Sticking with the data storage theme from yesterday, my investment recommendation today is STEC, Inc., (STEC), a young company that’s making inroads into the industry with revolutionary new products. These products, in short, are solid-state drives, like flash memory (which used in iPods and other small portable devices) but in this case designed for the enterprise market. It’s still early–next year STEC may ship 200,000 to 300,000 drives, which is tiny compared to the 30 million hard disks that will be shipped–but the trend is under way.
On August 31, editor Michael Cintolo wrote, “We’ve always said that the big leaders of any new bull market tend to be little-known stocks, and STEC is a great example of that. The stock has enjoyed a monstrous run-up this year because it has a new, revolutionary product with little competition–its solid-state drives (SSDs) save tons of component and power costs in storage devices and servers. So far, EMC has been the only major customer of these SSDs; it was the first to test STEC’s products, and has placed a $120 million order for the second half of this year. But many other storage firms including Hitachi and Network Appliance could begin to order in volume soon, and IBM is using STEC’s drives in some of its most popular servers. Analysts believe the firm will earn north of $2 per share next year, possibly $2.50 or higher. It’s not for the faint of heart, but this remains a great story with big potential.”
Just remember, data storage stocks can give, but they can also take away.