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SSD and power supply manufacturer OCZ announced it filed for bankruptcy today, after months of financial problems and a great deal of uncertainty as to whether the company would be able to continue as a going concern.
The SSD manufacturer shot to prominence in 2009-2010 thanks to a killer line of products based on Indilinx and SandForce SSD controllers. It snapped up well-regarded power supply manufacturer PC Power & Cooling, bought Indilinx to develop its own SSD controller in-house, and rolled out some of the
first affordable PCI-Express SSD cards
on the market. (Affordable, in this case, is a relative term, but RevoDrives were far cheaper than the competition from Fusion-io.)
The bottom drops out
OCZ was badly burned by problems with its SandForce-based
Vertex III SSD
when controller firmware issues led to a number of bricked drives. While it wasn’t the only company impacted by the problem, OCZ had dominated sales charts and market share with the Vertex III — which made it the hardest hit company.
At the same time, OCZ embarked on an acquisition tear, snapping up Indilinx,, assets from Solid Data, PLX Technology’s R&D department, and SANRAD. Seagate briefly sniffed around the idea of acquiring the company but the deal fell through in 2012. OCZ’s founder and CEO, Ryan Petersen, resigned shortly thereafter. Then the company dropped a bombshell — it would need to restate its earnings going back years, due to accounting improprieties.
OCZ shot to prominence on the strength of its early products
Then, in late 2012, problems started cropping up with the newly launched OCZ Vector SSD. The company announced a firmware update in March to fix the problem, but one-star reviews and reports of problematic failures continued. The Vertex 450, which launched this past summer, also got hit with more reports of drive failures than competing products from other companies.
Earlier this year, OCZ warned that it was having problems sourcing sufficient NAND flash, acquiring lines of credit, and building product. Sales fell sharply, from $88.6M in 2012 to $33.5M in Q2 2013. This suggests that the company had been put on “cash and carry” by suppliers, which means it has to pay up front for all product purchases. Even if this wasn’t the case, OCZ was clearly having trouble securing sufficient capital.
OCZ took a loan with a 15% interest rate from Hercules Capital Group earlier this year, apparently gambling that it could keep to the terms of the deal and demonstrate sufficient growth. This has not occurred, and
Hercules seized OCZ’s accounts today
.
OCZ reports that it has received an offer from Toshiba to acquire “substantially all of the Company’s assets in a bankruptcy proceeding… OCZ believes that all material terms have been agreed to… If the company is not able to agree to final documentation with Toshiba, the Company expects to imminently file a petition for bankruptcy and liquidate.”
About that asset purchase
Here’s the problem for ordinary consumers: When one company buys another company’s
assets
in bankruptcy proceedings, that means the IP, equipment, and worker contracts. It often does
not
mean the warranty service — at least, not explicitly. If Toshiba intended to operate OCZ as a subsidiary, the PR would simply announce that Toshiba had “acquired” OCZ. If the asset purchase agreement included warranty service for OCZ’s customers, the announcement would likely say that, too.
It’s possible that Toshiba and OCZ will still cut a deal for customer support, but it’s unlikely. OCZ will need the asset sale income to pay its creditors, and Toshiba probably isn’t interested in paying for a bunch of users with drives it doesn’t intend to support.
Whether this will result in OCZ products being yanked off the market altogether or dumped at firesale prices is unclear. Probably some of each.
Now read:
Two years later, HDD prices settle back to normal