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OCZ Technology Group AŞ Message Board

  • ashraf.eassa ashraf.eassa Sep 28, 2012 4:13 PM Flag

    Valuing OCZ's IP...thoughts?


    So, I was wondering: has anybody actually tried to value OCZ's IP?

    I feel like Indilinx, if BF3 comes out and kicks major butt, could make OCZ worth well over its current market cap. Imagine that...OCZ competing with Marvell and LSI in the controller space? It's not as glamorous, but it'd be a really great source of revenues. Undercut the "big" guys, still have a good margin profile.

    Further, enterprise solutions, as FIO has shown, have a lot of potential. If the SANRAD guys can really beef things up and start really competing with FIO, then that's another major, profitable source of revenues.

    Seriously, with competent management, this company could fly by lessening its dependence on consumers SSDs, and pushing more towards controller IP, software products, and enterprise hardware.

    Question is: why hasn't it done so? Could a change in direction at this point bring the company to profitable growth?


    Sentiment: Hold

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    • Indilinx alone could be $500M.

    • Ashraf....not sure where your trying to go with this because the enterprise value of OCZ is the market cap less cash, which at this time is ~$187.46M or $2.77/share.

      Enterprise value is essentially what it would cost to buy a company (e.g. incorporating equity, debt and cash). When you buy a company outright, not only do you get all the IP, revenues, profit/loss, cash flow, inventory and everything in the kitchen sink, you also get the cash held by the company. So, in effect, you pay to buy the company and then get some of that back immediately. For a debt-free company, that's great. But many companies also have debt. That means you are taking on the obligation to pay that debt back as well, so you have to cough up the extra dough.

      Note: The current $2.77 / share valuation does not include any current potential buy out premium, which would fall if the company takes on debt, sell additional shares etc..

      The company acquired Indilinx in March 2011 for a net purchase price of $32.219M

      From the 10-Q for period ending 5/31/12

      The acquisition of Indilinx is expected to expand OCZ’s presence in the embedded, hybrid storage, and industrial markets. The acquisition is also intended to broaden OCZ’s intellectual property resulting from Indilinx’s portfolio of approximately 26 patents and patent applications. In addition, the acquisition provided an assembled workforce, the implicit value of future cost savings as a result of combining entities, and is expected to provide OCZ with future unidentified new products and technologies. These opportunities were significant factors to the establishment of the purchase price, which exceeded the fair value of Indilinx’s net tangible and intangible assets acquired, resulting in goodwill of $36.9 million as originally recorded in the three months ending May 31, 2011.

      Note: Each year the company must reassess it's goodwill carried as an asset and must take impairment charges, which is not a positive (e.g. EBITDA).

      The company has owned Indilinx for 1-1/2 years now......what resulted?

      Only firmware for V4 SSDs (e.g. often called Beta FW on OCZ forum, NewEgg, Amazon etc.) and the pulling 'out of someones pants pocket' last week at major event (2012 INTC developers conference), a passive PCB (Read: non operative printed circuit board) Vector SSD.

      BTW, last report from LSI, Sanrad Y/Y growth @ 200% and currently shipping over 1M units per month. Don't discount MRVL either (e.g. work for engineering design company w/SATA IP and know they have always had a lock on SATA PHY and only only sell to companies that have huge potential).

      Hint: Beginning to get the drift of RP being walked to the door.

      • 2 Replies to onlyrentstocks
      • @onlyrentstocks,

        so the rumored 1.14 billion that was being thrown around by STX or the rumored 700 million being thrown around by WDC is way way way more than the OCZ vaule of 400 million it was at the time of the supposed offer,

        so stx was willing to pay nearly 350% more than the company was worth? and WDC was willing to pay 90% of what the company was worth?

        am i wrong? or looking at this in a different way?

        if 350% is till the premium then a current buyout price would be close to 1 billion or 14 ish a share?

        give or take a few dollars but i hope you get my point?

        what would the current estimated offer be if any company were to want to buy them out? In your view?

      • One important aspect I forgot to mention.

        When OCZ acquired Indilinx, the deal included 2 year employment contracts, that expire in less than 6 months.

    • "Born twelve years ago, Sanrad, backed by investors RAD Data Communications, Sequoia Capital Israel and Foundation Capital, got at least $29 million in financial funding in four rounds to finally being bought by OCZ for $15 million. But Sanrad's revenues have been in the low single digit millions of dollars over the past few years."

    • 1 Billion dollars