OCZ warns of ‘significant’ Q2 net loss

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.

Comments closed
    • albundy
    • 7 years ago

    “OCZ’s consumer-grade SSDs have received substantial and frequent discounts since the beginning of the year”

    did they really think the highest priced ssd milking wagon would never end? seriously, there are other ssds being discounted and preferred over ocz ssds. if your analysts couldn’t forecast something as basic as that, then sadly your end justifies the means.

    • jjj
    • 7 years ago

    Their consumer SSDs are a small part of total revenue,anyway, negative gross margins means at the very least over 40 mil loss and OCZ is small and losing money as it is.

    • Bensam123
    • 7 years ago

    Companies this big don’t explode in one quarter. I don’t think there is anything remarkable to see here. They gunned for market share and they most definitely got it. So now if they don’t discount any further, perhaps even raise prices, they’ll break even and eventually enjoy a much larger piece of the pie then everyone else.

    I hear people recommending OCZ products all over the place, it’s like the Sandforce BSOD stuff never happened and I’ve been recommending them as well because they perform quite well and are cheap. The exception to that is of course on tech websites like this, but we’re the minority. Their warranty support isn’t terrible either.

    Most definitely after the SSD tussle ends OCZ will be one of the major players that pops out of it. I’m guessing Samsung will as well and more then likely Corsair.

      • indeego
      • 7 years ago

      If the drives were so great, why the need for discount? Their price/performance would spur them to success, at higher costs, like Intel has been doing.

      “Their warranty support isn’t terrible either.”

      It took a business day to respond to my query, and I had to wait another business day to get RMA approval. It took two days to ship(that I paid for), and another two for confirmation of return. Another two days for delivery.

      And then it happened again, within 2 weeks of replacement drive. Serious Q/A issues in that org, top/down.

      Nope, they are an acquisition target, they can be run better, by other people. I’m sure their name is worth a bite from someone.

        • Bensam123
        • 7 years ago

        Because there are a gajillion makers on the market right now. How else do you differentiate yourself? All of the other drive makers use the same sandforce chips for the most part, so there is little in terms of differentiation. They have very similar performance. Unless you’re Samsung or Intel which have already built reputations and a infinite amount of resources to throw around, it’s quite hard to do.

        The best method for doing so is being the brand everyone buys because you’re the cheapest and because it really doesn’t matter as they’re using the same components. Motherboard manufacturers have a hard enough time doing this as is and they have a wealth of different options to add to set themselves apart.

        Getting a RMA back in a week isn’t bad… at all… I was in RMA with Gigabyte for two months. Newegg would only take maybe another day or two off of that. You’re responsible for how fast a drive gets there too, so you can’t hold them responsible for shipping to them. I have in rare cases seen where manufacturers pay for return shipping, but that isn’t anything fancy, usually a ground service and as I said rare.

        Perhaps you should inquire about cross-shipping next time. That applies to any RMAs.

        People get lemons, you got two. I have friends that swear off Asus and Newegg because they got lemons too. You just happen to be someone that had bad luck. If you value having a reliable component perhaps you shouldn’t aim for the cheapest possible product as well.

        The bottom line sells and the sheer amount of people that are buying OCZ products is a testament to it. They’re building a huge name for themselves even if the failure rate for those drives is 4% instead of 2%.

        • Chrispy_
        • 7 years ago

        -1 for complaining about a one-week RMA.
        +1 for acquisition target. Yes, they could be run better, I agree.

          • indeego
          • 7 years ago

          1 week RMA for a data-holding device is unheard of. Neither HP nor Dell have ever had that long a turnaround for anything under even basic support, in my experience.

        • ludi
        • 7 years ago

        The last time I RMA’d a bulk lot of Seagate mechanical drives (maybe three years ago), the process took roughly a week, and that was with an online entry system that verified the applicable warranty coverage by serial number automatically. Still had to ship them in, they still had to inspect the drives, and then I got the refurb set shipped back…via standard ground freight.

        That’s just how the process works.

      • aceuk
      • 7 years ago

      [quote<]it's like the Sandforce BSOD stuff never happened[/quote<] Yeah. Now there's the performance/storage mode crap to deal with on the Vertex 4's.

    • Morris
    • 7 years ago

    It was pretty obvious things were not right with OCZ for quite some time from my observations.

    • Kougar
    • 7 years ago

    When you could buy a brand new OCZ Agility 4 128GB for $40 @ Amazon after two rebates last month… yeah.

      • Rand
      • 7 years ago

      I’ve seen their 360GB Agility 3 as low as $160 in Canada a couple times.

    • sschaem
    • 7 years ago

    Wonder why they invested all that money in tapei in 2010 to build a brand new state of the art manufacturing plant…
    While Samsung invested 4 billion to build a plant in the US.

    Korean building manufacturing plant in the US, while US company building plants in Taiwan…

    So buy American to support the economy… buy Samsung not OCZ ?

      • BiffStroganoffsky
      • 7 years ago

      One big reason American companies shift their business to other countries is to avoid paying taxes on the earnings of those holdings. They can then wait for a ‘tax holiday’ from the business friendly politicians to bring the profits back to the U.S. at a large discount on their books. I wonder if it is the same in Taiwan. I understand that the cost of living in Taiwan is higher than the cost in the USA relative to earnings given equivalent locale.

        • sschaem
        • 7 years ago

        You dont need to setup your manufacturing overseas to use this accounting trick.

    • Star Brood
    • 7 years ago

    Hope it gets bought out sooner than later. I am really hesitant to buy one even at the really cheap discounts, due to the reviews I’ve read on their SSD’S…

      • DPete27
      • 7 years ago

      Their sandforce drives are fine. That was all solved almost a year ago now. But I do share your hesitation with their 4th gen products because of OCZs tendencies to rush out products that aren’t properly validated.

        • NeelyCam
        • 7 years ago

        Reputation matters.

        OCZ drives were all screwed up earlier. People noticed, and started avoiding them. OCZ cuts prices to be able to sell, and runs at loss while SSD shipments are growing:

        [url<]https://techreport.com/news/23712/ssd-shipments-continue-dramatic-growth[/url<] Moral of the story: make high-quality stuff, and if your product breaks for some reason, do everything in your power to keep the customer happy.

          • Rand
          • 7 years ago

          OCZ reputation was horrific long before SSD’s ever hit the consumer market though, all their issues with SSD’s have only furthered the negative perception.
          They’ll need a long run of quality and a radical adjustment to their customer service standards before I would even consider buying OCZ.

            • Forge
            • 7 years ago

            It all started with some “pre-tested” CPUs. I’ve had this rant a number of times, though, so I’ll let you Google it.

            Ugh, on second thought, don’t. Some of those really old threads are rather bitter.

            • NeelyCam
            • 7 years ago

            They need to rename themselves “ZOC” to get people buying again. Brand name “OCZ” is toast for life

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