) reported third quarter 2012 adjusted loss per share of 33
cents, narrower than the Zacks Consensus Estimate of 36 cents
loss per share. The adjusted or non-GAAP loss per share excludes
employee severance fees, litigation costs and deferred tax
valuation allowance, but includes stock-based compensation
expense. The quarter's earnings dropped 451.0% from the year-ago
level. The disappointing result was due to higher costs, lower
pricing and market share loss.
Total revenue for the third quarter was $42.1 million, down 42.0%
on a year-over-year basis. The sales decline was due to market
Reported gross margin in the quarter was 37.0%, down from 45.8%
in the year-ago quarter. Higher percentage of fixed production
overhead and labor costs on revenue and competitive pricing
pulled down the gross margin. This was partially offset by
favorable flash-component costs.
Operating margin was (50.9%) versus 7.6% in the year-ago quarter.
The company's total operating expenses increased 33.5% on a
year-over-year basis. Higher operating expenses were mainly due
to 73.9%, 16.5% and 25.2% year-over-year increases in general and
administrative, research and development, and selling and
marketing expenses, respectively.
Net loss on a GAAP basis was $19.8 million or 42 cents per
diluted share compared to a net income of $4.8 million or 9 cents
in the year-ago quarter.
After excluding non-recurring items associated with cost of sales
and operating expenses after taxes but including stock-based
compensation expense, adjusted net loss for the third quarter was
$15.5 million or 33 cents per diluted share. There were no such
one-time items recorded in the year-ago quarter.
Balance Sheet & Cash Flow
Cash and cash equivalents were $186.2 million versus $207.2
million in the previous quarter. Inventories were at $44.5
million compared with $34.6 million in the prior quarter.
Receivables were $13.2 million versus $19.4 million in the prior
quarter. Cash from operating activities was $18.1 million, up
from $4.0 million in the prior quarter. Capital expenditure was
$2.5 million compared with $4.7 million in the prior quarter.
Earlier, STEC marketed its products through OEMS (original
equipment manufacturers). However, since the past few months, it
has been marketing its products directly to enterprises and
end-users. The management believes that the transition could lead
to solid contributions from enterprise verticals. With this
diversification strategy, the company believes that customer
concentration risks will be mitigated.
For the fourth quarter, management expects revenue in the range
of $36.0-$40.0 million. Non-GAAP loss per share is expected
between 31 cents and 35 cents.
The Zacks Consensus Estimates for fourth quarter and fiscal 2012
are pegged at a loss of 27 cents and $1.23 per share,
STEC's third quarter loss per share was narrower than the Zacks
Consensus Estimate. The fourth quarter guidance announced by the
company is disappointing, despite the encouraging and diversified
marketing strategy adopted by the company.
Also, intense competitive pressures from
Micron Technology Inc.
OCZ Technology Group
) are concerns.
Currently, STEC has a Zacks #3 Rank, implying a short-term Hold
MICRON TECH (MU): Free Stock Analysis Report
OCZ TECHNOLOGY (OCZ): Free Stock Analysis
SANDISK CORP (SNDK): Free Stock Analysis
STEC INC (STEC): Free Stock Analysis Report
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