Shares of Santa Ana’s STEC Inc., a maker of flash memory drives for corporate and industrial uses, slumped Tuesday after an analyst downgraded the stock on concerns about slowing orders from its top customer.
Investors sent shares down nearly 9% in early afternoon New York trading on a recent market value of $693 million.
Needham & Co. analyst Richard Kugele lowered his rating on STEC’s shares to “hold” from “strong buy” and pared his estimates for the March quarter.
In the past six months, STEC’s stock has slipped over concerns about competition and slowing sales of STEC’s drives that use flash memory chips instead of spinning disks to store huge amounts of data for banks and retailers.
In September, STEC gave a conservative outlook for the fourth quarter and hinted that its top customer, EMC Corp. had a stockpile of drives and would slow its ordering.
The news sent shares plummeting and STEC lost two-thirds of its value by the end of 2009.
Kugele downgraded STEC because he’s not seen any indicators of ordering by EMC and the inventory situation is still uncertain.
“There has been little evidence that STEC’s top solid state drive customer has reordered thus far in the first quarter,” he said in a note to clients. “Since the inventory issue appeared in early November, we have been actively attempting to quantify the extent … with little success.”
Kugele slashed his estimates for the current quarter by more than half.
He now expects STEC to see profits of $3 million, down from a previous estimate of $17 million in profits.
The analyst seeks STEC reporting much lower sales of $47 million, down from a previous outlook of $82 million in revenue.
STEC is set to report results for the December quarter on Feb. 23.
Wall Street analysts, on average, are looking for STEC to report profits of $26 million on sales of $102 million.
