OCZ’s aggressive discounting of SSDs may have gone too far. The drive maker has lowered its revenue estimate for the second quarter due to the impact of “customer incentive programs” that include rebates and price adjustments. According to Mercury News, OCZ founder and former CEO Ryan Petersen “boosted” those incentive programs in a bid to gain market share, a move that might have cost him his job. Petersen resigned from OCZ last month; his replacement, former PLX CEO Ralph Schmitt, says the incentive programs will continue but “have been redesigned to achieve better results.”
We won’t know the full extend of the damage to OCZ’s financial position until the company posts its Q2 results, which are still being reviewed. However, OCZ says we can expect a “significant” net loss for the quarter in addition to negative gross margins. OCZ had previously forecast Q2 revenue of $130-140 million, a figure that was subsequently lowered to $110-120 million some time before this latest warning hit.
As we noted in our most recent look at SSD pricing, OCZ’s consumer-grade SSDs have received substantial and frequent discounts since the beginning of the year. Those numbers don’t take into account mail-in rebates, which we often see attached to OCZ drives.
The Q2 warning has predictably sent OCZ’s stock price tumbling, which could make the firm an attractive acquisition target, provided its finances aren’t in too bad of shape. According to the rumor mill, Seagate was eyeing OCZ a couple months ago, primarily for the company’s enterprise business. We’ve seen a lot of consolidation in the storage industry lately, including OCZ’s acquisition of controller maker Indilinx, so I wouldn’t be surprised to see a takeover in the company’s future.