Rumors swirl that Seagate is eyeballing an OCZ buyout

Brian Ambrozy 19 Jul, 2012 at 1:31pm ET Article published in Tech

Seagate, one of the world’s largest hard drive manufacturers, has been a bit slow on the uptake with SSD technology. OCZ, on the other hand, was so quick to move into SSDs (and find success through acquisitions and marketing savvy) that they ended up completely reinventing themselves from the RAM company they used to be known as, into the SSD company they’re known as today. What’s their tagline? The SSD Experts.

However, OCZ is not nearly as huge a company as Seagate (who has been around since 1979), and lacks the massive capital that Seagate has access to. However, OCZ has made some smart moves in the SSD space, and is arguably years ahead of where Seagate needs to be to remain competitive in a storage world that will eventually be all solid-state. All of this paints a scenario in which an acquisition of OCZ by the larger Seagate makes a lot of sense.

Today Fuad Abazovic cites “industry sources” in reporting that Seagate is, indeed, in talks to do this very thing.

A world without OCZ

Let’s explore four hypothetical scenarios in a post-OCZ acquisition world:

OCZ becomes the brand name of Seagate’s enterprise solid state division. OCZ has been making moves to reposition themselves as an enterprise vendor, but Seagate has decades of relationships with enterprise storage vendors and is a far more trusted name. A Seagate-backed push into enterprise might be exactly the ticket into the fabled enterprise market that OCZ has been trying to crack for some time now. Consumer division slowly left to wither and die. PC Power & Cooling gets spun off, since it’s a segment Seagate has no business being in.
Seagate flushes the OCZ brand and rebadges the existing OCZ portfolio as Seagate, leveraging the company’s more familiar-to-every-day-people brand.
Seagate, as they did with Maxtor (and most likely will do with LaCie), assumes ownership of the OCZ brand and portfolio but allows them to continue operating relatively as-is.
OCZ remains as a consumer brand, but the OCZ IP (including Indilinx and SANRAD tech) is leveraged into Seagate-branded products in the enterprise space.

Of course this is all rumor and speculation. We’re riding on information from a single anonymous “insider” talking to a tech reporter (admittedly, a well-connected one).

Since we’re playing pretend, what do you thing Seagate would do with OCZ?

Comments

19 Jul 2012 ~ 1:36pm Kwitko Most importantly, what happens to Ryder?
19 Jul 2012 ~ 1:39pm mertesn He retires a multibillionaire.
19 Jul 2012 ~ 1:47pm Tushon Publishes a book called Rydergate
19 Jul 2012 ~ 1:55pm MAGIC Buy your OCZ stock, ride the speculation.
19 Jul 2012 ~ 2:06pm Straight_Man 4.
19 Jul 2012 ~ 5:22pm BuddyJ I'd guess they go with route 4, keeping OCZ and PCP&C as separate entities, both leaders in their respective industries. My guess is PCP&C is a profitable division of OCZ, so it doesn't hurt to have them in their portfolio.

The concern with OCZ is always with their books. They flirt with having a good debt load and lots of goodwill on their books, and with massive rebates they end up with pretty slim margins by my understanding. Seagate may be able to increase the volume of OCZ's sales to make their numbers more appealing.

I'm an OCZ stockholder. I wouldn't mind the acquisition at this point so I'm anxious to see how this rumour pans out.