SANTA ANA, Calif., Nov. 3, 2009 (GLOBE NEWSWIRE) -- STEC, Inc. (Nasdaq:STEC) announced today its financial results for the third quarter ended September 30, 2009. Revenue for the third quarter of 2009 was $98.3 million, an increase of 54.3% from $63.7 million for the third quarter of 2008, and an increase of 13.8% from $86.4 million for the second quarter of 2009. GAAP gross profit margin was 49.7% for the third quarter of 2009, compared to 32.1% for the third quarter of 2008 and 50.0% for the second quarter of 2009. GAAP diluted earnings per share from continuing operations was $0.47 for the third quarter of 2009, compared to $0.02 for the third quarter of 2008, and $0.38 for the second quarter of 2009.

Non-GAAP gross profit margin was 49.8% for the third quarter of 2009, compared to 34.1% for the third quarter of 2008 and 50.1% for second quarter of 2009. Non-GAAP diluted earnings per share from continuing operations was $0.50 for the third quarter of 2009, compared to $0.10 for the third quarter of 2008, and $0.42 for the second quarter of 2009. GAAP results for the third quarter of 2009 included employee stock compensation and special charges related to the implementation of our restructuring plan. Non-GAAP results are explained and reconciled to GAAP results in tables included in this release.

Additional highlights for the third quarter of 2009 include:

  *  Delivered the Enterprise-Storage industry's first Flash SSD
     with next-generation 6Gb SAS interface;
  *  First-to-market with Enterprise-ready MLC NAND Flash-based SSD;
  *  Significantly improved the performance of our high-end ZeusIOPS
     product line increasing Read IOPS to 80,000 (from 52,000) and
     Write IOPS to 40,000 (from 17,000);
  *  Announced adoption of ZeusIOPS SSDs into the latest major
     Enterprise-Storage OEM customer, LSI;
  *  Integrated MACH8IOPS SSDs into IBM's system servers
     representing a key push into major Enterprise-Server OEM
     applications;
  *  Collaborated with IBM to set a new Storage Performance Council
     (SPC-1) record of 300,993.85 IOPS for high-end Enterprise-
     Storage utilizing ZeusIOPS SSDs in IBM's Power 595 system;
     and
  *  Increased cash, cash equivalents and short-term
     investments at the end of the third quarter of 2009 to
     approximately $133 million, a 42% sequential increase.

Business Outlook

"I am very pleased to share with you, our exceptional results for the third quarter of 2009," said Manouch Moshayedi, STEC's Chairman and Chief Executive Officer. "Our solid operating results, the strengthening of our balance sheet and the further integration of our SSDs into our customers' platforms leave us in a great position to address the growth opportunities and challenges that lie ahead. Despite a sluggish economy, we believe our growth through the end of the year will continue."

"One of our customers entered into a $120 million supply agreement with us for shipments covering the second half of 2009. We recently received preliminary indications that our customer might carry inventory of our ZeusIOPS at the end of 2009 which they will use in 2010. In light of this development, we have jointly initiated a strategic sales and marketing incentive program designed to promote the integration of STEC's SSDs into their systems. As of September 30, 2009, we have accrued $1.5 million of estimated costs for this marketing incentive program. Both companies believe that we will be successful in increasing the pace of the replacement of HDDs with SSDs. If our marketing program is not successful in increasing the demand flow of SSDs, our first quarter of 2010 orders from this customer will be negatively affected; however, the actual impact cannot be quantified at this time.

"We are also working on implementing sales and marketing incentive programs at our other major customers to further proliferate the use of our SSDs in their systems. We believe that it is just a matter of time before these customers become more significant to our overall sales of SSDs. In addition, we continue to qualify our ZeusIOPS into new platforms at our customers and are working closely with them to promote integration of SSDs into their systems by participating in sales conferences and end-user training programs both in the U.S. and in Europe. We believe these activities will help accelerate the adoption of our SSDs over the course of 2010.

"Longer-term, we believe that SSDs in the Enterprise market are here to stay and will grow to become a very significant market within the next five years. Further, we believe that as this market grows, there will be room for a few additional players and that STEC will remain the dominant player in Enterprise-class SSDs."

Guidance

"We currently expect fourth quarter of 2009 revenue to range from $101 million to $103 million (net of $2.4 million of estimated reserves related to sales and marketing incentive programs) with diluted non-GAAP earnings per share to range from $0.51 to $0.53."

Conference Call

STEC will hold an open conference call to discuss results for the third quarter of 2009. The call will take place today at 1:30 p.m., Pacific/ 4:30 p.m., Eastern. The call-in numbers for the conference are 877-419-6591 (United States and Canada) and 719-325-4843 (International).

Webcast

This call will be webcast. The webcast can be accessed by clicking on the gray "Nasdaq:STEC" tab at the top of the home page at www.stec-inc.com. The webcast will be archived and available for replay beginning approximately two hours after the live call concludes.

About STEC, Inc. (Nasdaq:STEC)

STEC, Inc. designs, manufactures and markets enterprise-class solid state drives, or SSDs, for use in high performance storage and server systems, and high density dynamic random access memory, or DRAM, modules for networking, communications and industrial applications. For information about STEC and to subscribe to the Company's "Email Alerts" service, please visit our web site at www.stec-inc.com, click the "Nasdaq:STEC" tab at the top of the page and then click "Email Alerts."

The STEC, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1079

Use of Non-GAAP Financial Information

To supplement the consolidated financial results prepared in accordance with generally accepted accounting principles in the United States ("GAAP"), we use non-GAAP financial measures (non-GAAP gross profit, non-GAAP income from continuing operations, non-GAAP diluted earnings per share from continuing operations and non-GAAP diluted earnings per share) that exclude start-up costs related to our Malaysia facility, employee stock compensation, employee severance, global tax structuring costs, intellectual property litigation costs, hiring and recruiting fees for key R&D employees, customer evaluation product cost, special charges related to the implementation of our restructuring plan, Malaysian government incentive grant income and the short-term impact of the global tax structuring on our effective tax rate. Management excludes these items because it believes that the non-GAAP measures enhance an investor's overall understanding of our financial performance and future prospects by being more reflective of our core, recurring operational activities and to be more comparable with our results over various periods. Management uses such non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. Guidance for diluted earnings per share is provided only on a non-GAAP basis due to the inherent difficulty of forecasting the timing or amount of such items. Difficulties in forecasting the non-GAAP items include the timing of customer audit approvals for the Malaysia facility which would impact the ramp up of production, registration costs for new entities related to our global tax structuring and unexpected delays in shipping new products developed by our foreign subsidiaries in lower tax jurisdictions than the United States. These items could be materially significant in our GAAP results in any period. By disclosing non-GAAP financial measures, management intends to provide investors with a more meaningful, consistent comparison of the Company's core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies' financial information and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. A complete reconciliation between GAAP and non-GAAP information referred to in this release is provided in tables included in this release. Certain amounts reported in prior releases may have been reclassified to conform to the current quarter's non-GAAP presentation.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This release contains forward-looking statements that involve risks and uncertainties, including, but not limited to, statements concerning future Company and SSD growth, customers' acceptance of SSDs, the impact of customer inventory on STEC in the first quarter of 2010, the effectiveness of sales and marketing initiatives, STEC's ability to reduce production and labor costs and lower SSD costs, and expected fourth quarter 2009 revenue and earnings per share. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes and results to differ materially from current expectations. Although STEC believes that the forward looking statements contained in this release are reasonable, it can give no assurance that its expectations will be fulfilled. Important factors which could cause actual results to differ materially from those expressed or implied in the forward-looking statements are detailed in filings with the Securities and Exchange Commission made from time to time by STEC, including its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, and its Current Reports on Form 8-K. The information contained in this press release is a statement of STEC's present intention, belief or expectation.