* Warns of key customer carrying inventory, hurting Q1
* Sees Q4 rev below estimates
* Sees Q4 adj EPS $0.51-$0.53 vs est $0.52
* Q3 EPS $0.47 vs $0.02 yr ago, rev up 50 pct
* Shares down 33 pct in heavy trading (Recasts; adds details, analyst comment, updates share movement)
By Manasi Phadke
BANGALORE, Nov 3 (Reuters) - Flash memory storage products maker Stec Inc’s STEC.O shares shed a third of their value after the company warned that a key customer, EMC Corp EMC.N, would carry 2009 inventory into 2010, putting Stec’s first quarters results at risk.
The warning could indicate that the rate of replacing traditional hard drives with Stec’s solid state drives (SSDs) in the enterprise storage and server market could be slower-than-anticipated.
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.
EMC, which accounts for 90 percent of Stec’s Zeus IOPS SSD business, had placed a $120 million order for the second half of 2009, of which $55 million has been delivered, Chief Executive Manouch Moshayedi said on a conference call.
The rest of the order is expected to be shipped in the current quarter, Moshayedi added.
“We were taken by surprise that (the inventory issue) occurred in the September quarter. We were expecting it in the March quarter,” Capstone Investments analyst Jeffrey Schreiner said by phone.
“We see the inventory adjustments impacting Stec beyond the first quarter of 2010,” Schreiner said, adding that he expects overall demand for SSDs to pick-up again in the second and third quarters of 2010.
Zeus IOPS contributed $60.7 million to Stec’s third quarter total revenue of $98.3 million.
Third quarter profit rose to $24.5 million, or 47 cents a share, from $1.2 million, or 2 cents a share, a year ago. Excluding items, it earned 50 cents a share.
Analysts were expecting earnings of 47 cents a share on revenue of $96.6 million, according to Thomson Reuters I/B/E/S.
Gross margins rose to 49.7 percent from 32.1 percent.
The company, which counts hardware OEMs such as IBM (IBM.N) and Hitachi (6501.T) among its larger customers, forecast fourth-quarter revenue of $101 million to $103 million, below analysts expectations of $106 million.
Shares of the Santa Ana, California-based company fell 33 percent to $15.49 in heavy trading after the bell. They closed at $23.15 Tuesday in regular trade on Nasdaq. (Additional reporting by Savio D’Souza in Bangalore; Editing by Pradeep Kurup, Anthony Kurian)