STEC, Inc. (Nasdaq:STEC), announced today the Company's financial
results for the fourth quarter and full-year ended December 31,
2012.
Revenue for the fourth quarter of 2012 was $35.1 million, a
decrease of 39.6% from $58.1 million for the fourth quarter of 2011
and a decrease of 16.6% from $42.1 million for the third quarter of
2012.
GAAP gross profit margin was 32.2% for the fourth quarter of
2012, compared to 41.1% for the fourth quarter of 2011 and 37.0%
for the third quarter of 2012. GAAP diluted loss per share was
$0.50 for the fourth quarter of 2012, compared to $0.08 for the
fourth quarter of 2011 and $0.42 for the third quarter of 2012.
Non-GAAP gross profit margin was 32.8% for the fourth quarter of
2012, compared to 41.5% for the fourth quarter of 2011 and 37.5%
for the third quarter of 2012. Non-GAAP diluted loss per share was
$0.35 for the fourth quarter of 2012, compared to $0.02 for the
fourth quarter of 2011 and $0.24 for the third quarter of 2012.
Revenue for full-year 2012 was $168.3 million, a decrease of
45.4% from $308.1 million for full-year 2011. GAAP gross profit
margin was 35.6% for full-year 2012, compared to 43.6% for
full-year 2011. GAAP full-year 2012 diluted loss per share was
$2.22, compared to full-year 2011 diluted earnings per share of
$0.50. Non-GAAP gross profit margin was 36.1% for full-year 2012,
compared to 43.8% for full-year 2011. Non-GAAP diluted loss per
share was $1.03 for full-year 2012, compared to non-GAAP diluted
earnings per share of $0.70 for full-year 2011.
A reconciliation of GAAP to non-GAAP results is provided in the
tables included in this release.
Business Outlook
"Although we experienced another very challenging quarter, I am
very pleased with the headway that we made towards the successful
implementation of our business strategy that is focused on
diversifying our customer base," said Mark Moshayedi, STEC's Chief
Executive Officer and President. "The strategic goal is to attain a
solid mix of channel distributors and Enterprise customers along
with our OEM customers.
"While the transition from being an OEM-driven company is taking
place over time, evidence of our progress includes achieving our
first greater-than-10%-of-revenue non-OEM customer, in the second
half of 2012. In 2012 and continuing in 2013, we've been executing
on our new strategic marketing initiatives and have recruited
seasoned personnel with significant Enterprise expertise. I believe
that we are now well-positioned to target our key vertical markets.
As an organization, we are evolving into a storage systems and
solutions provider and away from simply providing components.
"These transitions are never easy, but we are confident in our
people and core technologies. The combination of storage, SSD, and
applications expertise that we are bringing together will not only
distinguish ourselves in the marketplace, but we expect will also
begin to pay off as we continue to execute our strategy in 2013 and
beyond."
Guidance
STEC's current expectation for the first quarter of 2013 is as
follows:
- Revenue to range from $21 million to $23 million.
- Non-GAAP diluted loss per share to range from $0.40 to
$0.42.
STEC's projected non-GAAP loss per share results exclude
employee stock compensation expense and other items that the
Company does not consider indicative of its underlying business
performance.
Conference Call
STEC will hold an open conference call to discuss results for
the fourth quarter and full-year 2012. The call will take place
today at 1:30 p.m., Pacific/ 4:30 p.m., Eastern. The call-in
numbers for the conference are (877) 645-6380 (United States and
Canada) and (914) 495-8562 (International).
Webcast
This call will be webcast. The webcast can be accessed by
clicking on the blue "Investors" tab at the top of the home page at
www.stec-inc.com. Then click on the "Audio Presentations"
button.
Replay
The webcast will also be archived and available for replay
beginning approximately two hours after the live call
concludes.
About STEC, Inc.
STEC, Inc. is a leading provider of enterprise-class,
solid-state storage solutions designed for the ever-growing
performance, reliability and endurance requirements of today's
advanced data centers. The industry's first company to deploy
solid-state drives (SSDs) into large-scale enterprise environments,
STEC offers the industry's widest range of solid-state storage
solutions, which protect critical information for major business
and government organizations worldwide. Headquartered in Santa Ana,
California, STEC also serves the embedded and military/aerospace
markets with SSDs for industrial and rugged environments. For more
information, visit www.stec-inc.com.
For information about STEC and to subscribe to the Company's
"Email Alerts" service, please visit STEC's web site at
www.stec-inc.com, click on the blue "Investors" tab at the top of
the home page and then click "Email Alerts."
The STEC, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=1079
STEC and the STEC logo are either registered trademarks or
trademarks of STEC, Inc. in the United States and certain other
countries. All other trademarks or brand names referred to
herein are the property of their respective owners.
Use of Non-GAAP Financial Information. To
supplement the consolidated financial results prepared in
accordance with U.S. Generally Accepted Accounting Principles
("GAAP"), STEC uses non-GAAP financial measures (non-GAAP gross
profit, non-GAAP gross profit percentage, non-GAAP operating
expenses, non-GAAP operating (loss) income, non-GAAP operating
margin percentage, non-GAAP other income (expense), non-GAAP (loss)
income and non-GAAP diluted (loss) earnings per share) that exclude
employee stock compensation expense, employee severance, securities
litigation related costs, SEC investigation and litigation costs,
intellectual property litigation costs, litigation loss contingency
and deferred tax asset valuation allowance. Management excludes
these items because it believes that the non-GAAP measures enhance
an investor's overall understanding of STEC's financial performance
and future prospects by being more reflective of the Company's
core, recurring operational activities and to be more comparable
with the results of the Company over various periods. Management
uses non-GAAP financial measures internally for strategic decision
making, forecasting future results and evaluating current
performance. Guidance is provided only on a non-GAAP basis due to
the inherent difficulty of forecasting the timing or amount of such
items. Difficulties in forecasting the non-GAAP items include the
timing of issuing employee stock compensation, which could impact
the valuation and related expense, and the timing of employee
severance payments. These items could be materially significant to
the Company's GAAP results in any period. By disclosing non-GAAP
financial measures, management intends to provide investors with a
more meaningful, consistent comparison of the Company's core
operating results and trends for the periods presented. Non-GAAP
financial measures are not prepared in accordance with GAAP;
therefore, the information is not necessarily comparable to other
companies' financial information and should be considered as a
supplement to, not a substitute for, or superior to, the
corresponding measures calculated in accordance with GAAP. A
complete reconciliation between GAAP and non-GAAP information
referred to in this release is provided in tables included in this
release. Certain amounts reported in prior releases may have been
reclassified to conform to the current quarter's non-GAAP
presentation.
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995 This release contains
forward-looking statements that involve risks and uncertainties,
including, but not limited to, statements concerning the rapidly
evolving enterprise storage and server markets; growing acceptance,
adoption and qualification of SSDs within the enterprise storage
and server markets; the launch, marketing, qualification and
production of the Company's product and solution initiatives; the
qualification and sale of the Company's products and solutions into
emerging SSD system vendors, enterprises and non-traditional
end-user customers, along with OEM customers; diversifying the
Company's customer base; leveraging the Company's sales and
marketing and channel-support infrastructure to cater to
enterprises directly and develop a new vertical market strategy;
recruiting seasoned personnel; the Company's key product line
initiatives and development; the capabilities, performance, cost
advantages, and benefits of Company's products and solutions, and
developing technologies; anticipated increase in sales of the
Company's products and solutions; the future financial performance
and outlook of the Company; and expected first quarter of 2013
revenue and loss per share. Such forward-looking statements are
based on current expectations and involve inherent risks and
uncertainties, including factors that could delay, divert or change
any of them, and could cause actual outcomes and results to differ
materially from current expectations. Although the Company believes
that the forward-looking statements contained in this release are
reasonable, it can give no assurance that its expectations will be
fulfilled. Additional important factors which could cause actual
results to differ materially from those expressed or implied in the
forward-looking statements are detailed in filings with the
Securities and Exchange Commission made from time to time by the
Company, including its Annual Report on Form 10-K, its Quarterly
Reports on Form 10-Q, and its Current Reports on Form 8-K. Special
attention is directed to the portions of those documents entitled
"Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The information
contained in this press release is a statement of the Company's
present intention, belief or expectation. The Company may change
its intention, belief, or expectation, at any time and without
notice, based upon any changes in such factors, in the Company's
assumptions or otherwise. Except as required by law, the Company
undertakes no obligation to release publicly any revisions to any
forward-looking statements to reflect events or circumstances
occurring after the date hereof or to reflect the occurrence of
unanticipated events.
|
|
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STEC,
INC. |
CONSOLIDATED BALANCE
SHEETS |
(in thousands, except
per share amounts) |
|
|
|
|
December 31,
2012 |
December 31,
2011 |
ASSETS: |
|
|
Current Assets: |
|
|
Cash and cash equivalents |
$ 158,232 |
$ 180,853 |
Accounts receivable, net of allowances of
$6,248 at December 31, 2012 and $6,117 at December 31,
2011 |
13,515 |
27,368 |
Inventory |
41,760 |
61,736 |
Insurance claim receivable |
20,563 |
1,583 |
Other current assets |
10,212 |
8,865 |
Total current
assets |
244,282 |
280,405 |
|
|
|
Leasehold interest in land |
2,503 |
2,549 |
Property, plant and equipment, net |
30,343 |
34,287 |
Goodwill |
1,682 |
1,682 |
Long-term intangible assets, net |
5,144 |
6,185 |
Deferred income taxes, net |
-- |
9,100 |
Other long-term assets |
5,817 |
818 |
Total
assets |
$ 289,771 |
$ 335,026 |
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY: |
|
|
Current Liabilities: |
|
|
Accounts payable |
$ 6,818 |
$ 6,837 |
Accrued and other liabilities |
51,586 |
12,753 |
Total current
liabilities |
58,404 |
19,590 |
Other long-term liabilities |
6,185 |
5,083 |
Commitments and contingencies |
-- |
-- |
Shareholders' Equity: |
|
|
Preferred stock, $0.001 par value, 20,000
shares authorized, no shares issued and outstanding |
-- |
-- |
Common stock, $0.001 par value, 100,000
shares authorized, 46,805 shares issued and outstanding as of
December 31, 2012 and 46,110 shares issued and outstanding as of
December 31, 2011 |
47 |
46 |
Additional paid-in capital |
150,263 |
132,211 |
Retained earnings |
74,872 |
178,096 |
Total shareholders'
equity |
225,182 |
310,353 |
Total liabilities
and shareholders' equity |
$ 289,771 |
$ 335,026 |
|
|
|
|
|
|
|
|
STEC,
INC. |
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE (LOSS) INCOME |
(in thousands, except
per share amounts) |
|
|
|
Quarter Ended
December 31, |
Year Ended
December 31, |
|
2012 |
2011 |
2012 |
2011 |
Net revenues |
$ 35,135 |
$ 58,135 |
$ 168,308 |
$ 308,059 |
Cost of revenues |
23,831 |
34,260 |
108,469 |
173,852 |
Gross profit |
11,304 |
23,875 |
59,839 |
134,207 |
|
|
|
|
|
Sales and marketing |
7,346 |
6,236 |
28,188 |
23,790 |
General and administrative |
11,816 |
7,917 |
47,096 |
30,563 |
Research and development |
16,132 |
15,148 |
66,617 |
54,656 |
Total operating expenses |
35,294 |
29,301 |
141,901 |
109,009 |
|
|
|
|
|
Operating (loss) income |
(23,990) |
(5,426) |
(82,062) |
25,198 |
Other (expense) income, net |
821 |
58 |
(12,305) |
107 |
(Loss) income from operations before
income taxes |
(23,169) |
(5,368) |
(94,367) |
25,305 |
Provision for income taxes |
14 |
1,782 |
8,857 |
205 |
Net (loss) income |
(23,155) |
(3,586) |
(103,224) |
25,100 |
Comprehensive (loss) income |
$ (23,155) |
$ (3,586) |
$ (103,224) |
$ 25,100 |
|
|
|
|
|
Net (loss) income per share: |
|
|
|
|
Basic |
$ (0.50) |
$ (0.08) |
$ (2.22) |
$ 0.50 |
Diluted |
$ (0.50) |
$ (0.08) |
$ (2.22) |
$ 0.50 |
|
|
|
|
|
Shares used in per share computation: |
|
|
|
|
Basic |
46,763 |
46,106 |
46,472 |
49,847 |
Diluted |
46,763 |
46,106 |
46,472 |
50,652 |
|
|
|
|
|
STEC, INC.
Non-GAAP Reconciliations
The non-GAAP financial measures included in the following tables
are non-GAAP gross profit, non-GAAP gross profit percentage,
non-GAAP operating expenses, non-GAAP operating (loss) income,
non-GAAP other (expense) income, non-GAAP operating margin
percentage, non-GAAP (loss) income and non-GAAP diluted (loss)
earnings per share, which adjust for the following items: (a)
employee stock compensation expense, (b) employee severance, (c)
securities litigation related costs, (d) SEC investigation and
litigation costs, (e) intellectual property litigation costs, (f)
litigation loss contingency and (g) deferred tax asset valuation
allowance. Management believes these non-GAAP financial measures
enhance an investor's overall understanding of the Company's
financial performance and future prospects by being more reflective
of the Company's core, recurring operational activities and are
more comparable with the results of the Company over various
periods. Management uses non-GAAP financial measures internally for
strategic decision making, forecasting future results and
evaluating current performance. Non-GAAP financial measures are not
prepared in accordance with GAAP; therefore, the information is not
necessarily comparable to other companies' financial information
and should be considered as a supplement to, not a substitute for,
or superior to, the corresponding measures calculated in accordance
with GAAP.
Details of the items excluded from GAAP financial results in
calculating non-GAAP financial measures and explanatory footnotes
are as follows:
a) Employee stock compensation costs incurred in connection with
Accounting Standards Codification ("ASC") 718, "Compensation --
Stock Compensation," are comprised on non-cash expenses related to
equity compensation provided to employees, officers and directors.
Management believes non-cash stock compensation costs should be
excluded when evaluating core operations and current
performance.
b) Employee severance relates to costs incurred in conjunction
with the termination of certain employees. As an accommodation, the
Company provides compensation in the form of severance to certain
employees subject to termination without cause. Management believes
that severance costs should be excluded when evaluating core
operations and current performance.
c) In the fourth quarter of 2009, first quarter of 2010 and
fourth quarter of 2012, certain securities class action and
shareholder derivative lawsuits were filed against the Company and
certain officers and directors of the Company. These costs
represent the legal fees related to these class action securities
and shareholder derivative actions that have not been covered by
the Company's Directors and Officers insurance policies and include
indemnifiable legal costs advanced on behalf of these officers and
directors. Management believes these legal fees should be excluded
when evaluating core operations and current performance.
d) The SEC initiated in the fourth quarter of 2009 an
investigation of the Company and certain officers in connection
with trading in the Company's securities, which on July 19, 2012
resulted in the SEC filing a civil action against the Company's
Founder, Manouch Moshayedi. The SEC also notified the Company that
it would not bring an enforcement action against the Company or any
of its other officers. These costs represent the legal fees related
to this investigation and related civil action that have not been
covered by the Company's Directors and Officers insurance policies
and include indemnifiable legal costs advanced on behalf of these
officers. Management believes these legal fees should be excluded
when evaluating core operations and current performance.
e) On September 7, 2011, Solid State Storage Solutions, Inc.
filed a patent infringement suit against the Company and several
other defendants. According to the complaint, the patents relate to
solid-state drives employing a controller chip and a plurality of
NAND flash devices. On December 19, 2012, the Company resolved this
matter pursuant to a confidential agreement that releases the
Company from past claims and precludes the plaintiff from again
claiming that the Company's products infringe their patents.
Management believes that legal fees and litigation settlement costs
incurred in conjunction with this lawsuit should be excluded when
evaluating core operations and current performance.
f) In connection with the legal matters described in c) above,
the Company has accrued an estimated loss
contingency. Management believes that the litigation loss
contingency should be excluded when evaluating core operations and
current performance.
g) In accordance with ASC Topic 740, Income Taxes, the Company
determined based upon an evaluation of all available objectively
verifiable evidence, including but not limited to the Company's
U.S. operations falling into a cumulative three year loss, that a
non-cash valuation allowance should be established against its U.S.
deferred tax assets which are comprised primarily of accumulated
and unused U.S. tax credits and 2012 net operating losses. The
establishment of a full non-cash valuation allowance on the
Company's U.S. deferred tax assets does not have any impact on its
cash, nor does such an allowance preclude the Company from
utilizing its tax losses, tax credits or other deferred tax assets
in future periods. Management believes that the non-cash
valuation allowance against U.S. deferred tax assets benefitted in
prior periods should be excluded when evaluating core operations
and current performance.
h) The amount represents the estimated income tax effect of the
non-GAAP adjustments. Starting in the third quarter of 2011,
the Company calculated the tax effect of non-GAAP adjustments by
applying an applicable estimated jurisdictional tax rate to each
specific non-GAAP item. Prior to the third quarter of 2011,
the Company utilized the consolidated effective tax rate to
estimate the tax effect of non-GAAP adjustments.
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STEC,
INC. |
Schedule Reconciling
GAAP (Loss) Income to Non-GAAP (Loss) Income |
($ in thousands, except
per share amounts) |
(unaudited) |
|
|
|
For the Quarters
Ended |
For the Years
Ended |
|
December 31, |
December 31, |
September 30, |
December
31, |
|
2012 |
2011 |
2012 |
2012 |
2011 |
GAAP net (loss) income |
$ (23,155) |
$ (3,586) |
$ (19,783) |
$ (103,224) |
$ 25,100 |
|
|
|
|
|
|
The GAAP amounts have been adjusted
to exclude the following items (non-GAAP
adjustments): |
|
|
|
|
|
|
|
|
|
|
|
Excluded from cost of revenues: |
|
|
|
|
|
Employee stock compensation (a) |
$ 223 |
$ 232 |
$ 236 |
$ 924 |
$ 623 |
Employee severance (b) |
-- |
-- |
-- |
52 |
-- |
Total excluded from cost of sales |
223 |
232 |
236 |
976 |
623 |
|
|
|
|
|
|
Excluded from operating expenses: |
|
|
|
|
|
Employee stock compensation (a) |
3,468 |
3,596 |
3,892 |
14,730 |
12,886 |
Employee severance (b) |
430 |
-- |
49 |
883 |
-- |
Securities litigation related costs
(c) |
8 |
191 |
2,839 |
6,539 |
191 |
SEC investigation and litigation costs
(d) |
1,102 |
-- |
639 |
2,604 |
-- |
IP litigation costs (e) |
1,831 |
132 |
616 |
2,963 |
132 |
Total excluded from operating
expenses |
6,839 |
3,919 |
8,035 |
27,719 |
13,209 |
|
|
|
|
|
|
Excluded from other (expense) income,
net: |
|
|
|
|
|
Litigation loss contingency (f) |
-- |
-- |
188 |
15,188 |
-- |
|
-- |
-- |
188 |
15,188 |
-- |
|
|
|
|
|
|
Total excluded from cost of revenues,
operating expenses and other (expense) income before income
taxes |
7,062 |
4,151 |
8,459 |
43,883 |
13,832 |
|
|
|
|
|
|
Income tax effect on non-GAAP adjustments
(h) |
(51) |
(1,428) |
(70) |
(1,702) |
(3,716) |
Total excluded from cost of revenues and
operating expenses after taxes |
7,011 |
2,723 |
8,389 |
42,181 |
10,116 |
Excluded from provision for income
taxes: |
|
|
|
|
|
Deferred tax asset valuation allowance
(g) |
-- |
-- |
-- |
13,233 |
-- |
Total non-GAAP adjustments after income
taxes |
7,011 |
2,723 |
8,389 |
55,414 |
10,116 |
|
|
|
|
|
|
Non-GAAP (loss) income |
$ (16,144) |
$ (863) |
$ (11,394) |
$ (47,810) |
$ 35,216 |
|
|
|
|
|
|
GAAP diluted (loss) earnings per share |
$ (0.50) |
$ (0.08) |
$ (0.42) |
$ (2.22) |
$ 0.50 |
Impact of non-GAAP adjustments on diluted
(loss) earnings per share |
0.15 |
0.06 |
0.18 |
1.19 |
0.20 |
Non-GAAP diluted (loss) earnings per
share |
$ (0.35) |
$ (0.02) |
$ (0.24) |
$ (1.03) |
$ 0.70 |
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(a) - (h) See corresponding footnotes
above. |
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STEC,
INC. |
Selected Non-GAAP
Financial Information |
($ in
thousands) |
(unaudited) |
|
|
|
For the Quarters
Ended |
For the Years
Ended, |
|
December 31, |
December 31, |
September 30, |
December 31, |
December 31, |
|
2012 |
2011 |
2012 |
2012 |
2011 |
|
|
|
|
|
|
GAAP gross profit |
$ 11,304 |
$ 23,875 |
$ 15,554 |
$ 59,839 |
$ 134,207 |
Employee stock compensation (a) |
223 |
232 |
236 |
924 |
623 |
Employee severance (b) |
-- |
-- |
-- |
52 |
-- |
Non-GAAP gross profit |
$ 11,527 |
$ 24,107 |
$ 15,790 |
$ 60,815 |
$ 134,830 |
|
|
|
|
|
|
GAAP gross profit % |
32.2% |
41.1% |
37.0% |
35.6% |
43.6% |
Effect of reconciling item on gross
profit % |
0.6% |
0.4% |
0.5% |
0.5% |
0.2% |
Non-GAAP gross profit % |
32.8% |
41.5% |
37.5% |
36.1% |
43.8% |
|
|
|
|
|
|
GAAP operating expenses |
$ 35,294 |
$ 29,301 |
$ 36,968 |
$ 141,901 |
$ 109,009 |
Employee stock compensation (a) |
(3,468) |
(3,596) |
(3,892) |
(14,730) |
(12,886) |
Employee severance (b) |
(430) |
-- |
(49) |
(883) |
-- |
Securities litigation related costs
(c) |
(8) |
(191) |
(2,839) |
(6,539) |
(191) |
SEC investigation and litigation costs
(d) |
(1,102) |
-- |
(639) |
(2,604) |
-- |
IP litigation costs (e) |
(1,831) |
(132) |
(616) |
(2,963) |
(132) |
Non-GAAP operating expenses |
$ 28,455 |
$ 25,382 |
$ 28,933 |
$ 114,182 |
$ 95,800 |
|
|
|
|
|
|
GAAP operating (loss) income |
$ (23,990) |
$ (5,426) |
$ (21,414) |
$ (82,062) |
$ 25,198 |
Employee stock compensation (a) |
3,691 |
3,828 |
4,128 |
15,654 |
13,509 |
Employee severance (b) |
430 |
-- |
49 |
935 |
-- |
Securities litigation related costs
(c) |
8 |
191 |
2,839 |
6,539 |
191 |
SEC investigation and litigation costs
(d) |
1,102 |
-- |
639 |
2,604 |
-- |
IP litigation costs (e) |
1,831 |
132 |
616 |
2,963 |
132 |
Non-GAAP operating (loss) income |
$ (16,928) |
$ (1,275) |
$ (13,143) |
$ (53,367) |
$ 39,030 |
|
|
|
|
|
|
GAAP operating margin % |
-68.3% |
-9.3% |
-50.9% |
-48.8% |
8.2% |
Effect of reconciling items on operating
margin % |
20.1% |
7.1% |
19.6% |
17.1% |
4.5% |
Non-GAAP operating margin % |
-48.2% |
-2.2% |
-31.3% |
-31.7% |
12.7% |
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|
GAAP other income (expense), net |
$ 821 |
$ 58 |
$ 985 |
$ (12,305) |
$ 107 |
Litigation loss contingency (f) |
-- |
-- |
188 |
15,188 |
-- |
Non-GAAP other income |
$ 821 |
$ 58 |
$ 1,173 |
$ 2,883 |
$ 107 |
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(a) - (f) Refer to the corresponding
footnotes above. |
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CONTACT: STEC, Inc.
Mitch Gellman, Vice President of Investor Relations
(949) 260-8328
ir@stec-inc.com
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