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STEC Inc. Reports Operating Results (10-Q)

November 02, 2010 | About:
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10qk

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STEC Inc. (STEC) filed Quarterly Report for the period ended 2010-09-30.

Stec Inc. has a market cap of $774.2 million; its shares were traded at around $15.21 with a P/E ratio of 16.3 and P/S ratio of 2.1. Stec Inc. had an annual average earning growth of 23.1% over the past 5 years.STEC is in the portfolios of Richard Perry of Perry Capital, Bruce Kovner of Caxton Associates, Jim Simons of Renaissance Technologies LLC, George Soros of Soros Fund Management LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

We also offer both monolithic DRAM modules and DRAM modules based on our proprietary stacking technology. DRAM product revenue decreased 26% from $10.8 million in the third quarter of 2009 to $8.0 million in the third quarter of 2010. Sales of DRAM products represented 9% and 11% of our total revenues in the three months ended September 30, 2010 and September 30, 2009, respectively. The decrease in sales of DRAM products in absolute dollars and as a percentage of our total revenues was due primarily to a 34% decrease in unit shipments to a single customer.

Historically, a limited number of customers have accounted for a significant percentage of our revenues. Our ten largest customers accounted for an aggregate of 86.1% of our revenues during the first nine months of 2010, compared to 83.9% of our revenues during the first nine months of 2009, and 90.4% of our revenues during the third quarter of 2010, compared to 86.1% of our revenues during the third quarter of 2009. We had three customers account for more than 10% of our revenues, at 36.5%, 16.8% and 11.9%, for the nine months ended September 30, 2010, compared to one customer, which accounted for more than 10% of our revenues, at 37.9%, for the same period in 2009. We had one customer account for more than 10% of our revenues, at 52.0% in the third quarter of 2010, compared to one customer which accounted for more than 10% of our revenues, at 53.7%, for the same period in 2009. With certain exceptions, sales of our products are generally made through individual purchase orders and, in certain cases, are made under master agreements governing the terms and conditions of the customer relationships.

Net Revenues. Our revenues were $86.1 million in the third quarter of 2010, compared to $98.3 million in the same period in 2009. Revenues decreased 12% in the third quarter of 2010 due primarily to a 4% decrease in Flash memory sales, a 26% decrease in sales of DRAM products and a $5.8 million decrease of other revenues related to the sale of obsolete and excess inventory during the third quarter of 2009. Within Flash memory sales, shipments of our Zeus IOPS SSDs into the enterprise-storage market decreased 3% from $60.7 million in the third quarter of 2009 to $59.1 million in the third quarter of 2010.

Gross Profit. Our gross profit was $39.9 million in the third quarter of 2010, compared to $48.8 million in the same period in 2009. Gross profit as a percentage of revenues was 46.4% in the third quarter of 2010, compared to 49.7% in the third quarter of 2009. The decrease in gross profit in absolute dollars and as a percentage of revenue was due primarily to a 4% decrease in Flash memory sales, a 23% increase in material costs of Flash components and decreased average selling prices of certain SSD products, partially offset by a $580,000 decrease in write-downs of our inventory related to obsolescence, excess quantities and declines in market value below our costs.

Net Revenues. Our revenues were $186.2 million in the first nine months of 2010, compared to $248.2 million in the same period in 2009. Revenues decreased 25% in the first nine months of 2010 due primarily to a 30% decrease in Flash memory sales and a $6.7 million decrease of other revenues related to the sale of obsolete and excess inventory during the third quarter of 2009, partially offset by a 32% increase in sales of DRAM products. Within Flash memory sales, shipments of our Zeus IOPS SSDs into the enterprise-storage market decreased 28% from $144.0 million in the first nine months of 2009 to $104.2 million in the first nine months of 2010. An inventory carryover in early 2010 related to sales made to our largest customer during the second half of 2009 negatively impacted our Flash revenues for the first nine months of 2010.

Gross Profit. Our gross profit was $79.2 million in the first nine months of 2010, compared to $115.0 million in the same period in 2009. Gross profit as a percentage of revenues was 42.5% in the first nine months of 2010, compared to 46.3% in the first nine months of 2009. The decrease in gross profit in absolute dollars and as a percentage of revenue was due primarily to a 30% decrease in Flash memory sales and decreased average selling prices of certain SSD products, partially offset by an 18% decrease in material costs of Flash components and a $3.5 million decrease in write-downs of our inventory related to obsolescence, excess quantities and declines in market value below our costs.

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