Stec: Fiscal 1Q11 Financial Results

STEC, Inc. announced the company’s financial results for the first quarter ended March 31, 2011.

Revenue for the first quarter of 2011 was $94.9 million, an increase of 144.6% from $38.8 million for the first quarter of 2010 and an increase of 1.1% from $93.9 million for the fourth quarter of 2010.

GAAP gross profit margin was 42.4% for the first quarter of 2011, compared to 34.0% for the first quarter of 2010 and 45.2% for the fourth quarter of 2010. GAAP diluted earnings per share from continuing operations was $0.27 for the first quarter of 2011, compared to a GAAP diluted loss per share from continuing operations of $0.11 for the first quarter of 2010 and GAAP diluted earnings per share from continuing operations of $0.34 for the fourth quarter of 2010.

Non-GAAP gross profit margin was 42.5% for the first quarter of 2011, compared to 34.2% for the first quarter of 2010 and 45.3% for the fourth quarter of 2010. Non-GAAP diluted earnings per share from continuing operations was $0.32 for the first quarter of 2011, compared to a non-GAAP diluted loss per share from continuing operations of $0.08 for the first quarter of 2010 and non-GAAP diluted earnings per share from continuing operations of $0.35 for the fourth quarter of 2010.

The favorable financial results comparisons between the first quarter of 2011 and the first quarter of 2010 were impacted by the inventory carryover from 2009 into 2010 by one of our largest customers.

Business Outlook
"Our performance in the first quarter of 2011 produced one of the finest first-quarter financial results in STEC’s history," said Manouch Moshayedi, STEC’s Chairman and CEO. "The solid momentum from the second half of 2010 carried over into the first quarter of 2011 offsetting the typical seasonality trend.

"I am also pleased with the introduction of qualification samples of our next-generation ZeusIOPS SSDs in the first quarter of 2011, marking an important milestone in the transition of our flagship product line based on controllers using FPGAs to controllers using ASICs. This transition is important since it will enable us to realize cost advantages over previous designs using more expensive FPGAs. We are further driving down the cost of our products by using MLC components – enhanced by our CellCare technology. By applying this proprietary technology, we are able to achieve Enterprise-level endurance in our SSDs using standard MLC Flash. We believe that the increasing use of MLC will continue to drive adoption of SSDs in the enterprise markets.

"It is important to note that the same ASIC design used in our ZeusIOPS SSDs is also being leveraged in our PCIe product line due out later this year. This allows us to optimize our engineering resources and technological advancements across a greater range of products. With the introduction of our latest generation of ZeusIOPS products, our MACH family of products, and the anticipated addition of our PCIe products, we will provide the marketplace with what we believe is the broadest portfolio of SSD solutions covering the Enterprise-storage spectrum."

Guidance
"While the recent earthquake and tsunami in Japan have not significantly impacted our access to Flash memory or other key components, some of our customers have experienced supply chain disruptions. Consequently, we anticipate that some of our customers whose supply chains have significant exposure to the most impacted areas of Japan may postpone or reduce their orders for our products in the second quarter of 2011. Due to these unforeseen factors, we are providing a wider than usual range of revenue and EPS targets for the second quarter of 2011. We expect that the shortage of materials experienced by these customers will be resolved in the coming quarters."

STEC’s current expectation
for the second quarter of 2011 is as follows:

• Revenue to range from $80 million to $90 million.
• Diluted non-GAAP income per share to range from $0.21 to $0.30.