STEC reported EPS in line with the 47-cent consensus and topped revenue expectations in the third quarter, however the company's outlook through early 2010 has investors dumping shares. The stock is off by -30% yesterday after STEC said that its Q4 revenue should come in between $101 million and $103 million, less than the $106 million forecasted by analysts.

Accelerating the sell-off is a warning that EMC is carrying an inventory glut, suggesting that demand for STEC's solid state drives (SSDs) could be weaker than expected. Capstone Investments analyst Jeffrey Schreiner told Reuters, "We see the inventory adjustments impacting STEC beyond the first quarter of 2010."

It will be interesting to follow the Data Storage Stocks Index as solid state technology develops. Deutsche Bank maintained its Buy rating on STEC after the disappointing news, although it did cut its price target to $36 from $45. Oppenheimer also slashed its price target to $21 from $45. Both represent a significant premium to the stock's current value below $16.

By: DocMemory
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