The Channel logo


By | Chris Mellor 25th August 2009 18:21

SSD flag bearer to quickly hit $2bn valuation

Apex of STEC's bubble?

The solid-state drive streets are paved with gold for STEC, which is about to vault to a $2bn market capitalization.

The company's share price is hovering at a whisker below $40, and its present market capitalisation is $1.98bn. The stock appreciation has been fantastic: at the start of this year shares were a mere $4.67. The company achieved a billion-dollar valuation in June, and it's now double that and could grow even more.

But we could be watching a bubble building, with a bursting of that bubble soon to occur.

What's driving the price higher is that STEC has remained the SSD of choice for storage-array vendors following in EMC's pioneering footsteps - Compellent, Fujitsu, HDS, HP, IBM, and Sun Microsystems. It has put out bullish sales projections for its ZeusIOPS SSDs, which replace fast and short-stroked Fibre Channel hard disk drives.

The STEC SSD-selling prospects at Sun may be clouded by whatever Oracle does with Sun, but STEC expects IBM and others to ramp up sales over the remainer of this year and next.

There's currently no effective competition for STEC's ZeusIOPS solid state drives. Seagate intends to announce an enterprise SSD product before the end of the year, but it will take six to nine months or more for it to be qualified by STEC-using vendors and by the Intel-using ones such as Pillar Data.

Start-ups Pliant and SandForce have enterprise SSDs or controllers coming, probably before the end of the year, but they'll have to jump through the same qualification hoops.

STEC has extended its range as well, with a third generation ZeusIOPS that features improved performance, a faster 6Gb/sec SAS interface, and a cheaper multi-level cell variant. STEC's Mach8 server flash is also going into near-competition with Fusion-IO, although the Mach8 doesn't have a PCIe interface as does Fusion's ioDrive.

When competition does arrive in the enterprise SSD market, and as STEC starts competing in the more price-sensitive server flash market, then its early golden days - its first-mover advantages - will come to a close. Prices will drop and it will have to replace lost margins with higher volumes.

The company probably has until mid-2010 at the earliest before that happens. Let Nehalem EP 4-core and EX 8-core processors revitalise the server market, and let the downturn end, and both factors could increase enterprise storage-array sales significantly, making STEC sales reps very happy people.

This great and uncontested run has to come to an end sometime, and other players will eventually emerge. Until then, STEC's prospects look terrific.

However, if its sales don't rise and rise, or if the Nehalem server-boost rocket doesn't lift off, or the downturn stays at bottom - or even worsens - then STEC's $2bn valuation will probably vanish and its rise may well be seen to have been a bubble fuelled by expectant sentiment but not justified by real value.

Are we looking at a STEC share-price bubble or growth based on real value? No one knows yet, of course. That's the wonder of life in the investment casino known as the stock market. (I don't have any STEC shares, by the way. I don't have any shares at all, in fact.) ®

comment icon Read 1 comment on this article alert Send corrections


Frank Jennings

What do you do? Use manual typwriters or live in a Scottish croft? Our man advises
A rusty petrol pump at an abandoned gas station. Pic by Silvia B. Jakiello via shutterstock

Trevor Pott

Among other things, Active Directory needs an overhaul
Baby looks taken aback/shocked/affronted. Photo by Shutterstock

Kat Hall

Plans for 2 million FTTP connections in next four years 'not enough'
Microsoft CEO Satya Nadella


Suit-and-tie-wearing man tries to meditate, take deep breaths in faux yoga pose. Photo by Shutterstock
Emotional intelligence, not tech skills, is the way to woo suits
League of gentlemen poster - Tubbs and Edward at the local shop. Copyright BBC
One reselling man tells his tale of woe