For much of 2009, STEC Inc.’s Manouch and Mark Moshayedi seemed like shoe-ins for our businesspersons of the year.
In September, shares of STEC peaked at a gain of 800% on a market value of more than $1 billion.
Then came a pullback over concerns about competition and slowing sales of STEC’s drives that use flash memory instead of disks to store data.
But even with a 60% drop from September to early November, STEC shares still managed to post a 300% gain for 2009 on a market value of about $850 million.
That alone was good enough to earn the Moshayedis an honorable mention in our businessperson of the year consideration.
The brothers made a splash last year with the biggest innovation in data storage drives in years. STEC had the business market for what are known as solid state drives to itself in 2009.
“At this point, there’s no competitor,” Chief Executive Manouch Moshayedi said. “It will probably be another six or nine months from now. We don’t foresee any
competitors in 2010, the earliest would be 2011.”
STEC’s drives are called solid state drives because they have no moving parts, unlike traditional disk drives that use spinning disks to store data.
Solid state drives are seen as potentially replacing disk drives for their speed, quick startup, durability and energy savings.
The drives are built into computers bought by banks, retailers, governments and others to store and serve up data.
For most of 2009, STEC fed Wall Street a continuous stream of upward revisions to its financial guidance based on better-than-expected sales of its ZeusIOPS drives.
The company got a big boost from sales to EMC Corp., which designed STEC drives into its data storage computers.
Then came concerns about EMC. In September, STEC gave a conservative outlook for the fourth quarter and hinted that EMC had a stockpile of the drives and would slow its ordering.
EMC “forecasted a lot more sales of solid state drives than they actually needed,” Manouch Moshayedi said. “We think they might have some inventory left over. But at this point we sill still don’t have any news” on how the fourth quarter went.
Richard Kugele, an analyst at Needham & Co. in Boston, called the inventory issue “temporary.”
“We view the short-term inventory noise as a buying opportunity,” he said in a research note.
Pending competition for STEC is another worry as computer makers are expected to eventually look for alternate suppliers of solid state drives.
STEC—a small player for nearly all of its two decades—now is in the same lineup as some big names.
Others heading into solid state drives include Lake Forest’s Western Digital Corp., Scotts Valley-based Seagate Technology LLC and Fountain Valley’s Kingston Technology Co.
Other potential rivals are Milpitas-based Pliant Technology Inc. and a joint effort from Intel Corp. and Hitachi Global Storage Technologies—itself a venture of IBM Corp. and Japan’s Hitachi Ltd.
STEC’s plan is to position itself as the lower-cost option.
Last year it moved all of its manufacturing—and some 200 local jobs—to a state-of-the-art factory in Malaysia, where it lowered its taxes and labor costs.
“We recognize that everyone will want to have a second source in the market,” Manouch Moshayedi said. “We know that. That’s something we’ve always had in our plan. We’ve set ourselves up to compete.”
Wall Street still has high hopes for STEC, which is expected to come out with three products next year.
“We continue to believe that STEC will be a leading player within the emerging enterprise storage solid state drive world,” analyst Kugele said.
The company has design wins with other data storage computer makers, including IBM, Hewlett-Packard Co., Hitachi Data Systems Corp., Sun Microsystems Inc. and Fujitsu Ltd.
“If you look five years down the road, I think we will be a major player in the solid state drive market,” STEC President Mark Moshayedi said. “When the market becomes big enough, we will see where the chips fall.”
For now, the Moshayedis are tackling some of the obstacles that stand in the way of mass adoption of solid state drives.
A big one is education. The company recently rolled out an incentive plan to help salespeople pitch solid state drives.
“We are just at the beginning of a new market that hasn’t existed ever,” Manouch Moshayedi said. “It’s a matter of educating end-users so that they will demand this type of drive instead of hard drives. And it’s happening slowly.”
The Moshayedi brothers, natives of Iran, started out in computer memory products in the 1990s.
STEC grew out of the Moshayedis’ SimpleTech Inc., which started as a maker of memory modules for computers and later got into flash memory cards for consumer electronics.
In 2007, SimpleTech sold its consumer flash business to San Mateo’s Fabrik Inc., which was bought in early 2009 by Hitachi Global Storage Technologies.
