OCZ Discontinues Commodity DRAM Module Business

OCZ Technology Group, Inc. has made a strategic decision to discontinue certain commodity level DRAM module products as part of an optimization plan for its memory business to focus on specialty and high-performance memory offerings.

The decision to optimize the DRAM module business comes after careful consideration from OCZ’s Board of Directors, and is being implemented now as the Company has reached sufficient scale in its Solid State Drive segment. The plan is consistent with OCZ’s publicly stated strategy to focus resources on the continued growth in its SSD business, while scaling back on non-core, low-margin product lines.

OCZ is committed to continuing to deliver its core high-performance DRAM module products to its customers on an ongoing basis. The Company anticipates that the increased focus on high-performance memory products will also provide margin efficiencies in SSD production, due to the synergies in manufacturing, purchasing, and product development.

OCZ’s commodity DRAM module products represent roughly 70% of the Company’s overall DRAM module revenue (approximately $70 million TTM), which over the past 6 quarters has operated at less than 3% average gross margins.

These products will be taken out of production during the 2nd and 3rd fiscal Quarters, which end August and November 2010 respectively. The Company anticipates the transition will have a positive effect on operating margins, and plans to issue pro-forma financial statements beginning with the upcoming second quarter results, through the completion of the transition.

"OCZ continues to focus on Solid State Drive products and away from the rapidly commoditized standard speed DRAM module market; I am excited that we have been able to gain sufficient SSD manufacturing scale allowing us to focus on our strengths," commented Ryan Petersen, CEO of the OCZ Technology Group, Inc.

Mr. Petersen added: "Our R&D driven SSD business is performing well and is anticipated to be the majority of our revenue going forward, thus the next logical step is refocusing our DRAM business in the high-performance segment – a limited but more profitable market in which we have traditionally excelled. For fiscal 2011, OCZ’s prior revenue guidance was in the range of $200 million to $215 million. We are adjusting DRAM module revenue guidance down by $35.0 million, but all other product lines are anticipated, based on current booking rates, to be in line with expectations. Adjusted revenue guidance is now a range of $165 million to $180 million."