The highflying shares of Santa Ana-based STEC Inc. continued their month-long pullback on Tuesday.
The maker of a new type of data storage drive saw its shares slump more than 8% Tuesday on a market value of $1.2 billion.
Behind the drop appears to be ongoing concerns about looming competition.
STEC makes drives that use flash memory chips instead of spinning disks to store data. The drives, known as solid state since they have no moving parts, are found in servers used by companies, banks, governments and others.
Before slipping in mid-September, STEC’s shares were up some 800% since the start of the year. The recent pullback has cut that to about 500%.
STEC has had the market for solid state business drives to itself for much of the past year.
Now it faces the prospect of competition from Intel Corp., Kingston Technology Co. as well as disk drive makers Seagate Technology LLC and Western Digital Corp., among others.
An analyst report last month warning about looming competition sparked STEC’s Wall Street downturn. Other analysts have downplayed the competitive threat.
Eric Savitz of Barron’s Tech Trader Daily column pinned Tuesday’s drop on a report from analyst Gordon Johnson of Hapoalim Securities USA Inc., part of Israel’s Bank Hapoalim BM.
He called STEC “the biggest short of all time” and that the stock could sink back to $5, or 80% lower than what it is at today.
Johnson cited competition next year from Intel, Seagate, Hitachi Ltd. and Samsung Electronics Co.
Competition in the second half of the year is set to eat into STEC’s profits, he said.
*For more,
read the full Barron’s column.
