There's no doubt in my mind that memory-based storage will overthrow the hegemony of spinning magnetic disks. Flash-based solid-state storage drives, or SSDs, are lightning-fast, use very little electric power, and are impervious to bumps and drops that would destroy a traditional hard drive. They're great for both on-the-go computing and high-performance data crunching.
The revolution is coming. It just ain't here yet.
Look at SSD specialist STEC
Yeah, in theory. Reality turns out to be more complicated.
STEC reported a 38% year-over-year sales drop, weak gross margin, and a $0.02 loss per share. The company saw profits in both the third quarter and the year-ago period.
Management saw this sales drop coming. These results were on the low end of earnings guidance but above the guidance range for sales. CEO Manouch Moshayedi called this quarter a "transitional period" as its customers qualify a new generation of products.
That's the downside of selling mainly to enterprise customers, as STEC does: Big corporations want to make sure that every piece of hardware will work correctly in their systems before breaking out big purchase orders. You can't just throw new products out there and expect storage system builders EMC
In this report, Moshayedhi conceded that his recent results haven't followed larger market trends. The "key question" is, why not? "The short answer is that we are still in a period of transition," Moshayedhi said. The company has plenty of exciting and potentially profitable products on the market today, but the big orders are held back by that pesky qualification process. That could pay off big in the back half of 2012, but it's slow going for STEC right now.
In a larger sense, that frustrating qualification standard keeps pinching the brakes on the entire SSD trend. Until enterprise customers can feel comfortable with SSDs' quality, longevity, and integration with other systems, brief price blips don't really matter.
STEC may be focused exclusively on this tough-to-crack market, but SSD and other flash-based storage options are already making an impact on the trillion-dollar market for mobile computing. See who's making hay in that market today.
Fool contributor Anders Bylund holds no position in any of the companies mentioned. The Motley Fool owns shares of Western Digital, EMC, and IBM. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.