Shares of Santa Ana-based STEC Inc. rose Friday on rumors the data storage device maker could be a takeover target of Dell Inc.
STEC, which makes data storage drives that use flash memory instead of spinning disks, closed up more than 5% with a market value of about $610 million.
Behind the stock’s rise is a surge in options trading on STEC as some investors bet on the shares going higher amid rumors about a possible Dell bid.
Call options, or bets that STEC’s shares are likely to go up, have seen busier than usual buying, according to a Forbes story.
About 3,000 option contracts have been bought that allow buyers to purchase STEC’s shares at $12 this month.
STEC’s shares now trade at about $12. Options investors are betting the stock will rise above its current level this month, allowing them to pocket the difference.
Investors also have been buying September call options at $13.
STEC sells drives to computer makers that in turn supply them to big corporations for storing data.
The company’s drives, known as solid state because they have no moving parts, are seen as more reliable and energy efficient than traditional disk drives.
STEC has had the solid state market to itself for more than a year but now faces the threat of competition.
The company also has been reliant on Hopkinton, Mass.-based EMC Corp. for more than 60% of its $270 million in yearly sales.
The threat of competition and reliance on EMC has weighed on STEC’s shares, which are off by about 30% since the start of the year.
