STEC: Fiscal 2Q12 Financial Results

STEC, Inc. announced its financial results for the second quarter ended June 30, 2012.

Revenue for the second quarter of 2012 was $40.7 million, a decrease of 50.7% from $82.5 million for the second quarter of 2011 and a decrease of 19.2% from $50.4 million for the first quarter of 2012.

GAAP gross profit margin was 36.6% for the second quarter of 2012, compared to 44.7% for the second quarter of 2011 and 35.9% for the first quarter of 2012. GAAP diluted loss per share was $1.07 for the second quarter of 2012, compared to diluted earnings per share of $0.18 for the second quarter of 2011 and a diluted loss per share of $0.23 for the first quarter of 2012.

Non-GAAP gross profit margin was 37.2% for the second quarter of 2012, compared to 44.9% for the second quarter of 2011 and 36.4% for the first quarter of 2012. Non-GAAP diluted loss per share was $0.27 for the second quarter of 2012, compared to diluted earnings per share of $0.23 for the second quarter of 2011 and a diluted loss per share of $0.17 for the first quarter of 2012.

Business Outlook
"Although we experienced traction in both the OEM and the newer enterprise areas of our business, we now believe that the period of transition that we are undergoing will continue through the third quarter of 2012," said Manouch Moshayedi, STEC’s chairman and CEO. "During the second quarter, we continued to progress through the demanding qualification processes for the next generation of key existing products, including our ZeusIOPS SSD, our MACH16 SSD, and our new PCIe solid state accelerator. In addition, we also launched EnhanceIO, our recently announced data caching software. With our PCIe product, we will enter a developing market that is showing signs of potential growth. With EnhanceIO, we enter a new market in which our software solution could benefit enterprise users of storage, servers and even those who have historically employed hardware solutions from our competitors.

"Less than a year ago, we began the strategic process to fundamentally shift our business model from addressing the SSD market solely through traditional OEMs to a model mixing OEMs with emerging SSD system vendors, enterprises and non-traditional end-user customers. In order to address the needs of large- to medium- enterprises, we have been building our sales and marketing infrastructure to cater to enterprises directly and develop our new vertical market strategy. We are also working with partners in the existing channel to increase the availability of our products worldwide.

"We anticipate that within the next few quarters, enterprise customers will become important contributors to our revenue. Our eventual expectation is that our sales will come from a healthy mix of traditional OEM, enterprise, and channel accounts. The potential benefits of our marketing diversification strategy could include increasing our total addressable market, reducing dependency on a few customers, and shortening our overall sales cycle."

Current expectation for the third quarter of 2012:

• Revenue to range from $40 million to $42 million.

• Non-GAAP diluted loss per share to range from $0.27 to $0.31.
• Projected non-GAAP loss per share results exclude employee stock compensation expense and other items that the company does not consider indicative of its underlying business performance.