SimpleTech Updates Guidance for the Second Quarter of 2002
6/27/2002 - SimpleTech, Inc. (Nasdaq:STEC) revised the company's business outlook for the second quarter of 2002, which ends June 30. There will be no conference call accompanying this announcement. The revised business outlook is as follows:
- SimpleTech expects second quarter revenue to range from $41 million to $42 million, compared to the company's previous guidance of $45 million to $50 million. The lowered revenue expectation is due primarily to a sharp decline in DRAM prices during the second quarter. DRAM contract and spot prices have dropped approximately 50% since April 2002.
- SimpleTech expects second quarter gross margins to range from 14% to 17%, down from 22.5% for the first quarter due to the impact of DRAM price declines on DRAM inventory held in stock. SimpleTech estimates that declining DRAM prices will result in reduced second quarter gross profits of approximately $2.5 million to $3.0 million, or approximately four cents to five cents of after-tax EPS. To minimize the affect of the DRAM price declines, the company aggressively reduced its DRAM inventory position from $14 million at March 31, 2002 and expects its DRAM inventory position to be approximately $5 million at the end of the second quarter. If there is no further decline in DRAM prices in the third quarter of 2002, SimpleTech expects gross margins to return to their historical levels of 22% to 23%.
- SimpleTech expects GAAP EPS for the second quarter to range from a loss of two cents to three cents, compared to the company's previous guidance of one cent to three cents of net income.
- In the second half of 2002, SimpleTech believes that demand for memory products will increase due to the back-to-school purchasing cycle in the third quarter, the holiday purchasing cycle in the fourth quarter and increased corporate IT spending. The company also foresees the possibility of further consolidation among DRAM manufacturers, which may lead to increased DRAM prices.
- In June 2002, SimpleTech executed Flash memory product distribution agreements with two major national retail outlets with a combined store count of more than 1,250 stores.
SimpleTech, Inc. is a technology solutions provider offering products based on DRAM, SRAM and flash memory technologies. Headquartered in Santa Ana, Calif., the company is a leader in the design, development, manufacturing and marketing of custom and standard memory solutions. For information, contact the company's investor relations department or visit www.simpletech.com
SimpleTech, Inc., Santa Ana
Mitch Gellman (investor relations), 949/260-8328
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