Stec: Fiscal 3Q10 Financial Results

in US$ millions)	3Q09	3Q10	9 mo. 09	9 mo. 10
Revenues	98.3	86.1	248.2	186.2
*Growth*		-12%		*-25%*
Net income (loss)	24.5	13.6	46.8	11.1

STEC, Inc. announced financial results for the third quarter ended September 30, 2010.

Revenue for the third quarter of 2010 was $86.1 million, a decrease of 12.4% from $98.3 million for the third quarter of 2009 and an increase of 40.5% from $61.3 million for the second quarter of 2010.

GAAP gross profit margin was 46.4% for the third quarter of 2010, compared to 49.7% for the third quarter of 2009 and 42.6% for the second quarter of 2010. GAAP diluted earnings per share from continuing operations was $0.26 for the third quarter of 2010, compared to $0.47 for the third quarter of 2009 and $0.06 for the second quarter of 2010.

Non-GAAP gross profit margin was 46.5% for the third quarter of 2010, compared to 49.8% for the third quarter of 2009 and 42.7% for the second quarter of 2010. Non-GAAP diluted earnings per share from continuing operations was $0.31 for the third quarter of 2010, compared to $0.50 for the third quarter of 2009 and $0.09 for the second quarter of 2010. A reconciliation of GAAP to non-GAAP results is provided in the tables included in this release.

Business Outlook
"We delivered a solid quarter shipping SSDs to multiple enterprise storage customers which helped drive top-line revenue growth," said Manouch Moshayedi, STEC’s Chairman and Chief Executive Officer.

"A key factor contributing to our positive third quarter 2010 results has been the increasing number of our OEM customers – the storage system makers – that have introduced versions of Automated Data Tiering Software and as a result have incorporated SSDs into their storage system products. This data-tiering software optimizes the use of various tiers of media within a storage system. We see this trend of tiering software introductions as a key step in the process towards increasing the attach-rate of SSDs in high-end storage systems.

"Our overall product roadmap remains very strong. We successfully launched our ZeusRAM product last month to target ultra-low latency applications. In addition, we introduced CellCare and S.A.F.E. technologies that enable the wider use of less expensive MLC-Flash memory in our markets, which were previously addressed by our SLC-based products. Our pipeline of new product introductions includes a variety of SLC- and MLC-based Zeus drives and our recently-introduced MACH16 SSDs.

"As evidence of our progress, we have made significant strides towards qualifying our ZeusIOPS SSDs with a SAS interface at two of our large OEM customers. In line with the storage industry’s trend towards SAS interface technology, we are seeing an increase in orders of SAS interface SSDs. As a result, we now believe that sales of our SAS based ZeusIOPS SSDs could approach 40% of STEC’s total ZeusIOPS revenue for the fourth quarter of 2010."

Guidance
STEC’s current expectation for the fourth quarter of 2010 is as follows: