OCZ Technology Group, Inc., a leading provider of high-performance solid-state drives (SSDs) for computing devices and systems, today announced it has closed its acquisition of Indilinx Co., Ltd, a privately-held fabless provider of flash controller semiconductors and firmware for SSDs.
Indilinx provides a line of flash controllers to SSD manufacturers and OEMs across the server, embedded and industrial product sub-segments, as well as laptop and PC markets. Indilinx controllers have been integrated within certain OCZ products since December 2008, and are currently utilized in a number of OCZ SSDs including the enterprise class Z-Drive R2 PCI-Express SSD Series.
Pursuant to the Indilinx share purchase agreement, OCZ has acquired, among other things, approximately 20 patents and patent applications related exclusively to Indilinx's flash controller business. Approximately 45 Indilinx employees will join OCZ, including Indilinx's co-founders Bumsoo Kim and Hyun Mo Chung, each of whom serve as Indilinx's CEO and CTO, respectively. OCZ intends to continue supplying Indilinx controller semiconductor and firmware-based solutions to current Indilinx customers, which include OEMs and NAND flash manufacturers, in addition to further integrating Indilinx controllers into OCZ's SSD products.
"Producing SSD controllers for OEM integration and use within our own products significantly enhances our ability to capitalize on worldwide demand for SSDs, and yields cost reductions which help make SSDs more accessible to potential customers," said Ryan Petersen, CEO of OCZ Technology Group. "This combination puts OCZ in an advantaged position as one of the few SSD manufacturers with captive controller production. The acquisition will help to increase both revenue and gross margins as we vertically integrate controller technology, and it also provides critical support for current and future Enterprise and OEM opportunities."
Inclusive of Indilinx, OCZ expects its revenue for fiscal year ending February 28, 2012 (FY 2012) to be in the range of $300−$330 million, an increase of approximately 60%−75% from an estimated $189 million in its fiscal year ended February 28, 2011 (FY 2011).
As a result of the acquisition, OCZ expects its gross margin to increase by 2%−4% within 12 months of closing. Gross margins are expected to increase due to increased sales of controller products (which generally have gross margins in the 50%−60% range) as well as integration of Indilinx controllers into a greater range of OCZ products in the 12 months post acquisition. The Indilinx acquisition is expected to become accretive towards the end of FY 2012.
As stated in the press release dated March 7, 2011, OCZ expects to report revenue for the fourth quarter of FY 2011 of approximately $64 million, an increase of nearly 100% over the fourth quarter of fiscal year ended February 28, 2010. Preliminary GAAP operating loss for the fourth quarter of FY 2011 is expected to be in the range of $1.6 – $1.9 million, subject to final review of certain non cash costs. Preliminary non-GAAP operating income for the fourth quarter of FY 2011 is expected to be approximately $0.3 – $0.5 million. Then, when excluding approximately $1.5 million of fourth quarter operating losses related to the discontinued memory products, preliminary non-GAAP operating income is estimated to be in the range of $1.7 to $2.0 million.
Additional commentary pertaining to OCZ's fourth quarter results and any further guidance for FY 2012 will be issued when OCZ reports its full fourth quarter and FY 2011 financial results, which is expected to be in the second half of April 2011.
The financial estimates set forth herein are unaudited and preliminary. They remain subject not only to management's final review, but also to audit by OCZ's independent accounting firm. Estimated GAAP to non-GAAP operating income adjustments relate to items such as the discontinuation of the DRAM products, stock-based compensation, amortization of intangibles, non-cash write-offs of notes receivable from the 2009 sale of the NIA product line, and other potential non-cash expenses, totaling approximately $1.9 − $2.4 million.
