OCZ Technology Group, one of the world’s largest and most successful independent makers of solid-state drives, was reportedly a strategic acquisition target for at least two major companies several months ago, but the transaction did not happen. The company’s new chief executive officer does not have immediate plans to sell the company and claims there are a lot of things to do as an independent firm, but claims that consolidation is inevitable on SSD market.
“That is an option for use to look at. It is not off the table. We are always interested in looking at strategic plans moving forward. I’ve said publicly before, this market is very early in its stage, there definitely will be consolidation and there is power and size [for that]. The two big power players are hard drive [manufacturers] and NAND flash [producers]. I do think that we have a lot of time in front of us as a standalone entity. It is about the amount of IP and differentiation we can put in place to make a difference. We will see how that will play out,” said Ralph Schmitt, chief executive of OCZ, at the Stifel Nicolaus technology conference recently.
Market consolidations always happen in the high-tech industry as the research and development as well as manufacturing costs are getting higher and competition intensifies. For example, there were tens of hard disk drive manufacturers in the early nineties, around ten in the early 2000s and with the recently made transactions there are only three left: Seagate, Toshiba and Western Digital (ExcelStor formally remains a contract manufacturer and does not sell its own HDDs).
The two companies believed to be interested in OCZ Technology Group were Micron Technology, one of the world’s largest maker of NAND flash memory, as well as Seagate Technologies, a leading maker of hard disk drives. Since solid-state drives are slowly but surely gaining market presence, eventually this market will follow the path of HDDs.
OCZ was one of the pioneers on the market of consumer solid-state drives and managed to introduce a competitive lineup of enterprise-grade SSDs as well. By contrast, Seagate was clearly late to market of solid-state drives and in order to compensate for that has been inking agreements with third-party SSD providers to co-develop and sell solid-state storage solutions.
Even though OCZ recently faced troubles with financial accounting, it does not seem that the firm is looking forward to get acquired. The management of the company is working to improve the firm’s profitability and margins. 70% of OCZ’s revenue come from consumer-oriented SSDs, which are gaining popularity because of dropping prices. Meanwhile, the company wants to shift the demand towards higher-performance and higher-priced SSDs as well as possible to expand its offerings for the enterprise market.