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Name | Symbol | Market | Type |
---|---|---|---|
Santech Holdings Limited | NASDAQ:STEC | NASDAQ | Depository Receipt |
Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.0081 | -2.58% | 0.3061 | 0.3061 | 0.336 | 0.33899 | 0.303 | 0.3203 | 7,112 | 20:05:13 |
STEC, INC.
|
(Name of Registrant as Specified in Its Charter)
|
BALCH HILL PARTNERS, L.P.
BALCH HILL CAPITAL, LLC
SIMON J. MICHAEL
POTOMAC CAPITAL PARTNERS L.P.
POTOMAC CAPITAL MANAGEMENT, L.L.C.
POTOMAC CAPITAL PARTNERS II, L.P.
POTOMAC CAPITAL MANAGEMENT II, L.L.C.
POTOMAC CAPITAL PARTNERS III, L.P.
POTOMAC CAPITAL MANAGEMENT III, L.L.C.
PAUL J. SOLIT
ERIC SINGER
MARTIN COLOMBATTO
ADAM LEVENTHAL
CLARK MASTERS
MARK SCHWARTZ
DILIP SINGH
BERNARD XAVIER
|
(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
|
|
(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
|
BALCH HILL CAPITAL, LLC
2778 Green Street
San Francisco, CA 94123
|
|
Ø
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world class enterprise SSD technology and products;
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Ø
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a strong patent portfolio (as of March 8, 2013, STEC owned 48 patents and had 88 additional patent applications pending);
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Ø
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a strong but eroding balance sheet (as of December 31, 2012, STEC had cash and cash equivalents of approximately $158.2 million, or $3.40 per share, approximately $41.8 million in inventories, and no long term debt); and
|
|
Ø
|
a state of the art manufacturing facility in Malaysia.
|
|
·
|
From August 9, 2011 until March 30, 2012, the Company
spent approximately
$55 million
to repurchase 1,546,700 shares of common stock at an average price per share of $9.72 and 4,063,911 shares of common stock at an average price per share of $9.86. Less than eight months later, the stock closed at a low of $4.07 on the trading day immediately preceding the filing of our initial Schedule 13D on November 16, 2012.
|
|
·
|
In fiscal 2012, STEC recorded approximately
$21.8 million of settlement costs and legal fees
in excess of its insurance deductible under its director and officer insurance coverage, $15 million of which relates to the settlement of a federal shareholder class action, which is subject to court approval, relating to claims that the Company and certain of its senior officers and directors made materially false or misleading public statements.
|
|
·
|
STEC spent
over $66 million in R&D spending
for the year ended December 31, 2012, an increase of $12 million more than the year ended December 31, 2011 and an over
68% increase since 2008
, but has failed to see commensurate increases in revenue or income.
|
|
·
|
Total revenues for the year ended December 31, 2012
are down by over 45%
from the year ended December 31, 2011
.
|
|
·
|
STEC suffered
operating losses of over $103 million
for the year ended December 31, 2012, an over
510% decline in operating income
from the year earlier.
|
|
·
|
Revenues from sales to STEC’s three largest customers in 2011
declined by more than 65%
in the year ended December 31, 2012
.
|
|
·
|
STEC’s
share price has declined over 60%
in the year preceding our initial filing of a Schedule 13D on November 16, 2012 and approximately
70%
since the Company first announced, in its Annual Report on Form 10-K for the year ended December 31, 2009, that the SEC had commenced a formal investigation involving trading in the Company’s securities by Manouch and Mark Moshayedi.
|
|
·
|
Based on the Company’s guidance, STEC will post non-GAAP losses of $0.40 to $0.42 per share in the quarter ended March 31, 2013. This implies a cash burn from operations of over $19 million, and this does not include the likelihood of more significant legal expenditures. It appears that in order for the Company to breakeven, it would need to generate revenues of $70 million in the first quarter of 2013 or, in other words, grow its revenue by over 200%. Without immediate action, we do not believe the Company can breakeven for several more quarters.
|
|
·
|
Replace Mark and Manouch Moshayedi with trusted industry veterans to assist in the reengagement of large OEM customers;
|
|
·
|
Refocus the business on SAS SSD sales to large storage OEM customers;
|
|
·
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Significantly reduce operating expenses and improve capital allocation;
|
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·
|
Reevaluate the direction of the Company’s PCI Express, SATA, I/O software, and other business initiatives;
|
|
·
|
Explore all strategic alternatives, including a possible sale of the Company if the Company cannot remain a stand-alone entity.
|
Sincerely,
|
|||
BALCH HILL PARTNERS, L.P.
|
|||
By:
|
Balch Hill Capital, LLC,
|
||
its general partner
|
|||
By:
|
/s/ Simon J. Michael
|
||
Name:
|
Simon J. Michael
|
||
Title:
|
Manager
|
POTOMAC CAPITAL PARTNERS II, L.P.
|
|||
By:
|
Potomac Capital Management II, L.L.C.,
|
||
its general partner
|
|||
By:
|
/s/ Eric Singer
|
||
Name:
|
Eric Singer
|
||
Title:
|
Co-Managing Member
|
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