OCZ Technology Group Inc fka OCZTQ

[Silvr Surfr]

Still speculation, nothing concrete yet.

http://www.forbes.com/sites/ericsavitz/2012/07/30/seagate-earnings-due-monday-more-speculation-on-ocz/

Seagate: Earnings Due Monday; More Speculation On OCZ

Will Seagate provide a surprise tomorrow along with its fiscal Q4 earnings report?
The numbers have already been telegraphed. On July 5, the disk-drive maker reduced guidance for the quarter: the company projected revenue of about $4.5 billion and non-GAAP gross margin of 33.6%, down from previous guidance of at least $5 billion in revenue and non-GAAP gross margin of at least 34.5%.
Street consensus is now for $4.56 billion and profits of $2.51 a share.
“The June quarter’s shortfall was due primarily to two factors,” CEO Steve Luczo said in a statement when the company issued the warning earlier this month. “First, we did not achieve our planned market share growth as we reduced shipments in response to the industry’s faster than expected recovery from their supply chain disruption. Second, we experienced an isolated supplier quality issue that affected one of our enterprise product lines. This product issue impacted enterprise product unit shipments by approximately 1.5 million units and drove our non-GAAP gross margin below our targeted plan. While this disruption to our business was disappointing, we acted quickly and conservatively by suspending shipments of the affected products. We have resolved the issue and have resumed fulfilling our supply commitments to customers.”
Meanwhile, shares of the solid-state drive company OCZ Technology have continued to rally on rumors that the Seagate has been in talks about buying the company. I reported on the rumors on July 19, and they heated up again on Friday, driving up OCZ shares by another 30%. Barron’s noted in a post on Friday that the spike followed a report from the blog Bride Side of the News asserting that a deal between the two companies is “done.” The story asserts that the deal could be priced at $1.14 billion; the stock closed Friday with a market cap of about $478 million.
OCZ shares have now spiked 66% since July 13. One way or the other, tomorrow will be an eventful day for OCZ holders; either the rumors are right, and they get a big payday; or the rumors are wrong, and the stock is going to get pulverized.
As for Seagate shares, at about $30 they continue to look just ridiculously cheap, trading at less than 4x expected earnings for the June 2013 fiscal year.
Keep in mind that shares of primary Seagate rival Western Digital spiked last week after the company provided much better-than-expected guidance for the June 2013 fiscal year. Seagate shares followed WD’s stock higher last week; tomorrow we’ll get the word on whether WD’s surprising strong guidance – projected profits of $10 a share, far ahead of the previous consensus at $6.39 – reflects company specific factors, or a general improvement in the overall drive industry.
One thing I would keep in mind here is that the drive industry has now largely completed a multi-year consolidation that leaves basically two large players – Seagate and Western – plus a smaller #3 in Toshiba. In short, the industry has been transformed into and oligopoly, which should means more rational behavior by the industry on both pricing and capacity expansion than has been the case in the past. If true, that would suggest higher margins for the industry going forward, and more predictable profits. And that, you would think, would merit some widening of the industry’s low, low P/Es.