December 04, 2013, 2:44 AM — Time has run out for OCZ Technology, the SSD drive maker. The one-time high flier ran out of money and was forced to file for Chapter 11 bankruptcy, just as we warned two months ago.
It has already struck a deal with Toshiba, one of the logical choices and the only one to show interest, to sell off its intellectual property and other assets related to both the consumer and enterprise SSD market.
Naturally this is a steal for Toshiba. It's getting tremendous assets for a pittance, relatively speaking. Toshiba will also finance OCZ to continue operations and customer support its customers during the sale period. What happens after that is not clear, but as a friend said, users are usually the last in line with these bankruptcies. The deal should close in 60 days, barring any surprises.
"Over the past year, OCZ has dealt with numerous issues which have stressed the company's capital structure and operating model, posing a challenge to achieving near term profitability. The combination of NAND flash supply constraints and credit issues have impacted our ability to satisfy the demands of our customers; this combined with increased pricing pressure in our industry have contributed to our on-going operating losses. On an operational basis, we completed a complex investigation, several restructurings and a multi-year restatement that added significantly to our working capital requirements," said Ralph Schmitt, CEO of OCZ, in a statement announcing the sale. "We have been working diligently on this partnership with Toshiba and we believe that this is the best outcome under our current corporate conditions."
The big pickup for Toshiba is that it gains Indilinx, an SSD controller chip maker that OCZ bought two years ago for $32 million in common stock. Toshina is primarily in the NAND flash memory business. So now it has both of the major pieces of a drive and access to both the consumer and enterprise business. What a bargain.
It's a sad end for a company that did a lot to help spread the use and popularity of the SSD drive among consumers. OCZ was named to Deloitte's list of Technology Fast 500 companies just last week, which just shows Deloitte failed to read up on OCZ's current woes, because this bankruptcy did not come out of the blue. There had been questions around OCZ's financials and the company was known to be heavily leveraged.
OCZ was plagued by a high burn rate of cash and often undercut itself. Sure, it get drives in the hands of users but to its own detriment. Then there were problems with the Vertex 2 and other drives, which didn't help either.