UPDATE 2-Stec sees strong Q4 EPS; competition looms

* Q3 adj EPS $0.31 vs est $0.20

* Q3 rev $86.1 mln vs est $79.5 mln

* Sees Q4 EPS $0.31-$0.33 vs est $0.25

* Sees Q4 rev $88-$90 mln vs est $89.2 mln

* Shares up 5 pct in extended trade (Adds conference call details, analysts comments, updates share movement)

By Swati Chitnis

Nov 2 (Reuters) - Stec Inc (STEC.O) reported quarterly results that beat market estimates and forecast fourth-quarter profit above Street, sending shares up 5 percent, but analysts raised concerns over a possible decline in market share as new entrants may challenge the company's number one position.

"We have a negative longer-term view due to our concerns around the impact of future competition on STEC with Samsung's (005930.KS) entry into EMC (EMC.N), marking the first significant competitive entry into the largest current buyer of SSDs," Avian Securities analyst Matt Bryson said.

In October, EMC, Stec's largest customer, started using Samsung NAND in its enterprise flash drives, ending Stec's monopoly as the only SSD vendor for EMC.

Solid state drives (SSDs) market has a strong growth potential and is likely to see the emergence of competition in 2011 that could severely impact Stec's market share.

Stec shares may be vulnerable to any rumors or news about emergence of competition, Think Equity analyst Rajesh Ghai said.

"Stec continues to enjoy a monopoly in the high-end Enterprise Storage SSD market at all key OEMs and this monopoly is likely to persist at least through first quarter of 2011," he said.

Stec, which specializes in memory products -- including dynamic and static random-access memories and flash memories -- used in laptops, routers and digital still cameras said the Original Equipment Makers (OEMs) customers increased in the quarter.

Ghai said Oracle (ORCL.O) has picked up in SSDs in third quarter after being below "normal business levels" in prior quarters since the Sun acquisition.

"We also believe SSD demand is likely to accelerate with the launch of "Automatic Storage Tiering" technology across all tier-1 OEMs (IBM, Hitachi Data Systems and EMC)," Ghai said.

Stec, however, said, "we are not expecting any revenue hit as customers are buying twice the density and expects 40 percent of its revenue to come from SAS technology."

For the fourth quarter, Stec forecast adjusted earnings of 31-33 cents a share. Analysts, on average, expect 25 cents a share, according to Thomson Reuters I/B/E/S.

The company, which competes with Hitachi Global Storage Technologies and Fujitsu Ltd (6702.T), sees revenue of $88-$90 million, while analysts' expected $89.2 million for the period.

For the third quarter, Stec posted a net income of $13.6 million, or 26 cents a share, compared with $24.5 million, or 49 cents a share, last year.

Excluding special items, it earned 31 cents a share.

Revenue for the company, rose 41 percent sequentially to $86.1 million.

Analysts on average were expecting the company to earn 20 cents a share, on revenue of $79.5 million.

Shares of the Santa Ana, California-based company, which have been up 24 percent in the last one month, were trading up 5 percent at $16.15 after-market.

They closed at $15.32 on Tuesday on Nasdaq. (Reporting by Swati Chitnis in Bangalore; Editing by Vyas Mohan)