Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: STEC
So what: Second-quarter non-GAAP EPS of $0.23 missed the $0.24 consensus estimate. GAAP EPS was $0.18. Revenue grew 35% year over year. Guidance for the third quarter calls for non-GAAP EPS of $0.08-$0.10 and revenue of $70 million-$72 million. That's nowhere near the consensus expectations of $0.31 and $96 million, respectively.
Now what: This solid-state drive company isn't looking so solid anymore: A sub-header in the earnings press release flashed, "Business Outlook -- Near-term challenges". The mid-point of guidance represents a 71% non-GAAP EPS decline and 17% revenue decline year over year. The company admitted it is facing increasing competition from lower cost, lower performance alternatives, and products with similar performance. Actions it is taking to lower its own product costs could ultimately help margins, but are unlikely to address the pricing or market share challenges.
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