Q2 2012 Earnings Call

August 7, 2012 4:30 PM ET


Mitch Gellman – VP, IR

Manouch Moshayedi – Chairman and CEO

Raymond Cook – CFO


Gary Mobley – Benchmark

Kevin Lobes – Deutsche Bank

Aaron Rakers – Stifel Nicolaus

Rajesh Ghai – ThinkEquity

James Snyder – Goldman Sachs

Rich Kugele – Needham & Company

Edward Parker – Lazard Capital Markets

Richard Shannon – Craig-Hallum



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Good day, ladies and gentlemen, and welcome to the STEC Q2 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time (Operator Instructions) As a reminder, today’s conference is being recorded.

I would now like to introduce your host for today’s conference, Mr. Mitch Gellman. You may begin, sir.

Mitch Gellman

Okay, thank you, Kevin. Thank you and welcome everyone. Thanks for joining us today for our earnings call for the second quarter. We hope that you had an opportunity to read this afternoon’s release containing our results for the first quarter of 2012. Joining me here today for today’s discussion of our results and business outlook and the Q&A session are Manouch Moshayedi, our Chairman and CEO; and Raymond Cook, our Chief Financial Officer.

First, I’d like to update you on our schedule of upcoming investor conferences on August 14, we will present at the Oppenheimer Technology Conference that’s going to be in Boston. And on August 28th we present at the Credit Suisse SSDs and virtualization Investors Day that will be in San Francisco.

Also before we begin, I would like to remind everyone that our prepared remarks and answers to questions will include forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995 and are based on management’s current expectations.

These forward-looking statements include, but are not limited to statements concerning growing acceptance adoption and qualification of SSDs within the enterprise storage and server markets, the qualification of STEC’s fourth generation ZeusIOPS SSD, MACH16 SSD, PCIe solid state accelerator, EnhanceIO caching software and other developing technologies; the qualification of STEC’s products and solutions into emerging SSD system vendors, enterprises and non-traditional end user customers, leveraging STEC sales and marketing infrastructure to cater to enterprises directly and develop a new vertical market strategy.

STEC’s key product line initiatives and development, the transition from one product generation to the next, the length of qualification cycles, the capabilities performance cost advantages and benefits of STEC’s products and solutions, the rapidly evolving enterprise storage and server markets expected third quarter 2012 revenue and loss per share and anticipated settlement of the previously disclosed federal and state class actions filed against STEC and several of its senior officers and directors until various significant risks and uncertainties that could cause our actual results to differ materially from those expressed in such forward looking statements.

These risks and uncertainties are detailed in periodic filings with the Securities and Exchange Commission, 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.

Listeners are cautioned not to place undue reliance on these forward-looking statements, which represent our views only as of today. While, we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if the estimates change and therefore you should not rely on the forward-looking statements as representing our views as of any date subsequent to today.

Additionally, as we discuss our financial performance, we will be referring to certain non-GAAP financial measures, please see the reconciliations of our GAAP to non-GAAP measures included in today’s earnings release. Thanks again for joining us today.

And now I’d like to turn the call over to our CEO, Manouch Moshayedi. Manouch?

Manouch Moshayedi

Thank you, Mitch, good afternoon, and thank you for joining the call. The second quarter proved to be a challenging sales period. Looking ahead though, we are encouraged by the activity and traction of our new products and sales efforts.

But before I go into details about the upcoming quarter, I want to briefly address a matter of SEC’s recent decision to file the civil complaint against me. I intend to vigorously defend myself against unsubstantiated allegations and we expect that we and an independent evaluation of facts we’ll find the complaint is without merit.

In the mean time, it will be business as usual at the SEC and I remain as committed as ever to maintaining the same level of outstanding service and top quality products to our customers and to growing our company. I’ll also note that the SEC has decided not to pursue any enforcement actions against the company itself nor any other officers of the company. Since this remains an open case that is all the liberty to discuss at this time as much as I would like to provide you with a more detailed discussion of the relevant facts. Now, back to our business. Less than one year ago, we began the strategic process to fundamentally shift our business model, as we look to expand overall market for our products.

Traditionally, targeting major storage and server OEMs has enabled us to reach the majority of the enterprise market. In order to address the broader market and expand our opportunities, we’re taking critical steps over the past several quarters, including one, looking at emerging class of all existing base system OEMs, two, developing relationships with the large to medium enterprises to gain valuable end-user feedback and three, improving our channel presence. Thus far, we’re pleased with the progress in these areas.

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