STEC Design Win at Apple: Short-lived Catalyst?

Avian Research was out with an awesome intraday call on STEC (NASDAQ:STEC) on Friday. With the kind permission of Larry Zirkel their head of sales and trading, here's the meat of it:

..Recently numerous reports have indicated STEC has won a design for an MLC based SSD in the Apple (AAPL) MacBook Air. Follow up conversations with industry sources have basically confirmed this win. We were told that Apple initially approached Samsung about using its MLC SSD to replace the current SLC SSD in the MacBook Air. This view was based on Apple’s belief (which we agree) that using MLC SSD is the only way to make it more compelling for wide-spread consumer adoption as the current SSD upgrade costs $999.

Following months of negotiations both Apple and Samsung were unable to come to terms due to specific performance and pricing issues, and Apple then decided to seek STEC's alternative solutions. Although it's obvious that this win is important to STEC, our conversations suggest that this design win may be short-lived. In particular it has been suggested that Intel (INTC) has made inroads with AAPL and will see traction there once its design proves out.

As a reminder, MU and INTC have been substantial providers of NAND components to AAPL's other products. Longer-term we remain unconvinced that STEC will be able to parlay early design wins into a sustainable market leadership position as it doesn’t have the scale, particularly given a competitive landscape which includes a host of better financed companies with access to internal flash production. However, there is no doubt that such a win is a short term positive for STEC...

Notablecalls: This is what I call research! While most of the sell-side is going ga-ga over STEC's potential, Avian's team has gone the extra mile and brought new perspective on the topic. Well done, guys!

Comments

[User 188201]

You're giving them too much credit - coming out a week after the fact and confirming a win isn't exactly actionable research. It would have been more impressive if they had actually broke the news out themselves and stayed negative. Second of all, their conclusion is the easy one - obviously in the fight INTC/Samsung vs STEC you're going to pick INTC as a winner, for no other reason than it's INTC. And finally, Lehman has been notoriously negative about this stock for months. So the "ga-ga" comment is misinformed.

[rd4sndk]

Before you start counting Intel and Samsung chickens, you should first wait until they meet the design constraints. No one has produced a SSD at performance and price points like STEC. If Sandisk was smart they would scoop up STEC ASAP before its too late. Intel is targetting 2H08 and Sandisk 2009. Both are at least a year behind STEC in performance specs and customer qualifications. My money's on STEC. A bird in the hand is worth Intel or Sandisk in the bush.

[User 188201]

And also, what the Avian analyst is completely missing is that INTC's drive is coming out in a SATA interface, which is incompatible with AAPL's laptop. It's not before early 09 that the INTC drives can replace STEC. Is taht what he means by short lived?