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OCZ Technology Group (NASDAQ:OCZ) frequently disappointed investors when it came to talking about enterprise design wins back under the leadership of ousted ex-CEO Ryan Petersen. Investors were always told that they were coming, and "big" things were always hinted, but nothing actually ever materialized. However, for the first time in a while, an encouraging bit of good news just came OCZ's way with the announcement that Netgear (NASDAQ:NTGR), a well known network appliance vendor, would be using OCZ's Deneva 2 products in its own ReadyDATA 516 network attached storage products.

What Is Deneva 2?

OCZ's (newly revamped) product lineup goes something like this:

  • Consumer: Vector, Vertex, Agility
  • Enterprise SATA: Deneva
  • Enterprise SAS: Talos
  • PCIe: Z-Drive

So, the Deneva line is essentially an enterprise-grade edition of the traditional desktop/enthusiast lines of drives, and due to long qualification times and reliability needs of the data-center, the enterprise drives typically trail the consumer drives in terms of release date.

Reviews of the drive, and in particular, one from the well known storage review site, "storagereviews.com", were quite positive on the Deneva 2 lineup. This lineup does not typically lead the pack in performance, but against other SandForce devices it is a very clear winner. Intel's (NASDAQ:INTC) new flash controller seems to have really taken the lead here, albeit at a much higher price point, so OCZ still has a pretty competitive product.

Why Is This Win Important?

While a desktop NAS box isn't exactly the most mission-critical product, this win at Netgear does show that there are still reputable players in the industry willing to adopt OCZ's products. While I would be hesitant to expect the "floodgates" of design wins to open up from here, especially in more mission critical spaces, this is an important step forward for OCZ if it is to emerge from its financial funk.

To be clear: I think this is much more of a PR victory rather than a dollars-and-cents one, but for a name such as OCZ, even a PR victory is enough to move the stock up some. That being said...

The Pop Is Likely Temporary

I do not think that it is time to "buy" simply because of this win, especially as OCZ's prosperity depends heavily on sell-through of these devices. It is not clear what kinds of volumes Netgear/OCZ expect, but this would be something worth asking management at the next conference that they present at or at the next earnings call should the company see fit to host one in the near future.

I would not suggest buying into the rally especially as the main problems that keep the share price low still very much persist, despite this recent "sign of life". This was a great trading catalyst, but the fundamentals have not changed, and as a result, I do not expect the price to trend meaningfully higher and further expect a fade back to old lows. Time will tell, though. Good luck!

Source: OCZ Scores Netgear: Will This Move The Needle?

Additional disclosure: No position in OCZ, do not plan to take one.