Trouble ahead at OCZ?

[samboy]

Stock just took a 40% nosedive which could spell trouble for the financial viability?

Link

Interestingly, the CEO left a few weeks ago as well......

 

[kleinkinstein]

Of course trouble is looming, they make nothing but over-market everything!

 

[ViRGE]

In this case trouble is an understatement.

First they have a new CEO, which isn't coming at a great time but it's to be expected, as they were operating on an interim basis before.

The big news is that they're delaying the filing of their Q2 10-Q report (their quarterly financial report). Why? Because their revenue is going to be sharply lower than their earlier estimates in September, but that's not the half of it.

"Data-storage provider OCZ Technology Group Inc. (OCZ) warned it expects sharply lower quarterly revenue and said it is reviewing its financial statements after the company discovered costly customer incentives."

OCZ's revenue is going to be down because someone was doing something illegal under the table. "Customer incentives" in this case is a polite name for illegal rebates to OEMs to coerce them into using OCZ's products. It would appear that someone (quite possibly Ryan) was doing this under the table. Given the impact on their revenue this would be tantamount to securities fraud.

And just to top things off, a law firm is already putting together an investigation of OCZ specifically to find proof of that securities fraud. This is just a private firm and not the government, but if they find anything the SEC will be closely behind them.

A small company, already operating in the red, which has to hold back their 10-Q because they were committing securities fraud and/or illegal rebates. Small companies don't survive these kinds of ordeals. OCZ is screwed.

Pro tip: you probably shouldn't be buying OCZ drives right now; there's a high chance they won't be around in a year to service the warranty

 

[blastingcap]

Fun Fact: OCZ's founder and former CEO (who just got forced out of the company by the Board), Ryan Petersen, is a convicted felon ALREADY. http://www.bloomberg.com/news/2011-...s-after-reports-of-ceo-s-criminal-record.html

That said, I have never had any problems at all with my Vertex 2 drive. None. I did however update the firmware ASAP when I bought it.

 

[jwilliams4200]

<sarcasm>
Why all the OCZ hate? :'(
</sarcasm>

 

[MarkLuvsCS]

Ba-bye OCZ, can't say I'll miss you. Buying OCZ drives right now would be incredibly foolish.

 

[N4g4rok]

Buying OCZ drives right now would be incredibly foolish.

Unless a fire sale occurs. I'd be willing to risk $20 on sandforce or indilinx.

 

[balane]

Fun Fact: OCZ's founder and former CEO (who just got forced out of the company by the Board), Ryan Petersen, is a convicted felon ALREADY. http://www.bloomberg.com/news/2011-...s-after-reports-of-ceo-s-criminal-record.html

That said, I have never had any problems at all with my Vertex 2 drive. None. I did however update the firmware ASAP when I bought it.

Just to be fair to the guy, his felony was reduced to a misdemeanor and he was much younger at the time in 1998. His crime was trading some weed for a car stereo he says he didn't know was stolen. And like he says, the guy built a pretty big company up from nothing and didn't amass any debt doing so. That's worthy of respect in my book.

And heck yeah, if I can pick up some SSD's at sharply reduced rates because of this then I'll be happy. (Definitely be backing things up more religiously though.)

 

[BrightCandle]

OCZ has been doing quite a lot of dodgy things with their products over the years so it comes as no surprise they have been acting illegally and its finally biting them. On the one hand they really pushed the SSD market along but on the other hand they behaved pretty badly in doing so.

 

[Railgun]

Pro tip: you probably shouldn't be buying OCZ drives right now; there's a high chance they won't be around in a year to service the warranty

Not likely. If they do go bankrupt (read: restructure) that will still be handled. They`d probably be bought out if Seagate is still interested and warranty would simply continue under Seagate. Worst case, they disolve entirely and certain rights, licenses, etc are bought by some other company and warranty work would transfer somewhere else. I highly doubt you`ll end up with millions of peices of gear out there that`s warrantyless.

 

[blastingcap]

Just to be fair to the guy, his felony was reduced to a misdemeanor and he was much younger at the time in 1998. His crime was trading some weed for a car stereo he says he didn't know was stolen. And like he says, the guy built a pretty big company up from nothing and didn't amass any debt doing so. That's worthy of respect in my book.

And heck yeah, if I can pick up some SSD's at sharply reduced rates because of this then I'll be happy. (Definitely be backing things up more religiously though.)

True, but I know a local DA and it's one of those smoke:fire things where if you got nailed even once, who knows how many other crimes you did that you weren't ever prosecuted for, or were wiped off your record or plea bargained away into silliness... I'm not saying Ryan didn't reform himself, but you've gotta wonder if old habits die hard with those possibly illegally high rebates or whatever (we don't know the details yet so you are right, we should as a matter of criminal justice refrain from judging him just yet... as an investor though, I'd get the hell out of that stock if I were in it). Petersen might be prosecuted for making misleading statements during earnings calls, too.

 

[samboy]

This wasn't intended to be another hate OCZ thread and I don't think it has turned into one.

I'm interested in how companies are run and OCZ has certainly made a name for itself in the SSD space in a short amount of time competing effectively with some of the big players. I guess it was all too good to be true.

They have helped everyone by being the company that I believe provided the price pressure recently (their drives seems to hit the new low sooner than others). It turned out they were doing this in an unsustainable way. SSD prices would have still fallen due to NAND prices; but I believe OCZ helped this to be passed onto the consumer sooner.

The interesting thing will be to see what happens with SSD prices down the road; if OCZ is out of the picture as a major player. I'm hoping that they have served their purpose already and that the uptake of SSD's will reach mainstream next year and this will be enough to drive prices down further as the remaining players compete for market share; it's a race right now to see who becomes the dominant supplier at the end of this.

I've never personally purchased an OCZ drive (quality concerns) but this doesn't mean that I wish for them to be out of business or anything like that. Smaller companies can grow up, get better at quality etc, and become great companies.

 

[Hellhammer]

My view of things is that OCZ is preparing themselves for getting sold. That's why Ryan "resigned" (from what I've heard, he was more or less forced out) because he was the one blocking the sale. If negotiations are already underway, these recent stock drops don't really mean much.

 

[corkyg]

I agree with Hellhammer. Yesterday's news supports this possibility;

"OCZ Technology Group (NASDAQ:OCZ) was the hardest-hit stock of the day, plunging 39.68% to $1.90 after the company revealed, in requesting from the Securities and Exchange Commission (or SEC) a deadline extension for its second quarter filing, that it expects a &#8220;significant&#8221; second-quarter net loss. OCZ also appointed board member Ralph Schmitt as president and CEO."

Current news about the new CEO: http://www.theregister.co.uk/2012/10/11/ocz_new_ceo/

A big 2Q loss can impact the sale price. The delay in SEC filing could relate to preparing for due diligence by a prospective buyer.

 

[Phynaz]

In this case trouble is an understatement.

Wow, nice intel gathering Virge.

 

[Phynaz]

Just to be fair to the guy, his felony was reduced to a misdemeanor and he was much younger at the time in 1998. His crime was trading some weed for a car stereo he says he didn't know was stolen. And like he says, the guy built a pretty big company up from nothing and didn't amass any debt doing so. That's worthy of respect in my book.

Doesn't matter. SEC rules say all felonies of officers of a company must be disclosed. Ryan didn't disclose his, therefore securities fraud.

 

[VirtualLarry]

Since OCZ owns Indilinx, I would hate to see Indilinx go under, if OCZ goes under. Therefore, I feel that OCZ will most likely be sold to a larger company (Seagate?), for cheap because of the stock tanking and their other troubles.

I doubt Samsung would be at all interested in them, nor would they want to tarnish their brand by being associated with OCZ at all.

 

[blastingcap]

Since OCZ owns Indilinx, I would hate to see Indilinx go under, if OCZ goes under. Therefore, I feel that OCZ will most likely be sold to a larger company (Seagate?), for cheap because of the stock tanking and their other troubles.

I doubt Samsung would be at all interested in them, nor would they want to tarnish their brand by being associated with OCZ at all.

From what I understand, Seagate is no longer interested, and I wouldn't be interested if I were them, either... too many problems associated with OCZ, especially legal problems. Might as well wait for them to go bankrupt and then buy the assets for cheap, like NVidia waited for 3DFX to go bankrupt and then bought assets for cheap. Assets can include things like Indilinx if you are a fan of them (I'm not).

 

[Rvenger]

Hmm, Well all of my SSD drives are now OCZ brand. I hope these all last 3 years or I guess I am SOL. I hate to sell them off because I really like them.

 

[Railgun]

Hmm, Well all of my SSD drives are now OCZ brand. I hope these all last 3 years or I guess I am SOL. I hate to sell them off because I really like them.

As are mine and still going strong.

 

[balane]

I've had five OCZ drives over the years. Four still in use by myself. An original Vertex, 2 x Vertex LE and an Agility 3. The original Vertex failed but because I was able to put it into Engineering Mode via a jumper I was able to flash in a new firmware and it worked great after that. So other than that hiccup I've been fortunate to have a nice success rate with them. I know that, at the low prices I paid, I definitely enjoy the price to performance ratio of them. I hope they all keep chugging along.

 

[tweakboy]

10 years ago OCZ were the RAM kings remember, especially amongt OCers.

Now the company is a POS. I wouldn't be surprised if they sell out to a bigger company like join a big company sorta how AMD came to ATI ,,,, gl

 

[ViRGE]

From what I understand, Seagate is no longer interested, and I wouldn't be interested if I were them, either... too many problems associated with OCZ, especially legal problems. Might as well wait for them to go bankrupt and then buy the assets for cheap, like NVidia waited for 3DFX to go bankrupt and then bought assets for cheap. Assets can include things like Indilinx if you are a fan of them (I'm not).

That would be my concern as well. If OCZ fails - and I think they will - then someone will want them (though probably not Seagate). But they're so Toxic right now that I have my doubts that anyone would want the whole company. Rather they'll do exactly as you say and wait until bankruptcy to pick up the good bits for cheap while casting aside the debt and any other obligations.

 

[Eug]

10 years ago OCZ were the RAM kings remember, especially amongt OCers.

10 years ago OCZ wasn't king of anything. They did cater to OCers, but that's a pretty small group overall.

 

[blastingcap]

10 years ago OCZ wasn't king of anything. They did cater to OCers, but that's a pretty small group overall.

I think he meant that OCZ were kings of RMA, not RAM. And they still are.

Edit: for the humor challenged among you, yes I was joking.