Sales of OCZ Technology Decline as Company Suffers Insufficient NAND Flash Supply

OCZ Continues to Suffer Insufficient Supply of NAND Flash Memory

by Anton Shilov
10/15/2013 | 11:10 PM

 

 

OCZ Technology Group, a leading maker of solid-state drives (SSDs), on Tuesday reported its second quarter (Q2 FY2014) results which ended on August 31, 2013. The company’s revenues and profits declined both sequentially and year-over-year because the company failed to get enough NAND flash memory for its drives.

Revenue for the second quarter of 2014 was $33.5 million compared to revenue of $55.3 million for the first quarter of 2014 and revenue of $88.6 million for the second quarter of 2013. Gross margin for the second quarter of 2014 was 4.2% compared to a gross margin of 14.7% for the first quarter of 2014 and a gross margin loss of (4.6%) for the second quarter of 2013. Gross margins declined on a sequential basis primarily due to increased costs and decreasing sales prices in our mainstream client business. Enterprise margins remained consistent in the quarter.

"Revenue and gross margins declined in the second quarter as revenue for our client SSD products continued to be impacted by our challenges in procuring flash. Revenue from our enterprise solutions accounted for roughly half of our SSD revenue, compared to about 60% in the first quarter, as a major data center customer completed its installation during the quarter. This has been a difficult quarter as demand for our products continues to be greater than our ability to supply, given our capital constraints," said Ralph Schmitt, CEO of OCZ Technology.

Operating expenses for the second quarter of 2014 were $20.5 million, compared to operating expenses of $19.7 million for the first quarter of 2014 and operating expenses of $26.6 million for the second quarter of 2013. Operating expenses for the second quarter of 2014 include restatement related expenses of $3.4 million compared to $1.7 million in the first quarter of 2014.

"Over the course of the quarter we continued to add strategic channel partners that help extend the reach of both our high-end client products and enterprise solutions worldwide. During the second fiscal quarter we also announced the general availability of our PCIe-based ZD-XL SQL accelerator which is a new way for OCZ to go to market with a total solution consisting of both our enterprise solid state storage and virtualization software. This innovative product is primarily targeted at our channel partners and offers an optimized plug-and-play storage system solution for enterprise customers," added Mr. Schmitt.

Cash and cash equivalents at the end of second quarter of 2014 were $10.6 million compared to $5.0 million at the end of the Q1 FY2013. The increase in cash primarily reflects the issuance of $13.1 million of convertible debentures partially offset by cash used to finance our on-going operations.

"Due to uncertainties in being able to procure forecasted flash amounts and credit constraints, we will not be providing guidance for the fiscal third quarter of 2014, ending November 30, 2013. It is our belief that at this point we cannot accurately predict the outcome of our efforts to resolve these issues. We continue to engage with interested parties in the various strategic options available to the Company, including additional financing initiatives and strategic alternatives and plan on providing an update to discuss progress regarding flash availability, credit, and our strategic activities when appropriate," stated chief executive of OCZ.