OCZ Technology (OCZ +30.2%) +15.7% AH to $8.19, adding to the big gains it saw today on reports...

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Ashraf Eassa Comments (5798)
 
What alternatives are there?
27 Jul 2012, 06:24 PM Reply Like

Stone Fox Capital Comments (4617)
 
it won't find a better value.
27 Jul 2012, 06:31 PM Reply Like

Ashraf Eassa Comments (5798)
 
Yeah.
27 Jul 2012, 06:34 PM Reply Like

serndipity Comments (143)
 
Not at all convinced w/ Valich and rumor creditability.

Truth is that OCZ is over the barrel.

Company has never made a profit, has negative cash flow and continuing massive cash burns (in Q1/FY13 alone they spent more than half of what they raised w/ the entire $100M+ February Q4FY12 secondary).

FY'13 midpoint revenue guidance is $665M less the $113M Q1 actual leaves $552M to be done in the remaining 3 quarters.

After two secondaries within a year, that raised more than $200M the company has only has $43M in cash remaining plus an open $35M line of credit. Note: the LoC term is 5 years with possible expansion to $60M and then $100M, but it is limited to factored receivables and more importantly, covenants (e.g. EBITDA performance which is currently at -$16.55M).

The companies business model has basically been to assemble SSDs using commonly available off the shelf components (e.g. controllers and NAND flash). Beginning in 2008, they first deployed Indilinx controllers, then SanForce and today Marvell controllers with Indilinx firmware (company acquired Indilinx last year).

Company management expects that they will begin offering a new Barefoot controller, that has been in development at Indilinx since August 2008, during its FY'13 2nd half.

Recently numerous SSD controller companies have been acquired in the $250M to $400M area (LAMD, SanForce, Pliant, Anobit etc.).

Additionally, Smart Modular was taken private by Silver Lake Partners for $645M. Smart Modular had great Y/Y revenue increases, positive cash flows and was profitable yet sold for 1X trailing 12 month sales.

BTW, OCZ trailing 12 month sales are $405.6M and with 67.65 shares outstanding, works out to be $5.99 / share.

During this weeks earning CC, LSI (bought Sanforce for less than $400M) increased their SSD/Flash year over year (FY'2012/FY'2011) growth guidance to 200% (whereas OCZ is looking for 80%).

Go figure.
27 Jul 2012, 07:45 PM Reply Like

David J. Nelson Comments (28)
 
Yeah, go figure. OCZ will do $1 billion in sales FY 2014. They will probably earn $100 million the same year. Guess what - acquirers buy companies based on future expectations - NOT trailing revenues or earnings. People rag on OCZ's use of cash like they are squandering it on booze and loose women but they have made some very shrewd acquisitions and purchased loads of NAND for the massive revenue ramp they are expecting. Not to mention brought to market products that compare favorably to anything the "mighty" FIO might have to offer. This is what Seagate sees - a well established name with formidable presence in the consumer, workstation, and enterprise space in an exploding market. They are getting it cheap for $1 Billion, especially considering probably half will be paid with their own stock which is seriously undervalued in it's own right.
27 Jul 2012, 08:44 PM Reply Like

Micah Comments (378)
 
Anecdotally, this seems like a good match. OCZ will give STX much needed technology and capacity in the SSD space. STX will give OCZ the resources, scale, and financing to continue to grow and to be an industry leader.

I also like your comment David about STX using their severely undervalued stock to finance at least part of this acquisition. Savvy.
28 Jul 2012, 06:31 AM Reply Like

peerabd Comment (1)
 
More people are negative than positive. And that's why they are not making any cents.
29 Jul 2012, 07:10 AM Reply Like