STEC, Inc - (formerly SimpleTech, Inc.) (STEC)

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Broadpoint starts STEC with buy, shares rise
Gowri Jayakumar
BANGALORE
Tue Dec 22, 2009 1:26pm EST
http://www.reuters.com/article/idUSTRE5BL3JT20091222?type=globalMarketsNews

BANGALORE (Reuters) - Broadpoint Amtech started coverage of solid-state drive maker Stec Inc (STEC.O) with a "buy" rating, saying the company's first-mover advantage will be sustainable for a longer-than-expected period, sending its shares up as much as 8 percent.

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The enterprise solid-state drive (SSD) market is expected to expand from $246 million in 2009 to $1.4 billion in 2013, analyst Dinesh Moorjani said in a note to clients.

SSDs are viewed by many as the future of the disk drive industry as they are faster and unlike hard disk drives have no moving parts, making them sturdier.

Moorjani said while competition was inevitable from hard disk vendors, NAND suppliers and other entrants, he does not expect any material impact in 2010 and sees no real competition to Stec's flagship ZeusIOPS product.

The analyst expects a 24 percent growth in earnings per share and a 21 percent revenue rise in 2010 for Stec, driven by strength at customers.

Stec counts hardware original equipment manufacturers such as IBM (IBM.N) and Hitachi (6501.T) among its larger customers.

The analyst said Stec shares have fallen 67 percent from their September peak of $42.5, hurt by competitive concerns and cloudiness in business with EMC Corp (EMC.N), and the pull-back was an excellent opportunity for investors.

The stock has risen over 250 percent in the last 52 weeks.

On December 7, disc drive-maker Seagate Technology (STX.O) unveiled its first SSD, getting into a nascent but potentially lucrative market.

"We are going to a crowded space for Stec, so the dynamics of the market have changed," Wedbush Morgan Securities analyst Betsy Van Hees said.

In September, Stec Chief Executive Manouch Moshayedi told Reuters that 2010 would witness the entry of new competitors into the company's core enterprise storage business.

"I think 2010 will end up being a good year for them," Hees said and added it would probably be off to a slow start, considering the inventory overhang.

Shares of the company were trading up 5 percent at $14.64 in afternoon trade Tuesday on Nasdaq. They touched a high of $15.09 earlier in the day.

(Reporting by Gowri Jayakumar; Editing by Unnikrishnan Nair)