Another Class Action Vs. Stec, by Roy Jacobs & Associates

Roy Jacobs & Associates has filed a class action complaint in the United States District Court for the Central District of California on behalf of purchasers of the common stock of STEC, Inc. during the period from November 4, 2009 through February 23, 2010, alleging claims for securities fraud pursuant to the federal securities laws. The Complaint was filed against STEC and its Chief Executive.

The complaint alleges that on November 3, 2009, STEC represented in a conference call that EMC’s inventory of STEC’s SSD products was affecting STEC’s sales, but that this problem could be ameliorated by energizing sales force efforts and increasing consumer education about SSDs. In fact, however, the problem was not a lack of sales force effort or consumer knowledge about SSDs, but consumer resistance to purchasing the ultimate product due to its cost, performance, and flexibility of use.

Then, on February 23, 2010, STEC revealed that it believed "the first half of 2010 will be a trough period for our business due to an inventory carryover by our largest customer [EMC] . . . [B]ased on our best estimates we now anticipate [the EMC] 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."

As a result, STEC is earning half the revenue analysts predicted STEC would earn. As a result of this surprise announcement, STEC shares dropped over 23% in value on February 24, 2010, a decline of $3.15 on extraordinary trading volume, and have not recovered.