Going for my 3rd 5* post today on OCZ today...maybe theo will give me a job as the in-house M&A analyst at bright side lol
Before the AH reuters article, i said that i thought a deal was still in the works and would be announced by the end of the week. I am now convinced that virtually everything that has happened in the past 2 weeks from the blog rumors to the wire service reports to the analyst comments to the stock volatility--were all the product of a behind the scenes negotiating battle between OCZ and STX. Today was all about STX showing OCZ management what life will be like without them.
My guess is that an offer was in fact on the table late last week and STX speculated that OCZ would accept. OCZ management got a little too full of themselves seeing that OCZ stock was up 60% and pushed back on STX. They probably used Theo's blog post about other parties being interested as a way to get STX to offer even more. STX was probably already offering a 100% premium (i think this gets done at $12-14 cash/stock which depending on the value of STX and OCZ stock on the day of the announcement, it could be anywhere from a 75-125% premium). STX wants OCZ but not at any cost. They won't risk their own credibility with their institutional shareholder base and analysts by offering something like a 150% premium. So they decided to respond to OCZ's hardball tactics with some hardball of their own.
By ignoring the rumors and even downplaying the need for SSD, STX knew OCZ stock would tank. Remember, OCZ traded above 8.50 pre market today, so the drop from the pre-market high to the AH low was 8.50+ to 5.15. That is a 40% drop in 8 hours.
I imagine that sometime after the CC, the companies decided that they both need each other more than they let on and the hardball tactics would stop. STX floated OCZ a life line with the AH interview. I bet that the CFO of STX sought out the reuters reporter. There is no other explanation for why at 8:30PM EST he would just happen to talk to the reporter and decide to issue statements that represent the most market moving development of anything reported in this saga for the past 2 weeks. This was not a coincidence.
Fast forward to tomorrow. It could happen pre-market (which I am sure many of you would be unhappy about because it will prevent you from buying back any shares you sold today), intraday, or AH...or maybe not til Wednesday--but I think a deal will be announced and STX will buy OCZ in a cash/stock deal.
This is a bit tricky in terms of numbers since STX stock will drop at the open tomorrow based on AH action. So I think the important metric will not be the market cap price that STX will pay (actually one of Theo's tweets quoted his source as saying it was not market cap dependent--this means that STX knows their stock will take a hit so the market cap price of the deal will end up being 10-15% lower when it is announced this week than it would have been had it been announced late last week when STX was trading above 30). The only important thing is that OCZ will be trading with a $12 handle when all is said and done.
Good luck. I am done thinking about this as it has consumed a big chunk of my day. I have no sources, no info, nothing--I just try to take public information mixed with my own market instincts in order to come up with a hypothesis that seems both logical and likely. I am not always right but I think have been almost 100% correct on this particular deal. I hope I have helped some of you--although helping people wasn't really my intent--I just enjoy writing about stocks.
I'm not one for conspiracy theory's, but there has been a lot of activity on the board lately, as well as other locals... I would have to be naive to NOT think some of it is being funded somewhere. Hell I know my government pays people to write comments on blogs and forums to try to influence opinion...
Hope you are right because I have Aug calls, but I just don't see a deal happening until at least Sept....Seagate is in no hurry, it appears....they just stated that he doesn't see the SSD enterprise market of significance until 2015....
....they just stated that he doesn't see the SSD enterprise market of significance until 2015....
They may state what they want but they have to enter the SSD market at the moment otherwise they will die before 2015. They're just bluffing. IMO
Great post. There is no way a CFO releases SSD news 17 minutes after the after mkt closed if there is something going on. The reporters are done working at that hour so the CFO totally sought out the reporter or had them sign an agreement that they could not release the news until after 8:30. No matter, all is good in OCZ land. We have believers over at STX.
i agree with everything you've said.... maybe perhaps not the timing...... i just don't think that every day is today or tomorrow.... it might be friday or a few days later...... my guess last friday when we read the "monday it happens" article was that it would actually take at least a week from that friday..
we'll see...... the only thing that is for sure is that a buyout is coming, we just can't know the timing
I fully agree... I think we were all caught up in the timing of this, as probably individual ego, bravado and arrogance were not factored into this thing... I think something will come out of this whole charade by the end of the week... thanks so much for your time and effort!!! MUCH APPRECIATED!!
I agree. Imho, everything is coming together to ink a deal which has been in the works for many weeks now.
Confirmation SSD maker is a target by STX:
Confirmation OCZ is an enterprise market share leader:
"OCZ expects net revenue for its fiscal year ending February 28, 2013 (FY'13) to be in the range of $630 to $700 million. This represents a growth rate of approximately 80% at the midpoint; we expect, based on historical trends, revenue to be weighted to the second half of the year, with approximately 60% to 65% of revenue to occur in the second half of the year."
$630M-700M this fiscal year
$767M-$1.02B next fiscal year
This revenue estimate DOES NOT include the Microsoft wins:
"The most important news was that the company expects to win up to 4 or 5 sizable deals with Microsoft (MSFT) with a couple already won as the sole source provider. The value of any deals is not even included in the revenue guidance for FY13, as the company is unsure whether the revenue will materially ship in Q4 '13 or Q1 '14."
Therefore the revenue numbers for the current fiscal year can ALREADY be closer to $1B. This is why Seagate must act fast. They are smart and will close the deal or OCZ is going to be out of their price range like FIO is today at $1.8B market cap. They don't have enough cash. If they wait longer and their stock goes lower they'll have to pay more in shares in a stock transaction. The time is now, imho.
My take... I think you are reading into this thing all wrong, Since we are speculating heres my take that has no merit as well.
The STX offer was real. They think ocz needs the money and will sell out. OCZ is RP's baby. I do not believe he will ever sell. (I even sold a call on that belief.. soo happy i did.) Yes OCZ is strapped for cash, but not because they can't turn a profit. They are hurting for money because they can't meet demand and keep up with the technology. If RP can scale back the spending, but he doesn't want to. Look at the back end revenue. They are expecting way over 1 billion next year. If they stop spending then they won't get all that market share.
I bet someone from ocz leaked that article. That rumor showed wall street what OCZ is actually worth. RP needs the SP to shape up so he can either 1) get more money from another offering or 2) cut a deal with micron by giving them some stock and getting cheap nand. RP obviously wants #2, he said that in CC, but he will do anything it takes. RP doesn't care if the stock hits bottom. It will go up in a 10 years when OCZ is bigger than STX or WDC.
If I could read RP's brain.. thats what he is thinking. Maverick you been shouting for more PR for the past year I been reading this board, well there's your pr, they launching rumors lol.