Seeking Alpha

Copperfield Res...'s  Instablog

Copperfield Research
Send Message
Copperfield Research is the pseudonym of a research team focusing on publicly traded equities. As of the publication date of our articles, we may have long or short equity positions in the companies covered. We do not discuss unpublished reports, or provide any advanced warning of future reports... More
  • OCZ - The Master of SSD (Shady, Suspect, Deceitful) 61 comments
    Apr 20, 2011 11:19 AM | about stocks: OCZ, STEC, WDC, STX, IBM, EMC
    Today we published a long report on OCZ Technology (NASDAQ:OCZ), "OCZ - The Master of SSD (Shady, Suspect, Deceitful)" which can be found in its entirety here:

    www.scribd.com/doc/53435574/OCZ-The-Mast...

    Below is a brief intro of the issues covered in the first few pages of the article, many of which we believe will be helpful reveleations for investors......

    Over the last six months, investors have learned a painful and expensive lesson from the following story. A small Chinese company comes public through an RTO (reverse take-over) or a backdoor listing on the OTC Bulletin Board. The story blossoms alongside a rising stock price, riding a new hot theme or even a legitimate end market. Ignoring red flags from management's past, sellside analysts and investors choose to believe the Cinderella tale. The tale itself is always hard to verify, but the detailed insight the CEO shares creates complacency and a willingness to look past obvious risks and financial irregularities. Based on the CEO's story, a cult-like following ensues, and the company is able to raise large sums of capital. The company puts up huge revenue numbers quarter-after-quarter, yet the profitability and cash flows never seem to materialize. And then one day, investors realize that numbers never reconciled and huge accounting inconsistencies existed the whole time. They also realize important facts were never disclosed and the product wasn't what management claimed. Ultimately, investors suffer large losses as the final chapter. OCZ Technology (OCZ) may just be the American version of the story above.

     

    OCZ has parlayed investor and market excitement for solid state drives (SSDs) into an amazing story. From a low of $1.79 last summer, OCZ's stock has steadily climbed more than 350% on a feel good tale told by its CEO. But there is a much darker and sinister side that has been well hidden. It is our opinion that OCZ has misrepresented its SSD growth and has financial irregularities that are nearly impossible to reconcile. We believe that some form of a restatement may be required and that the auditors tick and tie review has some substantial inconsistencies. As such, we have sent our findings to the Securities and Exchange Commission asking for clarification on the multiple sets of numbers that we have uncovered. We believe OCZ's Board has the fiduciary responsibility to form a special committee to examine these discrepancies.

     

    But the misrepresentations are not confined to the financials. A scathing lawsuit and industry reviews suggest OCZ has misrepresented product specs and performance. Additionally, a recently completed secondary failed to disclose the CEO's criminal record, major underwriter conflicts (until the final prospectus), and contained financial results that were different from past filings. And if that is not enough, there are other confusing pieces to the story such as Fusion-io, STEC, and Smart Modular disclosing that they do not see OCZ in competitive situations. Amazingly, we believe most of the interest in OCZ is nothing more than a wise guy backdoor play on the hot Fusion-io deal that should backfire as the OCZ issues get exposed.

     

    As investors begin to recognize that the CEO has told the world that OCZ is trying to get qualified at EMC and IBM (so much for selective disclosure), the last catalyst will have played itself out versus elevated expectations. Although the sellside will likely remain complicit, we believe buyside investors that expect $400 million of revenue, and more importantly $0.75 of earnings in fiscal 2012, will be disappointed. With buyside estimates at unobtainable levels and promotional qual announcements fully priced in, we think the stock will finally be valued on fundamentals. If OCZ trades in-line with the comp group, a generous assumption given OCZ's limited asset value, differentiation, and minimal profitability, a reasonable price target would be between $2.58 and $4.98 per share.

     

    This report will highlight:

    1) Huge losses for AIM investors and a previous profitless revenue ramp. OCZ listed its stock on the AIM before moving to a U.S. listing. OCZ management rode a profitless revenue ramp and told a very similar story then to raise money from investors. They proceeded to miss estimates by 40% and delist their shares less than three years after the original listing. OCZ's stock declined 95% from its peak.

    2) BCInet - an unusual transaction. OCZ claims to have sold its Neural Impulse Actuator line to a company that was incorporated, at most, just seven days before the sale took place. Public filings show OCZ shares the same address as the purported buyer, a company called BCInet.

    3) Accounting Irregularities, SSD growth overstatement, and irreconcilable financials. Based on discrepancies in OCZ's SEC filings, we believe the company has misrepresented its SSD revenue and growth rates. The SSD revenues from past financials do not reconcile with an important segment table they have been providing since January. Based on comments in the MD&A from the 10Q, it appears management has overstated the year-over-year SSD growth rate by over 200%.

    4) Irregularities in the prospectus, past filings, and a needed restatement. The prospectus that investors relied upon for the recent secondary appears to have contained material financial inaccuracies. Based upon the financials provided, we are unable to reconcile the Segment attributions with past SEC filings. The prospectus appears to overstate SSD growth for 2010 by 183%. The 8K (from 1/10/11), the 10K, and the revenue from quarterly results reported in each 10Q do not reconcile. Additionally, it appears SSD revenues were somehow reallocated to the PSU segment in some financials and the memory segment in others - with the result being overstated forward revenue growth in SSD. Finally, OCZ's CFO resigned late last year after only 18 months in that role.

    5) Material information was withheld about the CEO's past felonious activity. OCZ and the underwriters did not disclose material background information on the CEO's criminal record. While we are sympathetic to mistakes made in the past, we believe the importance of the CEO's credibility is essential given the extreme reliance investors and analysts have placed on his story. A national criminal records search shows the CEO was arrested and/or charged in various Courts for: Grand Theft, Forgery, Unlawful Entry Motor Vehicle, Theft-1, Drug Violations, and Traffic in Stolen Property.

    6) Controversial geographic disclosures suggest all of the growth is from EMEA. Despite cagy references to HP, Yahoo, and other U.S.-based enterprise wins, close to 100% of OCZ's growth has come from the Middle East, Africa, and Europe. Based on public disclosures by the CFO, for the numbers to reconcile, SSD business outside of the U.S. is somehow growing nearly 3x faster than U.S. SSD growth. The company's comments about SSD attributions imply North American non-SSD revenues would have fallen between 53% and 92% sequentially, while that same non-SSD business was flattish outside of the U.S. While unrelated, it is worth noting that OCZ has received inquiries from the FBI about product sales into the Middle East.[i]

    7) Claiming to triple capacity out of thin air. OCZ has publicly stated multiple times that they expanded capacity by 3x in the third fiscal quarter. We have been unable to find the associated expenses or capital expenditures supporting that level of capacity expansion. In fact, PP&E declined by $10,000 from Q1 to Q3, while capex was only $728,000 for the entire first nine months of the fiscal year.

    8) Hype aside, OCZ looks ugly next to STEC. Despite a rocky road ahead for STEC, the side-by-side comparisons are alarming for OCZ investors that believe the company has the infrastructure and support to establish large revenue agreements with OEM's (qualification announcement do not equal revenue). STEC employs 250% more heads in R&D and spends nearly 90% more per such employee. Further, STEC spent more than 400% more on R&D in 2010 than OCZ spent in the previous four years combined. When taking all of OCZ's options and warrants into consideration, the enterprise value of OCZ is now just $250 million less than STEC.

    9) OCZ's appears delusional and does not seem to play in the high-end enterprise SSD sandbox. Don't take our word for it, look at the supposed competition. In public filings, OCZ claims to compete with Fusion-io, STEC and Smart Modular. However, none of those three list OCZ as a competitor in their public filings. Additionally the "wise guy" investors that have bought OCZ as a backdoor to Fusion-io are likely to be sorely disappointed if they actually compare the financial profiles and end markets of the two companies.

    10) Industry reviews accuse OCZ of disingenuous specs and "shady" marketing. The CEO of DDRdrive and the industry review website Storage Review have accused OCZ of knowingly publishing disingenuous product specifications. OCZ's decision to deceptively market new products with legacy specs and marketing material led one industry website to warn (talking about the product, not the stock) "At this point it is buyer beware until OCZ steps up and reveals some degree of transparency."[ii] 

    11) OCZ is being sued for Negligent Misrepresentation and Deceptive Advertising Practices. OCZ failed to disclose any of the details behind the lawsuit filed against them in U.S. District Court less than three weeks ago. The lawsuit provides great detail into OCZ's decision to change the number of modules, the densities, and the nodes of its flash cells without disclosing such changes to customers. The lawsuit accuses OCZ of Deceptive Advertising and Negligent Misrepresentation, among six total claims, "OCZ's advertisings and marketing representations concerning the storage capacity and performance of the Products are false, misleading, and deceptive."

    12) The Indilinx acquisition - fuzzy math and a bleak revenue picture. Despite management's rosy comments around Indilinx and future accretion, public SEC filings portray Indilinx as a company that was quite challenged. In 2010, Indilinx revenues fell by 69% to just $2 million. Excluding the decline in revenue from OCZ, their sales still fell 46% compared to 2009. We are unsure how management defines "accretive" and do not think Indilinx can generate the required $1.7 million of EBIT to offset the dilution from the deal.

    13) OCZ will not come close to hitting buyside expectations. We have carefully analyzed buyside expectations for revenues this year (FY'12) of $400 million and pro forma earnings of $0.77 per share. We believe that buyside investors are making a major error extrapolating the contribution margins that are implied in the fourth quarter from management's two press releases. Further, we believe management may need to rely on a) selling DRAM inventories at 100% gross margins that had previously been reserved against, and b) the possible reversal of an accrual taken for lack of payment to a supplier. We slice the numbers several different ways and think buyside revenues may be attainable, but the company will come nowhere close to making $0.77 of earnings.

    14) The co-founders aggressive selling may be one step ahead of investors. The spate of insider selling could raise some flags. CEO Ryan Petersen sold nearly two million shares a few months ago in private transactions and the open market at levels 50% lower than where the stock currently trades. Also, one of OCZ's co-founder's recently sold most of his stock below $4.00 (he may have sold 100% of his stock, but we can not confirm that yet).

    15) Why was the Merriman Capital relationship not disclosed in the preliminary prospectus? For some reason the lengthy and intertwined relationship between OCZ and Merriman Capital did not appear to get disclosed in the preliminary prospectus. Given the depth of the relationships, the Chairman's significant stake in OCZ, and the bullish support from research, we are unsure why the relationship was not initially disclosed.


    Disclaimer – As of the publication date, the author of this report has a short position in the company covered herein and stands to realize gains in the event that the price of the stock declines. The author does not use options to establish positions prior to a report’s publication. The author does not discuss unpublished reports, or provide any advanced warning of future reports to others. Following publication, the author may transact in the securities of the company, and may be long, short, or neutral at any time hereafter regardless of our initial opinion. The author of this report has obtained all information herein from sources believed to be accurate and reliable. The author of this report makes no representations, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use. All expressions of opinion are subject to change without notice and the author does not undertake to update or supplement this report or any of the information contained herein. This is not an offer to buy any security, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction.





    Stocks: OCZ, STEC, WDC, STX, IBM, EMC
Back To Copperfield Research's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (61)
Track new comments
  • J2B
    , contributor
    Comments (2) | Send Message
     
    In the disclaimer the author claims a short position.
    Stifel Nicolaus just started OCZ at a buy yesterday. I will trust Nicolaus.
    Needham also put a buy on OCZ yesterday.
    20 Apr 2011, 12:12 PM Reply Like
  • JimmyBob
    , contributor
    Comments (2) | Send Message
     
    Both Stifel Nicolaus and Needham also have a vested interest in OCZ success as they were part of the team leading the secondary round of funding.
    21 Apr 2011, 05:17 PM Reply Like
  • Brandybuck
    , contributor
    Comments (5) | Send Message
     
    From a purely technical (stock chart perspective), it was not encouraging that OCZ stock price was unable to respond positively to the analyst upgrades. Some serious technical damage has been done to the stock (now below both the 20 and 50 day mavgs), and it appears the long investors may have exhausted their buying power for now. The stock price rebounded to 50% of the sell off from the bottom (a 50% Fib retracement) and may now be dropping to retest the low. I note that 200-day moving average is about $5/share - where I would expect some strong buying support. There is now a lot of overhead resistance from folks who bought in at the $7-9 band level and are currently have a loss.
    23 Apr 2011, 11:01 AM Reply Like
  • gelded
    , contributor
    Comments (9) | Send Message
     
    And if the author has a large short postion, he just made millions on his BS post!
    And others with stop sells just sold an upcoming company!
    20 Apr 2011, 12:23 PM Reply Like
  • fire171
    , contributor
    Comments (11) | Send Message
     
    The author of this article refuses to disclose his identity and has a short position. This is the same person who brought down EBIX a couple of weeks ago. His analysis was much the same as this article claiming falsifications and criminal activity by the CEO. The pattern of this scammer is exactly the same. He is cleaver and is making money by manipulating the market. The accusations against EBIX have turned out to be false and I think OCZ is a victim of this unscrupulous author.
    20 Apr 2011, 12:28 PM Reply Like
  • J2B
    , contributor
    Comments (2) | Send Message
     
    I would think that the big boys have already looked into OCZ before they upgraded.
    20 Apr 2011, 12:32 PM Reply Like
  • zitani
    , contributor
    Comments (2) | Send Message
     
    If you think the author is a fraud, the stock is undervalued and a good pick up at this price level. I believe the damage is done.
    20 Apr 2011, 12:40 PM Reply Like
  • Value Bulldog
    , contributor
    Comments (105) | Send Message
     
    Nice work again. My DD uncovered similar things from talking to U.S. based industry participants. If you look at their U.S. business over 2/3 of it goes through NewEgg.com which is clearly not enterprise or OEM business. I was scratching my head on where all this volume in Europe was going given they had no 10% customers there. The explanation I got from the sell side was "small system integrators". Good work uncovering the CEO's legal issues, I had not thought to do that. I also did not realize to just what extent it was a pump and dump on the AIM.
    20 Apr 2011, 01:03 PM Reply Like
  • ThatFigures
    , contributor
    Comments (8) | Send Message
     
    This is BS I just bought at $10.26 this morning and sold for $6.68 on a stop limit. This sort of review by a short player should be illegal!!!
    20 Apr 2011, 01:05 PM Reply Like
  • chhsa
    , contributor
    Comment (1) | Send Message
     
    What a scam - short a stock, then write an anonymous hit piece on the web. Seeking Alpha should be ashamed to allow publication. Same thing was done to EBIX a few weeks ago. Hope the SEC is on this one.
    20 Apr 2011, 01:29 PM Reply Like
  • South78
    , contributor
    Comment (1) | Send Message
     
    This article reeks of bias and potential stock manipulation.
    20 Apr 2011, 01:29 PM Reply Like
  • belsey
    , contributor
    Comments (11) | Send Message
     
    This is the same crap Varient View Research pulled through an article in SA about ABAT dropping the stock 45%. VVR has no website or even address. They admitted they were short on ABAT. There was no named author of the article. How can SA publish articles where the author won't even give his/her name? Then the articles are published as "headlines" on Yahoo Finance. What a racket. Is SA getting a piece of the action? These people are admitted short sellers making millions with their unproven accusations and misinformation. I love their disclaimer at the end of the article. Some smart law firm will have a hayday with these scumbags soon.
    20 Apr 2011, 01:30 PM Reply Like
  • fire171
    , contributor
    Comments (11) | Send Message
     
    The author is a "pump and dump" artist. He and his minions prey upon the fears and greed of investors by manipulating thinly traded small cap stocks. He will never go after the large caps like GE, XOM or PG because he cannot successfully manipulate price and his BS will be instantly shot down. Please check out the post by "Special K" (one of his minions). Click on the comments and you will see a clear pattern. Scroll down to the bottom and see his positive comments about CBEH and note the posting date. Not long after his post CBEH cratered. Just check it out....
    20 Apr 2011, 01:31 PM Reply Like
  • semi expert
    , contributor
    Comments (18) | Send Message
     
    Copperfield reserach = master of shady, suspect, deceitful
    Is this legal? I think SEC investigation is in order esp since large puts were traded yesterday before the article. Market manipulation moving from Bulletin boards to Seeking Alpha
    20 Apr 2011, 01:43 PM Reply Like
  • zitani
    , contributor
    Comments (2) | Send Message
     
    Seeking Alfa should have done due diligence before admitting the article. This person went after ABAT EBIX and now OCZ. The damage in ABAT and EBIX is still lingering. Let us hope it does not do the same to OCZ.
    20 Apr 2011, 01:51 PM Reply Like
  • Dave Schwartz
    , contributor
    Comments (20) | Send Message
     
    I tried posting article to seeking alpha and got rejected because they said it was difficult to back up my research. Figure this article has to have some merit.
    20 Apr 2011, 01:53 PM Reply Like
  • JimmyBob
    , contributor
    Comments (2) | Send Message
     
    Although it is hard to tell what is fact or fiction. Certain items do stand out and demand some clarity out of OCZ. The 3x increase in manufacturing capacity, without a subsequent capital investment.
    One surface mount line required in the assembly of drives would cost approximately $800,000. Any 3x increase would necessitate a 3x increase in the number of surface mount lines. Now it could be that they are only performing the final assembly of the drives, which would only require a 3x increase in the number of torque screwdrivers et.
    A very low investment, and the 700k expense would more than cover. However, this would mean that a significant portion of the production/manufacturing process is outsourced and I do not believe this is how they have presented themselves. Reviewing their website I see no physical address or photo's of their facility.
    I am sure they have one, but I suspect it is for final assembly.

     

    On his listing of competitors he is exactly right. The competitors he has listed all are based upon the same hardware and firmware.
    Exact same controller, same type flash, and same FW.
    All dependent upon Sandforce. STEC and Fusion IO have substantial IP and are not dependent.

     

    The DRAM business is the most interesting. The DRAM business and SSD business are both highly dependent upon managing a volatile commodity, DRAM and Flash. Given the significant write offs over previous few quarters, prior years performance when listed on the AIM, their track record at managing does not lead to a significant amount of confidence in their ability in the future to manage the Flash commodity. Additionally, during the period where these substantial write downs of inventory took place, although the market was in a downward trajectory, it does not equate at all with the amount of the write down. The potential of reversal of these write downs, or what was written down, certainly exists. One could lump a lot of things into a write down, only to capture upside in a later quarter. Making whatever story come to reality.

     

    Although the author might have had an ax to grind, or short position to cover, does not necessarily invalidate his conclusions. Just because your paronoid, does not mean they are not after you.
    20 Apr 2011, 02:02 PM Reply Like
  • stoneoak
    , contributor
    Comments (2) | Send Message
     
    How is this not illegal? They're inciting others to trade based on lies so that they can profit from the price change... isn't that illegal?

     

    SA really needs to take action, CR has done this before against EIBX. Either take down the posts or mark them as opinion, under review, or something to show this isn't legitimate research before SA itself looses credibility.

     

    I for one had a minor long position with a long term view and have used to weakness to add to that long position. Based on my own analysis, not the latest 'headline' to be posted anonymously
    20 Apr 2011, 02:07 PM Reply Like
  • stts1
    , contributor
    Comments (7) | Send Message
     
    I know this is a bunch of shit and I hate that people can do this to investors, but man what a gift, as Cramer might put it. I got blown out monday with that "little" seloff. I assumed it was offering investors dumping a few shares. A little dumping makes this stock move alot. But now I got a bunch at 6.80. Holly cow, way below the offering. Its not like these people make vaporware, and it will be funny if the charges turn out to be pot selling and passing bad checks in his youth. Anyways, Its already jumped up big to make up my loss from the tinny seloff. In fact, I wouldnt doubt if the 250,000 shares sold off monday was that bozo getting his shorts for the big reviel. :O Whatever the case, I kinda hope they catch this guy even though he made me money. Im still scared to short this stock. Its got way too big a story ahead of it.
    20 Apr 2011, 02:09 PM Reply Like
  • jonsjon1223
    , contributor
    Comments (225) | Send Message
     
    Floor of $30. It's a freaking GIFT. I THANK CR. They are going to make me so much money. A buy in at $6,5 and sell at $30 is 500% increase. A buy at $10 is only 300% increase.

     

    Thank you CR.
    20 Apr 2011, 02:34 PM Reply Like
  • mgl888
    , contributor
    Comments (2) | Send Message
     
    As a computer engineer, I can easily kill off argument #10 and #12

     

    10) Industry reviews accuse OCZ of disingenuous specs and "shady" marketing.

     

    Yes there was performance degradation caused by moving to 25nm NAND. It was not an honourable move for OCZ to use the same product branding, but they handled the consequences better than anyone else in the industry.
    Anand have a lot of respect for OCZ and the way they handled this issue.
    www.anandtech.com/show...

     

    12) The Indilinx acquisition - fuzzy math and a bleak revenue picture.

     

    Indilinx is a smart acquisition for the expansion of the company
    www.anandtech.com/show...

     

    I'm long OCZ.
    20 Apr 2011, 02:31 PM Reply Like
  • jonsjon1223
    , contributor
    Comments (225) | Send Message
     
    Floor of $30 for OCZ. I don't even care about this bashing. Buy in at 6,50 are you kidding. Any true strong long would rejoice at getting this $30 stock for $6,5 instead of $10.
    20 Apr 2011, 02:33 PM Reply Like
  • Back2Basics
    , contributor
    Comments (10) | Send Message
     
    I finally got my chance to buy in under $9 because this company is strong. Has this, excuse my french, but a**hole even seen the new Vertex3 and Vertex3 Pro SSDs that OCZ came out with. They exceed every other consumer SSD on the market and are barely in stock at retailers. Who is this "Cfield Research" clown fooling.
    20 Apr 2011, 02:36 PM Reply Like
  • JRF77
    , contributor
    Comments (80) | Send Message
     
    First of all, you should know I'm long this stock and want most of all to try to separate fact from fiction. Can we have a discussion about some of the points that Copperfield raises?

     

    Let's grant that they have an interest in driving the stock down. Let's also not play shoot the messenger. They've clearly done a lot of research and in my mind the company needs to get its cards on the table, and fast. What would the answer be to the following, which are most troubling to me?

     

    (1) Why is growth in the US flat, and all growth seems to come from the Mideast and Africa?

     

    (2) Why don't OCZ's principal competitors list them as a competitor?

     

    (3) Was the Indilinx acquisiton "window dressing", or will there be real economic benefit here?

     

    The "cockroach theory" is in play here. If any of the accusations is true, then we can't really believe anything else the company says, until they regain our trust.

     

    What would you all say?
    20 Apr 2011, 03:01 PM Reply Like
  • Mohasa
    , contributor
    Comments (6) | Send Message
     
    (1) Why is growth in the US flat, and all growth seems to come from the Mideast and Africa?

     

    The statement is a lie - check Needham's response posted on the yahoo message board.

     

    (2) “OCZ doesn’t play in the high-end enterprise SSD sandbox”: Firstly, the company has already achieved “enterprise wins”, albeit more for low-end storage and server. Second, as we said in our initiation, we believe the greatest unit opportunity is actually in the mid-range, a market that the company IS targeting. Who said you have to be up against STEC to be in SSDs? Technically they compete with many SSD vendors, but in reality they seldom see STEC. We are far from a zero game in SSDs, and as we laid out in last report on OCZ, there is more than enough growth to see multiple winners.

     

    The above from Needham - The yahoo who posted the info does not know a thing!

     

    (3) From Needham again:
    Indilinx Acquisition Fuzzy Math”: The Indilinx acquisition was not for revenue, so it is irrelevant that they only had $2M. This was a technology acquisition to bolster internal development of their own controller. Accretion comes from use of the Indilinx controller in the ramping PCIe product and keeping the nearly 60% margin they would have had to pay as well as including the controller in future products.

     

    If you are invested in OCZ, you should have known all of what Needham said above! Long OCZ
    20 Apr 2011, 03:34 PM Reply Like
  • truth1347
    , contributor
    Comments (5) | Send Message
     
    This so called "copperfield" is a market manipulator of the worst kind. They are too cowardly to even use their own names. I would not believe a thing they say. Obviously, they are so afraid of getting sued (or arrested) they have to hide in the shadows. Is anything they say actually true? So far, all I have seen is evidence refuting what they say. I cannot blame OCZ for not lending any creedence to "copperfiled's" quasi-legal tactics until they are willing to show their faces. It is apparent from Copperfield's attack that they do not even understand what SSD's are or how they differ from standard memory. Who cares whether these so-called 'competitors' list them as competition or not. I own several of OCZ's drives and know they are fantastic. I have been in the business for 30 years. Personally, I will put my faIth in my own experience, and well known and recognized analysts like those from Needham and Nichols Stifel who gave the stock a $13 target, not to mention the glowing review of the Vertex 3 drive by CNET. Trust those who make their living in the open, not some nameless scum lurking in the shadows trying to drive down the price of a perfectly good stock. I cannot blame OCZ for not wanting to lend creedence to these creeps unless they are willing to face them in the open.
    22 Apr 2011, 03:29 PM Reply Like
  • truth1347
    , contributor
    Comments (5) | Send Message
     
    So did CNET lie in their recent glowing review of the Vertex 3 drive? Are they supposedly in on this "conspiracy" also? Somebody needs to go to jail, and it ain't the CEO of OCZ, it's the publisher of this garbage.
    20 Apr 2011, 03:08 PM Reply Like
  • ThatFigures
    , contributor
    Comments (8) | Send Message
     
    The only profits being made with this little game are by SA & CR at the expense of the honest investors. Worse yet is the fact that this type of activity drives away potential investors and gives the whole trading industry a bad rep.

     

    It is apparent to me now that one rumor mill email can wipe out 50% or more of a securities value in a matter of minutes. I will never invest in any security with confidence again. I did not realize the markets were that unstable/volatile. I'm learning the hard way.
    20 Apr 2011, 03:26 PM Reply Like
  • stts1
    , contributor
    Comments (7) | Send Message
     
    Why be mad at a stocks volitility? Would you rather it trades like Microsoft that hasnt given anybody a heart attack or a profit in overv 10 years? I picked up a boatload when it plunged below 7 and I sold most over 8. Thats a fantastic trade brought to us by some crazy dude that manipulated a plunge. I and people like me got the legal cash. That dude that did this is going to have blood hounds chaseing him. Even if you had stock in the plunge, you could have bought an equal short to limit your losses then turned it around at the bounce like I did. Embrace the volitility. Its a traders friend. :) Now I dont know what will happen going forward, I have a modest long right now. If it wants to plunge more, I'll do this all over again. Short for a loss limit, then reversal for the bounce. It would really be great to own these at $2, then all we do is wait till they land an ssd contract. The buyers will go crazy.
    20 Apr 2011, 07:33 PM Reply Like
  • semi expert
    , contributor
    Comments (18) | Send Message
     
    I think it might be prudent to log a complaint with the SEC regarding Copperfield... www.sec.gov/complaint/...
    20 Apr 2011, 03:39 PM Reply Like
  • The Fundamental View
    , contributor
    Comments (46) | Send Message
     
    Wiat a second now.....how is it legal for them to publish such a report (Copperfield) that slams the stock is what I am hearing. Other analysts go long and then recommend the stock don't they? You think any analyst that doesn't issue a buy rating on a stock isn't already long the stock? They aren't fools...they will first line their pockets and fill their positions before they tell anyone else what to do.

     

    REgardless of anyone's views about Copperfield, they do make valid points.
    20 Apr 2011, 03:50 PM Reply Like
  • stts1
    , contributor
    Comments (7) | Send Message
     
    You dont know that they make valid points. They are pointing at the negatives and then inventing a story around it saying it must mean this or it must mean that. Its a comon gosip trick that works well in generateing hoopla. BP has been disclosed to have engaged in all sorts of "questionable" activities relateing to the oil spill. But that doesnt mean the company is a cock roach and the stock should be quartered. Nothing ever adds up perfectly and people need to decide what is important. I dont think a kid ripping off cars at a time that Copperfield failed to mention (very convenient ommission), has much bearing on a produceing ssd company. Its clear Copperfield did not intend to fully enlighten us as much as he intended to create a panic. Im sure there are a few items to note, but the bulk will end up being a moutain out of a mole hill that freaked people out.
    20 Apr 2011, 07:48 PM Reply Like
  • stts1
    , contributor
    Comments (7) | Send Message
     
    Somebody up there said they clearly have done alot of research. Hah, those anylyst comfrences that bring their own technical experts to dig into OCZ wares are the ones that are doing indepth research. If there was something juicy about the criminal record, they would have posted it in bold type. It is clearly inuendo to spook investors like they did. And they also added a new board member who also is no technical slouch about what he is looking at. I dont care what the rest of you do, but Im long a reasonable amout. Got to save some powder in case he does this again in a day or too. :) The thing I got to wonder is what all those chartists will say now. This has dived thru all of the god given suports in all respects. I guess its a broken stock to short to kingdom come. Well, I suspect they wont have good luck with that unless the owners sell half their stake like STEC did. Shit does happen...
    20 Apr 2011, 03:52 PM Reply Like
  • stts1
    , contributor
    Comments (7) | Send Message
     
    I was looking for some anouncement from the company to comment on this published short sellers opinion, but they may be restricted from doing so while in their quiet period before their earnings release. How very convenient for Copperfields shorts.
    20 Apr 2011, 07:57 PM Reply Like
  • shrine
    , contributor
    Comments (2) | Send Message
     
    SEC knocking. This is bull shit. I can't believe SA allows market manipulation like this. I thought this was a reputable site?
    20 Apr 2011, 09:11 PM Reply Like
  • TheGribbler
    , contributor
    Comments (15) | Send Message
     
    Disclosure: I am long OCZ and I work professionally in forensic accounting.

     

    As an investor in OCZ, when I read the Copperfield Report, beyond the obvious hyperbole and misleading insinuations, the only points made that concerned me were with respect to the reconciliation of segment revenue. After studying this issue more carefully tonight, I have concluded that Copperfield's allegations on this point are also incorrect and unfounded, if not outright fraudulent. Here's why:

     

    The first discrepancy noted by Copperfield is whether the Q32010 SSD revenue is $21.2mm or $9.8mm. It appears that Copperfield is correct that the 8-K release is different from the original 10-Q numbers and it appears Memory and SSD have been flip-flopped. Copperfield goes on to incorrectly assume that the 10-Q numbers must be right, and then concludes that the 8-K and PR using the higher growth rate was deceptive, etc. etc.

     

    In a blur of accusations, I almost missed where Copperfield notes, "Our first reaction when seeing this irregularity was that it must be a flip-flop mistake. However, we were unable to find any reclassification disclosures (always a possibility that we missed it somewhere)."

     

    For purported "extensive due diligence," did Copperfield happen to see the 10-Q/A filed on 1/14/11 (one day after the original 10-Q filing)??? This amended filing corrects the mistakes and matches the 8-K. It clearly says on p.1 of the 10-Q/A, "This amendment corrects certain typographical errors within the “Net revenues” discussions in the MD&A."

     

    This type of purposeful misleading analysis is why Copperfield is an outright fraud.

     

    The second revenue accusation has to do with not being able to reconcile earlier SSD figures, before it was a standalone segment. Copperfield accuses OCZ, claiming, "Our guess is management moved SSD revenues to PSU in 2010 to overstate SSD growth."

     

    Without going through all the specifics, Copperfield's work is flawed because the old segment breakdown included a category called "SSD/Flash Memory Storage" and another called "Power supplies." The new (current) segment set is now "SSD" and "PSU/Other." Clearly the "Flash Memory Storage" is principally the "Other" which got moved over and is now grouped with PSU. Through Copperfield's limited understanding of OCZ's actual products, he has failed to account for USB thumb drives, which, while made with flash memory, are very very different from SSDs and deserve to be in a separate segment. When OCZ was just getting started in SSD years ago, it made sense to group these together, but as SSD grew, this was a logical split.

     

    So, comparing these two is not apples to apples, which is precisely why OCZ provided the historical figures on the new basis, so we would have an accurate picture of the SSD business standalone. Once again, Copperfield's dirty trick has been revealed.
    20 Apr 2011, 09:52 PM Reply Like
  • stts1
    , contributor
    Comments (7) | Send Message
     
    I didnt actually go thru all the numbers. I was sure everybody else would be pouring all over them to see whats up. Besides, he didnt blast about anything really significant like revenue discrepencies. And another red flag about Coperfields message was his criticizm of SSD growth projections. I got no respect for his opinion there. Everybody in the know realises that this whole SSD thing is going to launch like a rocket. Its going to be monster huge, but who can actually put an accurate growth number on monster huge. The point is that its going to be a melt up senario and nobody will be able to keep up with demand. As far as products, OCZ's R3 is a great product that is PCI-express based. If the numbers are accurate, its even 20% faster than Fusion IOs best offering in the same IO slot, but Fusion IOs other cards that run in the higher bandwidth slots have simply stagering performance. But the ongoing debate it wether Intel will eliminate these slots in future servers. It would be a meaningless debate except that Nvidia is indeed branching into ARM based mobile computeing because of its vulnerability to Intel and AMD integrateing graphics into their chipsets. So unless Coperfield can uncover more substantial number discrepancies, the whole Solid State memory upgrade cycle in data centers is the main attraction and there are still not enough supliers to deal with whats just around the corner.
    21 Apr 2011, 04:21 AM Reply Like
  • snowman23
    , contributor
    Comments (18) | Send Message
     
    Copperfield obviously fancies himself a magician with this kind of smoke and mirrors market manipulation...
    20 Apr 2011, 10:09 PM Reply Like
  • davcnslt
    , contributor
    Comments (133) | Send Message
     
    Richard Kugele, Managing Director of Equity Research at Needham & Co. filed a report today that is in retort to this post. I have combed the email he distributed and for the life of me I cannot find the copyright statement, nor any specific prohibition against replication. So I was tempted to post a cut-and-paste of Mr. Kugele's summary. However, I know that would be a disservice to him. I would mention that I have learned to respect his opinions in the data storage space.
    With regard to this post, one would do well to write to Mr. Kugele requesting a copy of his report. His email address is readily available simply by googling "Rich+Kugele+Needham. I would hastily add that I join those who noted that the author of the above SA post timed his odious slam well, given that OCZ is in their quiet period. Secondly, I am very suspicious of accusations that contain innuendo, and open ended inferences. This report is in the language of a feature story one might find in a supermarket end-cap display with blaring headlines about Charlie Sheen cavorting with a two-headed alien zombie.

     

    I heartily recommend that interested parties get a copy of Kugele's report. I am going to take the liberty of quoting his closing two sentences as follows: << "So What Now? For investors, we believe there is little substance in many of these claims and would be an aggressive buyer on this weakness." - Rich Kugele, Managing Director-Equity Research
    Needham & Company, LLC >>
    20 Apr 2011, 11:52 PM Reply Like
  • jmabie200
    , contributor
    Comments (6) | Send Message
     
    The author motives are very clear… create Fear, Uncertainly and Doubt to benefit from a sell-off. If his\her intent was to expose real issues at the company, then he should focus on these real issues, and not try to confuse the reader with unnecessary issues.

     

    For example, why be concerned with which companies list OCZ as competitors? There are many different market segments for SSD, and OCZ is certainly winning its share of business.

     

    Here is a website that has been tracking the SSD market for years. OCZ is listed as the number 5 SSD OEM based on on-line searches. Their on-line ranking has been growing with their sales success. www.storagesearch.com/...

     

    You don’t get this type of web traffic without buyer interest in your products.
    21 Apr 2011, 12:03 AM Reply Like
  • ram60
    , contributor
    Comment (1) | Send Message
     
    I am not US citizen but closely follows up the SSD market and technologies.
    StorageSearch ranking is bluff. It is mainly based on the manufacturer's press releases. I.E. No. 1 & 2 in SSDs sales (by far) are Samsung and Sandisk and only ranked 13 & 18 in StorafeSearch.
    The aouthor also published it in LinkedIn:
    "
    Patrick Kiley • SOURCE: Copperfield Research's Instablogs

     

    seekingalpha.com/insta...

     

    Today we published a long report on OCZ Technology (OCZ), "OCZ - The Master of SSD (Shady, Suspect, Deceitful)" which can be found in its entirety here:

     

    scribd.com/doc/5343557......

     

    ........
    "
    So you got his name.
    Some comments related to the full article and some not. The full article is 23 pages and found in www.scribd.com/doc/534...
    21 Apr 2011, 03:20 PM Reply Like
  • snowman23
    , contributor
    Comments (18) | Send Message
     
    Where do you see the "Patrick Kiley" name in relation to Copperfield?
    21 Apr 2011, 04:42 PM Reply Like
  • JRF77
    , contributor
    Comments (80) | Send Message
     
    If you look on LinkedIn you can see that a Patrick Kiley worked at OCZ for 8 months ending June 2010. He is now senior director of sales at Unigen. Looking at his profile, I can see nothing that ties him to Copperfield. ram60, why did you mention his name? If you've found a link, where is it? Let us know, please, or explain what his name is doing in your posting. Thanks.
    21 Apr 2011, 06:18 PM Reply Like
  • The Fundamental View
    , contributor
    Comments (46) | Send Message
     
    Did the company issue any press release re-butting the allegations? I sure didnt't see one.
    21 Apr 2011, 07:11 PM Reply Like
  • ThatFigures
    , contributor
    Comments (8) | Send Message
     
    The CEO did talk with Bloomberg here is the link.....
    www.bloomberg.com/news...
    22 Apr 2011, 06:19 PM Reply Like
  • pissedoff
    , contributor
    Comments (2) | Send Message
     
    looks like somebody might of found who this mystery crook is that caused this manipulation. looks like he lives in China and his name is Alfred Little and the company he claimed to have worked for for 10 years does not seem to exist , see below
    www.fearthevix.com/ind...?
    and below
    messages.finance.yahoo...

     

    option=com_content&...
    22 Apr 2011, 04:09 AM Reply Like
  • LiarSlayer
    , contributor
    Comment (1) | Send Message
     
    Alfred Little has been published/aired many times by Seeking Alpha, each story being a hit peice. My opinion, Seeking Alpha had better prepare to be investigated, and worst case....found culpable. Many here are on the war path with lawyers and Gov't complaints, which must be investigated. Freedom of the press does not include assisting criminal behaivior as a protection, repititively...I hope that is was worth it for Seeking Alpha. It will be for all of those that were harmed....can you say legal fees....fines....private suits in multiple states....state's AG's investigations....have fun Seeking A....the A will stand for your posterior when this is over.

     

    my opinion.....
    22 Apr 2011, 05:33 AM Reply Like
  • ThatFigures
    , contributor
    Comments (8) | Send Message
     
    Bloomberg Report:
    "Bloomberg's Cory Johnson reported on OCZ Technology Group Inc.'s stock decline and OCZ Chief Executive Officer Ryan Petersen's conviction in 1998 of a felony that was later amended to a misdemeanor.

     

    www.bloomberg.com/news...
    22 Apr 2011, 06:24 PM Reply Like
  • truth1347
    , contributor
    Comments (5) | Send Message
     
    So 13 years ago, a mixed-up kid bought a hot car stereo for a bag of weed, and it is now an earth-shattering revelation, whereas a bunch of crooked investment bankers traded a bunch of worthless sub-prime derivatives for 100s of billions of dollars out of middle-class worker's pension funds, and it it is just business as usual. What a messed up world.
    23 Apr 2011, 11:44 AM Reply Like
  • snowman23
    , contributor
    Comments (18) | Send Message
     
    Firstadopter response to Copperfield:

     

    www.firstadopter.com/2.../
    23 Apr 2011, 06:44 PM Reply Like
  • The Fundamental View
    , contributor
    Comments (46) | Send Message
     
    Seems to me the only ones complaining are those poor folks who were caught long. Nobody else gives a shite.
    23 Apr 2011, 09:09 PM Reply Like
  • ThatFigures
    , contributor
    Comments (8) | Send Message
     
    If that's how you really feel, then you’re no better than the lying, Shady, Suspect, Deceitful Copperfield scumbags.
    23 Apr 2011, 11:57 PM Reply Like
  • SonOfIsreal
    , contributor
    Comment (1) | Send Message
     
    I was an owner of 4,000 shares that I sold this morning. I like OCZ products, but if you read the report in detail and you read OCZ's response, you can't help to fee that something is going on. A simple typo on a public and filed doc is almost as bad as fraud. What kind of people run a company that is capable of making these kinds of errors?
    25 Apr 2011, 02:32 PM Reply Like
  • Hester
    , contributor
    Comments (549) | Send Message
     
    Copperfield, as usual your research is good and the seeking alpha comments in response are hilarious.

     

    What's really funny is when people named Truth1347, chhsa, and Fire171 criticize the author for being anonymous. Is Fire171 your first or last name?

     

    Please learn the definition of hypocrisy.
    26 Apr 2011, 03:45 PM Reply Like
  • truth1347
    , contributor
    Comments (5) | Send Message
     
    Hey, I don't have to worry about lawsuits or criminal investigations, I am honest. It is common practice to use screen names in comments. That is very different than publishing a "research" report full of erroneous information, with the express purpose of stock manipulation. If "Copperfield" wants to give me his real name and address, I will gladly give him mine.
    27 Apr 2011, 02:20 PM Reply Like
  • snowman23
    , contributor
    Comments (18) | Send Message
     
    "as usual your research is good" (??) ..are you joking?? this pseudonym only ever posted two bogus hit pieces...what do you mean "as usual"?
    21 Jun 2011, 10:29 PM Reply Like
  • tenax
    , contributor
    Comments (95) | Send Message
     
    how many people are aware of the ocz controversy over memory sticks from way back when:

     

    www.msfn.org/board/top.../
    25 May 2011, 10:02 PM Reply Like
  • josephjpeters
    , contributor
    Comments (18) | Send Message
     
    Revisiting this article 9 months later provides a good laugh.

     

    At CES 2012, OCZ has demonstrated their Everest 2 platform from Indilinx which will give them a huge competitive advantage as it's 3x faster with incompressible data then the competing Sandforce controller. Furthermore, the next-gen Sandforce controller won't be available until January 2013 and still won't match Everest 2 with performance. I appears that management was correct in saying that the Indilinx acquisition will be accretive in FY13.

     

    The article was correct with their FY12 GM predictions, however OCZ has begun ramping their Enterprise PCIe solutions (Z-Drive R4) which will have Gross Margins greater then 50% and will allow them to reach their end of the year FY13 GM target of 30-40%.

     

    With more then 40% of the float short because of weak arguments such as those presented in this article, OCZ will have a very strong 2012.
    17 Jan 2012, 01:00 PM Reply Like
  • Austin Craig
    , contributor
    Comments (1016) | Send Message
     
    Hows that strong 2012 working out Joseph? Now thats a laugh.
    OCZ is just 13 days away from being forced to file or be delisted.
    24 Sep 2013, 03:37 PM Reply Like
  • MordyNYC
    , contributor
    Comments (42) | Send Message
     
    Love reading old articles like this.
    11 Jan, 06:02 PM Reply Like
  • Austin Craig
    , contributor
    Comments (1016) | Send Message
     
    bankrupt now. lol
    13 Jan, 10:13 AM Reply Like
Full index of posts »
Latest Followers

StockTalks

More »
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.