Shares of Santa Ana’s STEC Inc., a maker of flash memory drives for corporate and industrial uses, tanked on Tuesday after it gave an outlook for the current quarter that fell well short of Wall Street’s expectations.
Investors sent shares down nearly 22% in afterhours trading on a recent market value of $675 million.
For the first quarter, STEC said it’s expecting sales of $33 million to $35 million, short of Wall Street analysts’ expected sales of $80 million.
The company is looking for profits of $5.5 million to $6.5 million, short of analysts’ expectation of $15 million.
STEC outlook slipped due to 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.
STEC’s biggest customer, Hopkinton, Mass.-based storage kingpin EMC Corp., has slowed its ordering due to an inventory buildup of the drive, which it first warned about back in November.
“We believe that the first half of 2010 will be a trough period for our business due to an inventory carryover by our largest customer,” Chief Executive Manouch Moshayedi said in a statement. “Based on our best estimates we now anticipate this inventory carryover to continue to negatively impact our sales to this customer during the first half of 2010, as we do not expect any meaningful production orders from this customer during that time.”
The cloudy outlook comes on the heels of STEC’s results for the three months through December, which beat analysts’ sales expectations and was in line on profits.
The company reported sales of $106 million, up 86% from the same period a year earlier and beating analysts’ expectation of $102 million in sales.
Excluding charges for stock compensation, severance pay, legal fees and other one-time costs, it posted profits of $26 million, up nearly ten-fold from the year-ago quarter and in line with analysts’ expectations.
In the same announcement, STEC said it’s set to repurchase up to $80 million of its shares.
