By Chandni Doulatramani
Dec 6 Solid-state drive maker Stec Inc
should consider strategic alternatives including a sale, its
biggest independent shareholder said in a letter to the company
that expressed "serious concern" about its strategic direction.
Balch Hill Capital, which holds 9 percent of Stec, said the
company's response to intensifying competition has been to
broaden its product line and dramatically increase its operating
expenses, particularly in research and development, to gain
scale and compete.
"Yet, there is no commensurate increase in revenues or
profits," the letter said. ()
Balch Hill also said Stec should consider selling itself to
a larger industry player but did not name any potential buyers.
Seagate Technology, Western Digital Corp,
Samsung Electronic Co, Micron Technology,
Toshiba Corp and SanDisk Corp could be the
potential buyers, Craig-Hallum Capital analyst Richard Shannon
"Potential buyers could span from companies who make hard
drives to companies which makes flash memory," Shannon said.
"A flash maker would have an immediate advantage as they
don't have to pay the margin on buying the flash, which is the
biggest part of its cost," he said.
Stec, which makes solid-state drives that are faster and
costlier than traditional magnetic drives, has been losing its
share in the highly lucrative but cut-throat market for
The company, whose shares were up about 1.5 percent at $4.90
in late-morning trade on the Nasdaq, has posted losses in the
last four quarters.
Stec, which has lost nearly a third of its market
capitalization in the last three months, was valued at about
$225 million as of Wednesday.
The largest shareholders are the members of the family of
co-founder Manouch Moshayedi.
Moshayedi, the chief executive for 22 years, resigned in
September after U.S. regulators filed insider trading charges
"We are extremely concerned that Stec has a deep-rooted
'founder-culture' with little regard for its public
shareholders," Balch Hill said.
Stec's auditor PricewaterhouseCoopers LLP (PwC) resigned
earlier this year.