Shares of Santa Ana’s STEC Inc., a maker of flash memory drives used in corporate data centers, jumped on Tuesday after the company reported second-quarter results and an outlook for the current quarter that surpassed Wall Street’s expectations.
Investors sent shares up more than 6% in afterhours trading on a recent market value of $793 million.
For the third quarter, STEC said it’s expecting to see sales of $78 million to $80 million, down about 19% from a year earlier and more than the $68 million in revenue analysts were looking for.
STEC said it’s set to report adjusted profits of $9 million to $10 million, down roughly 62% and more than the $7 million in profits analysts had been expecting.
The rosier outlook comes on the heels of STEC’s second-quarter results, which also topped expectations.
For the three months through June 30, STEC reported sales of $61 million, down 29% from a year earlier and beating analysts’ average expectation of $50 million in revenue.
Excluding charges for stock compensation, severance pay and other one-time costs, the company posted $5 million in profits, down 76% from a year earlier and beating Wall Street expectations that STEC would break even.
The company, whose soaring shares crashed late last year amid a drop in orders from a key customer, makes flash memory drives used by banks, retailers and other large corporations.
STEC’s been joined at the hip with Hopkinton, Mass.-based EMC Corp., one of the top makers of data storage computers. EMC accounts for more than 60% of STEC’s yearly sales, which are projected at about $234 million this year.
Late last year, STEC’s stock tanked after it disclosed that EMC had built up too many of its drives and was pausing orders.
The news sent shares freefalling. STEC, a star performer for most of last year, lost two-thirds of its value by the end of 2009.
It has struggled to regain lost ground since then. The company’s shares are down about 15% so far this year.
STEC’s products are known as solid state drives and have made inroads replacing traditional disk drives in corporate storage networks. Solid state drives have no moving parts and are touted for their reliability and energy savings.
The inventory issue with EMC has since been resolved, but STEC is still working on diversifying its customers.
“After a challenging first quarter, we have rebounded quite well and surpassed our revenue and earnings guidance for the second quarter,” Chief Executive Manouch Moshayedi said in a statement. “The inventory carryover situation at our largest customer was resolved during the second quarter.”
The company said it’s starting to see more adoption of solid state drives.
“We are seeing increased interest in the use of solid state drives in enterprise applications and it is very encouraging to see adoption … increase not only at our largest customers but also across most other enterprise-storage customers,” Moshayedi said.
