STEC becalmed as Fusion-io streaks ahead

EMC over-ordering breaks STEC's run


Comment Conditions are variable in the solid state drive (SSD) world, with STEC lagging while Fusion-io has the wind in its sails.

STEC makes SSDs that replace fast hard disk drives (HDD), fitting in HDD slots in storage arrays, and boosting the I/O rates much better than having lots of short-stroked, fast-spinning Fibre Channel drives. Fusion-io deploys its NAND flash as cache, PCIe-connected cache in servers, where it accelerates I/O off all drives in a storage array.

Last year STEC made an amazing clean sweep of storage array vendors, from Compellent to IBM as they all followed EMC's ground-breaking lead in adding STEC Fibre Channel interface SSDs to its arrays. No other vendor made FC interface SSDs, and STEC rampaged through FC storage arrays as every other vendor - apart from hold-outs like Pillar which chose Intel - followed EMC's lead.

STEC's revenues rocketed and so did its valuation. There were no competitors on the near horizon, only distant possible wannabees with most of its competition for storage array flash plumping for SAS interfaces.

But the picture was illusory; EMC over-ordered its ZEUSIOPS SSDs and didn't sell its stock fast enough. STEC's forward earnings now face a trough as EMC is its biggest customer, and the stock sell-off is going to last well into this year.

STEC's other customers are not ramping up their sales as fast as might have been expected, and investors have punished STEC's stock severely for this interruption in its earnings trend. In September last year STEC shares were $41.84 each. As the EMC stocking disaster became visible they fell to $23.15 in early November and then dropped off a cliff, falling to $11.44 in December and now still trading at a lowish $11.14.

STEC has introduced cheaper HDD replacement SSDs in its MACH8IOPS line, but these haven't yet received a wide take-up buy its OEMs. Its last quarterly report was good on the previous growth front; revenue for the fourth quarter of 2009 was $106.0m, an increase of 86.3 per cent from $56.9m for the fourth quarter of 2008.

But that was then and investors are looking ahead and STEC's sales forecasts show a distinct lack of oomph, with CEO Manoush Mossayedi saying: "We believe that the first half of 2010 will be a trough period for our business due to an inventory carryover by our largest customer [EMC]... We now anticipate this inventory carryover to continue to negatively impact our sales to this customer during the first half of 2010, as we do not expect any meaningful production orders from this customer during that time."

Hmm, your biggest customer goes on a buying strike and your other customers aren't ramping up sales fast enough. Cue Wall Street's hissy fit.

Fusion-io isn't suffering from a hissy fit at all. Of course it's still privately-owned but a kind of sustained pre-IPO news flood is coming out.

It's appointed its first chief financial officer, Dennis Wolf, and let slip that it is enjoying more than 80 per cent quarter-over-quarter sales growth and more than 300 per cent sales growth year-over-year. Triple digit growth sounds nice. Wolf himself said "the quarterly numbers have eight digits", so that's a miminum of $10m for the quarter.

To ram the message home Jim Dawson, Fusion-io's SVP worldwide sales, said: “In the 20 years I’ve been working in this industry, I’ve never seen a company grow this fast and I believe we are well poised to triple our growth in 2010.”

The company says it has relationships with the top three server OEMs. It characterises deployment of STEC HDD-replacement flash as being "relegated to a random, high-IOPS niche", whereas its own server-connected flash has a much wider deployment potential.

Fusion-io could be right and STEC has ambitions in the server flash space too. It's gone through a valuation hype bubble and will now grow its stock value at a much more pedestrian pace, whereas Fusion-io is in the growth phase of its hype curve. We might provisionally expect an IPO in 2011, with a year of great growth and good revenues behind it if that happens, and more forecast to come, timed when hype is still rising. ®


Other stories you might like

  • It's primed and full of fuel, the James Webb Space Telescope is ready to be packed up prior to launch

    Fingers crossed the telescope will finally take to space on 22 December

    Engineers have finished pumping the James Webb Space Telescope with fuel, and are now preparing to carefully place the folded instrument inside the top of a rocket, expected to blast off later this month.

    “Propellant tanks were filled separately with 79.5 [liters] of dinitrogen tetroxide oxidiser and 159 [liters of] hydrazine,” the European Space Agency confirmed on Monday. “Oxidiser improves the burn efficiency of the hydrazine fuel.” The fuelling process took ten days and finished on 3 December.

    All eyes are on the JWST as it enters the last leg of its journey to space; astronomers have been waiting for this moment since development for the world’s largest space telescope began in 1996.

    Continue reading
  • China to upgrade mainstream RISC-V chips every six months

    Home-baked silicon is the way forward

    China is gut punching Moore's Law and the roughly one-year cadence for major chip releases adopted by the Intel, AMD, Nvidia and others.

    The government-backed Chinese Academy of Sciences, which is developing open-source RISC-V performance processor, says it will release major design upgrades every six months. CAS is hoping that the accelerated release of chip designs will build up momentum and support for its open-source project.

    RISC-V is based on an open-source instruction architecture, and is royalty free, meaning companies can adopt designs without paying licensing fees.

    Continue reading
  • The SEC is investigating whistleblower claims that Tesla was reckless as its solar panels go up in smoke

    Tens of thousands of homeowners and hundreds of businesses were at risk, lawsuit claims

    The Securities and Exchange Commission has launched an investigation into whether Tesla failed to tell investors and customers about the fire risks of its faulty solar panels.

    Whistleblower and ex-employee, Steven Henkes, accused the company of flouting safety issues in a complaint with the SEC in 2019. He filed a freedom of information request to regulators and asked to see records relating to the case in September, earlier this year. An SEC official declined to hand over documents, and confirmed its probe into the company is still in progress.

    “We have confirmed with Division of Enforcement staff that the investigation from which you seek records is still active and ongoing," a letter from the SEC said in a reply to Henkes’ request, according to Reuters. Active SEC complaints and investigations are typically confidential. “The SEC does not comment on the existence or nonexistence of a possible investigation,” a spokesperson from the regulatory agency told The Register.

    Continue reading

Biting the hand that feeds IT © 1998–2021