."

Guidance

• STEC’s current expectation for the third quarter of 2010 is as follows:
• Revenue to range from $78 million to $80 million.
• Diluted non-GAAP earnings per share to range from $0.18 to $0.20

STEC’s projected non-GAAP earnings per share results exclude employee stock compensation expense and may also exclude other items that the Company does not consider indicative of its underlying business performance.