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Rumor: Seagate May Acquire OCZ; Stocks Soar

By - Source: Reuters | B 24 comments

A report claiming that Seagate may acquire OCZ has caused the latter company's stock to rise.

Reuters reports that shares of OCZ Technology Group spiked as much as 21-percent in early trade thanks to a rumor sparked by Fudzilla. The site claims that rival Seagate Technology has offered to buy the SSD maker for an undisclosed amount.

According to the Fudzilla report, "industry sources" claim that Seagate is one of many looking into a possible acquisition of OCZ. The HDD company reportedly plans to offer much more than the $308.5 million that Nasdaq currently values OCZ, which seems like mere chump change compared to Seagate's Nasdaq value of $11.71 billion.

If true, the rumored move would certainly accelerate Seagate's progression into the SSD market which has thus far been slow at best and rather late to the game. OCZ, which considers itself as the SSD expert, is somewhat years ahead of where Seagate needs to be. It realized the market shift years ago and quickly transformed itself from a core RAM company to one of today's premier SSD manufacturers.

For Seagate, this acquisition would make sense, even more so as the industry shifts away from platter-based storage solutions. Experts claim the OCZ acquisition will boost Seagate's margins and help it establish a firmer foothold in the lucrative enterprise segment. Meanwhile, OCZ would benefit from Seagate's massive capital that would enable the SSD company to meet consumer demand, a problem OCZ has reportedly encountered in the past.

It's also believed that Seagate will likely keep the OCZ brand if the SSD company is brought in-house. Yet there's a possibility that OCZ could continue on as a separate company -- yet still owned by Seagate -- in order to prevent disrupting its current momentum on the SSD market.

"It is plausible for Seagate or Micron to buy an SSD company," Benchmark Capital analyst Gary Mobley said. "Seagate has been late to address the flash storage market and needs to hedge its aging HDD business. Micron would benefit from owning OCZ by selling more NAND flash."

The Fudzilla report claimed that Micron is one of the companies considering an OCZ acquisition.

According to Reuters, shares of OCZ, which was valued at $308 million as of Wednesday's close, were trading up 22-percent at $5.57 on the Nasdaq. Thursday's gains added about $68 million to its market capitalization.

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  • 16 Hide
    ko888 , July 19, 2012 8:23 PM
    What will happen to the OCZ power supply division and also PC Power & Cooling?
  • 14 Hide
    bryonhowley , July 19, 2012 8:32 PM
    Quote:
    What will happen to the OCZ power supply division and also PC Power & Cooling?

    My guess would be that they would continue to run as a subsidiary of Seagate.
  • 12 Hide
    s3anister , July 19, 2012 9:23 PM
    The last thing we need is homogenization of the solid state storage market to happen. As things stand now prices are low because there are so many manufacturers competing against each other.

    I really don't want to see the SSD market turn into another Seagate vs. Western Digital.
Other Comments
  • 16 Hide
    ko888 , July 19, 2012 8:23 PM
    What will happen to the OCZ power supply division and also PC Power & Cooling?
  • 14 Hide
    bryonhowley , July 19, 2012 8:32 PM
    Quote:
    What will happen to the OCZ power supply division and also PC Power & Cooling?

    My guess would be that they would continue to run as a subsidiary of Seagate.
  • 0 Hide
    spartanmk2 , July 19, 2012 8:36 PM
    Reminds me of Vivendi and Activision Blizzard...
  • 0 Hide
    leo2kp , July 19, 2012 8:52 PM
    Not sure what to think about this. Didn't realize OCZ was in need of a buyer or would even want something like this. Someone explain this to me!
  • 11 Hide
    freggo , July 19, 2012 9:08 PM
    Would give OCZ access to substantial funding of course.
    Use of Segate's distribution channels, manufacturing expansion and resulting increased sales may lead to lower prices.
  • 2 Hide
    verbalizer , July 19, 2012 9:14 PM
    OCZ quality will go back up I hope and maybe fix the bugs with the Vertex series in the process.
    I wish them luck.
  • 1 Hide
    Stardude82 , July 19, 2012 9:15 PM
    leo2kpNot sure what to think about this. Didn't realize OCZ was in need of a buyer or would even want something like this. Someone explain this to me!
    OCZ's board could reject this unsolicited offer if the offered price isn't view as sufficient to be in the best interest of the shareholders. But, this is what is normally called a takeover. In principle, anybody with enough capital could just buy 50%+1 share (or whatever according to corp. gov. rules) and takeover the board of directors and replace the company's management. Though generally, its the case that a purchasing company will swap the disappearing stock in exchange for the purchaser's stock by the consent of the company's governing board or through a shareholder's referendum. In this case, I imagine the board will take a premium excess in Seagate stock to offset the faster growing potential of the OCZ stock, which in the short term benefits share holders and leads people buying up stock in the run up to such a merger, hence the jump in the OCZ stock price.
  • 12 Hide
    s3anister , July 19, 2012 9:23 PM
    The last thing we need is homogenization of the solid state storage market to happen. As things stand now prices are low because there are so many manufacturers competing against each other.

    I really don't want to see the SSD market turn into another Seagate vs. Western Digital.
  • 10 Hide
    slabbo , July 19, 2012 9:41 PM
    seagate and western digital are way behind in the SSD market. Not surprising that one is jumping to buy up a SSD manufacturer. They pretty much have to, or get left behind and eventually put under. I'm just surprised that WD hasn't made the move first.

    PS: might wanna look into buying stocks of other SSD manufacturers, like Kingston, Sandisk, Crucial...etc.
  • -2 Hide
    hannibal , July 19, 2012 10:29 PM
    Well it would allso allow some new ssd upgraded hybrid drives with bigger ssd part?... But hard to say what would happen to competition... There are so many players in SSD market that I don't think that this would affect SSD prices. OCZ is not the most aggressive in that front (allthough it have had guite competative prices). But if if we ever get in the same situation that is in HD segment (only two players) there is allways a posibility that prices can climp up...
  • 1 Hide
    pfdman , July 19, 2012 10:53 PM
    Not sure that Western Digital needs to buy an SSD company right now. Remember that they just closed on their purchase of Hitachi's drive business and along with that came Hitachi's SSD products. They currently make some of the best SSDs in the enterprise market.

    http://www.hgst.com/solid-state-drives/

    With a little engineering work they should be able to change the interface from a SAS interface to a SATA interface and have a pretty good desktop/laptop SSD in their lineup.
  • 1 Hide
    teh_chem , July 19, 2012 10:57 PM
    Curious to see what happens to the stock price if this rumor isn't backed by fact. :) 
  • 0 Hide
    shqtth , July 19, 2012 11:10 PM
    two favourite companies but i don't think they should merge (or OCZ taken over).

    OCZ is better off running as a separate company then merging with seagate, as saagate will just slow down progress and innovation.
  • -4 Hide
    mayne92 , July 20, 2012 1:24 AM
    I do want this acquisition to happen as everything Seagate touches turns to shit!
  • 1 Hide
    sykozis , July 20, 2012 1:51 AM
    teh_chemCurious to see what happens to the stock price if this rumor isn't backed by fact.

    It's likely the stock will dive if the rumor turns out to be false....
  • 0 Hide
    CaedenV , July 20, 2012 2:40 AM
    s3anisterThe last thing we need is homogenization of the solid state storage market to happen. As things stand now prices are low because there are so many manufacturers competing against each other.I really don't want to see the SSD market turn into another Seagate vs. Western Digital.

    True, but OCZ is an interesting and innovative company, I would love to see what would come if they had some real money to play with on research. This is not a consolidation as Seagate does not have an SSD branch yet, but I am with you... the last thing I would want to see is Seagate vs Corsair/Intel/Crucial... that would be as bad as things are now in the HDD market where everyone has recovered, and yet they are all pacing with eachother on price so that they all make a killing.
    Keep in mind though that Seagate has been the first to lower prices after the floods, so they are not entirely evil.
  • 1 Hide
    CaedenV , July 20, 2012 2:47 AM
    greghomePersonally, I do not want to see this happen.Last time Seagate bought another storage device manufacturer (SamSung HDD division)the quality got worse and now samsung's 3 Year warranty has dropped to just 1

    Sammy's quality was going to go down regardless as they were hit bad by the flood. While they were down Seagate bought them up, it was just good business. Sammy's quality has sense returned to almost what it use to be, while their warranty will go back up after they are sure all the kinks are out of their manufacturing process. Keep in mind that for a little while there ALL major HDD manufacturers when down to 1 year warranty on consumer drives, and where 3-5 years use to be normal, we are now only seeing 2-3 year warranties.
  • -3 Hide
    xtc28 , July 20, 2012 3:51 AM
    Go Seagate!
  • 0 Hide
    xtc28 , July 20, 2012 3:53 AM
    Sorry I sold you off today but the cash sure was nice :) 
  • -1 Hide
    s3anister , July 20, 2012 4:05 AM
    caedenvTrue, but OCZ is an interesting and innovative company, I would love to see what would come if they had some real money to play with on research. This is not a consolidation as Seagate does not have an SSD branch yet, but I am with you... the last thing I would want to see is Seagate vs Corsair/Intel/Crucial... that would be as bad as things are now in the HDD market where everyone has recovered, and yet they are all pacing with eachother on price so that they all make a killing.Keep in mind though that Seagate has been the first to lower prices after the floods, so they are not entirely evil.

    I agree completely with the sentiment of having more funds for R&D, I would love to see the result of it.

    Anyway, what I'm replying to is the reduction of price after the floods. Seagate/WD would have had to do that at some point regardless; they would face a price fixing class-action lawsuit if they didn't.
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