SANTA ANA, Calif., May 4, 2005 (PRIMEZONE) -- SimpleTech, Inc. (Nasdaq:STEC), a designer, manufacturer and marketer of custom and open-standard memory solutions based on Flash memory and DRAM technologies, today announced its financial results for the first quarter ended March 31, 2005.
Revenue for the first quarter of 2005 was $61.2 million, a decrease of 21% from $77.6 million for the fourth quarter of 2004, and a decrease of 8% from $66.3 million for the first quarter of 2004. Revenue for the first quarter of 2005 decreased from the prior quarter due primarily to a 46% decrease in sales of Stacked Memory products, the affects of seasonality and an approximately 30% to 40% decline in DRAM component prices during the quarter. Decreased sales of Stacked Memory products resulted primarily from delayed orders related to the process of qualifying some of our latest generation stacked modules with customers as they transition certain of their OEM solutions from PC 2100 to PC 2700 and from DDR I to DDR II technologies. This qualification process has taken longer than expected, and will also impact second quarter of 2005 results. We are optimistic that these issues will be resolved by the end of the second quarter of 2005. Diluted earnings per share was $0.02 for the first quarter of 2005, compared to diluted earnings per share of $0.06 for the fourth quarter of 2004 and diluted earnings per share from continuing operations of $0.01 for the first quarter of 2004. Order backlog increased from $8.1 million at December 31, 2004 to $14.0 million at March 31, 2005.
During the first quarter of 2005, the company repurchased 2,414,964 shares of common stock under its previously announced stock repurchase program at an average price, including commissions, of $3.93. Since the inception of the stock repurchase program in June 2004 through April 30, 2005, the company has repurchased an aggregate of 3,777,022 shares of common stock at an average price, including commissions, of $3.84 per share.
Business Segments
OEM Division
Revenue from OEM Division customers comprised 44% of total revenue in the first quarter of 2005, compared to 53% in the fourth quarter of 2004. OEM Division revenue decreased 34% from $41.0 million in the fourth quarter of 2004 to $26.9 million in the first quarter of 2005 due primarily to a decrease in the sale of Stacked Memory products.
Consumer Division
Revenue from Consumer Division customers comprised 56% of total revenue in the first quarter of 2005, compared to 47% in the fourth quarter of 2004. Consumer Division revenue decreased 6% from $36.6 million in the fourth quarter of 2004 to $34.3 million in the first quarter of 2005 due primarily to the affects of seasonality and the decline in DRAM component prices.
Business Outlook
"During the second half of 2004, we identified a number of initiatives to drive future revenue growth and profitability for year 2005 and beyond," said Manouch Moshayedi, CEO of SimpleTech, Inc. "Our strategic goal is to create new and increase existing bases of sustainable revenue for the long-term. These initiatives include building on our high-capacity, solid-state Flash drive business and increasing our share in the external storage market by adding significant proprietary features which separate our products from others currently available. We continue working diligently to execute these initiatives.
"While we have gained considerable traction on our initiatives, lengthy design and sales cycles are often necessary to achieve long-term, sustainable revenue. While our order backlog has increased significantly during the first quarter of 2005, we hope that execution of our initiatives will translate into significant future revenue generation.
"We currently expect our revenue for the second quarter of 2005 will range from $63 million to $66 million and our diluted earnings per share to range from $0.02 to $0.03."
Conference Call
SimpleTech, Inc. will hold an open conference call to discuss results for the first quarter of 2005. The call will take place today at 1:30 p.m., Pacific/4:30 p.m., Eastern. The call-in numbers for the conference are 1-800-781-3662 (United States and Canada) and 1-706-643-7710 (International).
Webcast
This call is being webcast by Thomson/CCBN. The webcast can be accessed by clicking on "Investors" at the bottom of the home page at www.simpletech.com. The webcast will be archived and available for replay beginning approximately two hours after the live call concludes.
About SimpleTech, Inc. (Nasdaq:STEC)
SimpleTech, Inc., designs, manufactures and markets custom and open-standard memory solutions based on Flash and DRAM memory technologies. Headquartered in Santa Ana, California, the company offers a comprehensive line of over 2,500 products and specializes in developing high-density memory modules, memory cards and storage drives. For information about SimpleTech, Inc., and to subscribe to the company's "Email Alert" service, please visit our web site at www.simpletech.com, click "Investor" and then Email Alert.
The SimpleTech company logo can be found at: http://www.primezone.com/newsroom/prs/?pkgid=1079
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
This release may contain forward-looking statements that involve risks and uncertainties, including, but not limited to, statements concerning our enthusiasm about our outlook for 2005, expected future growth and profitability due to execution of our initiatives, creation of new or increase existing bases of sustainable revenue for the long-term, building upon our Flash drive business and increasing our share in the external storage market by adding significant proprietary features which separate our products from others currently available, continued plans to diligently execute our initiatives, gaining considerable traction on our initiatives, and revenue and earnings per share guidance for the second quarter of 2005.
Actual results may differ materially from the results predicted. Important factors which could cause actual results to differ materially from those expressed or implied in the forward-looking statements are detailed under "Risk Factors" in filings with the Securities and Exchange Commission made from time to time by SimpleTech, including its Annual Report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K. Other factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements include the following risks: the cost of raw materials may fluctuate widely in the future, the delays we are experiencing in the qualification process of our latest generation stacked memory modules may not be resolved within our time expectations, our major initiatives may not be successfully implemented, slower than expected growth in market demand for our products or a slower adoption rate for these products in current and new markets that we are targeting, slower than expected expansion of our international business; the impact of the implementation in 2006 of new accounting rules related to the expensing of stock options, excess availability of DRAM or Flash memory could reduce component pricing resulting in lower average selling prices and gross profit, DRAM or Flash memory supply may tighten requiring suppliers to place their customers, including us, on limited component allocation, interruptions of or delays in supply from the semiconductor manufacturing facilities that supply products to us, higher than expected operating expenses, new and changing technologies limiting the applications of our products, our inability to become more competitive in new and existing markets, our inability to maintain and increase market share, difficulty competing in sectors characterized by aggressive pricing and low margins, higher than anticipated product returns, inventory write-downs, price protection and rebate charges, new customer and supplier relationships may not be implemented successfully and we may not repurchase any additional shares under our previously announced stock repurchase plan. SimpleTech undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.
SimpleTech, Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
March 31, December 31,
2005 2004
-------- --------
ASSETS:
Current Assets:
Cash, cash equivalents
and marketable
securities $ 69,191 $ 83,318
Accounts receivable,
net of allowances of
$1,242 at March 31,
2005 and $993 at
December 31, 2004 37,978 37,047
Inventory, net 33,552 19,002
Deferred income taxes 1,615 1,515
Other current assets 2,042 2,663
-------- --------
Total current assets 144,378 143,545
Furniture, fixtures and
equipment, net 5,754 6,146
Intangible assets 353 373
Deferred income taxes 2,733 3,345
-------- --------
Total assets $153,218 $153,409
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 25,637 $ 16,553
Accrued and other
liabilities 4,420 5,428
-------- --------
Total liabilities 30,057 21,981
Shareholders' Equity:
Common stock 45 47
Additional paid-in
capital 111,893 121,193
Retained earnings 11,223 10,188
-------- ---------
Total shareholders'
equity 123,161 131,428
-------- --------
Total liabilities and
shareholders' equity $153,218 $153,409
======== ========
SimpleTech, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months
Ended March 31,
2005 2004
---- ----
Net revenues $ 61,247 $ 66,291
Cost of revenues 50,264 54,766
---------------------
Gross profit 10,983 11,525
---------------------
Sales and marketing 5,380 5,054
General and administrative 3,078 2,927
Research and development 1,287 844
---------------------
Total operating expenses 9,745 8,825
---------------------
Operating income 1,238 2,700
Interest income 435 200
---------------------
Income from continuing
operations before
provision for income taxes 1,673 2,900
Provision for income taxes 637 1,227
---------------------
Income from continuing
operations $ 1,036 $ 1,673
Loss from discontinued
operations before
benefit for income taxes (2,447)
Benefit for income taxes (1,073)
--------
Loss from discontinued
operations $ (1,374)
--------
Net income $ 1,036 $ 299
=====================
Net income (loss) per share:
Basic:
Continuing operations $ 0.02 $ 0.04
Discontinued operations -- (0.03)
---------------------
Total $ 0.02 $ 0.01
=====================
Diluted:
Continuing operations $ 0.02 $ 0.03
Discontinued operations -- (0.02)
---------------------
Total $ 0.02 $ 0.01
=====================
Shares used in computation
of net income (loss) per
share:
Basic 46,599 47,829
=====================
Diluted 48,044 50,214
=====================