There is a misperception that OCZ is a consumer oriented PC hardware company due to its past history. 90% of OCZ revenue is SSD.
Only 7% of SSD revenue is consumer and the rest of SSD revenue is high performance/server and data center/cloud computing enterprise.
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The Deneva enterprise SSD and Vertex 3 server SSD products are the key drivers of 2011 growth.
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“This growing market awareness and recognition has translated into solid business momentum. As every segment of our SSD business grew rapidly this quarter. In addition to our first Tier-1 OEM that is now shipping in volume, we have continued to achieve a number of design wins.
For example we received orders recently from a large Asia Pacific based telecom service provider for our Deneva series of SSDs and they’re expecting this client to start limited deployment this year, and to ramp considerably over the next 24 months.
We have recently received initial orders from our Deneva series with a new high performance computing OEM who we expect to roll out to a major cloud computing service provider over the next two quarters.
We have recently seen a sole source design in with our Deneva series to well known enterprise class storage system OEM, who we expect to ramp to mass production quantities in our fourth quarter. And though we are still determining potential revenue for this client, we’re excited in our ability to win and compete with this business.
We recently qualified our Deneva SSDs from Palo Alto networks, a provider of next generation enterprise firewalls, and we’re in the final stages of qualification and pricing with a large data center for our VeloDrive. Should this business come to fruition, it could represent a significant portion of our PCIe-based SSD sales through fiscal ’13.” – OCZ Q4 2011 conference call on 5/3/11 [Link]
New enterprise design wins mentioned on the conference call:
1) Tier 1 OEM shipping in volume
2) large Asia Pacific based telecom service provider (Devena enterprise SSD)
3) new high performance computing OEM rolling out to major cloud computing service provider over next two quarters
4) sole source design win (Devena enterprise SSD) to well known enterprise class storage system OEM
5) design win with Palo Alto networks for their next generation enterprise firewalls (Devena enterprise SSD)
6) large data center (enterprise PCIe VeloDrive)
OCZ clearly states design wins from #2 to #6 are NOT included in current guidance.
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At Friday’s close of $6.77, OCZ is trading at 0.9 CY2011 EV/sales growing at 99.5% y/y (SSD revenue +380% y/y). STEC is currently trading at 2.2Xs CY2011 EV/sales and really isn’t growing much if you take account the EMC inventory burn-off catch up.
OCZ has a similar SSD revenue growth ramp with Fusion-io in both absolute revenue numbers and y/y growth. Fusion-io is an enterprise SSD company which was named the #1 venture capital funded technology company in 2010 by the Wall Street Journal. Fusion-io’s products are higher end, higher ASP, and higher margin. However if it comes public at the rumored 10Xs sales valuation or any multiple significantly higher than OCZ/STEC, the relative valuation discrepancy will be stunning.
OCZ in the last quarter had a non-GAAP net profit of $1M ex-a $1.8 million loss associated with the discontinued memory business (there will be no more memory business after this quarter). The ramp of the enterprise SSD design wins in 2011 will help OCZ scale into its long-term model of 28-32% gross margins and 13-17% operating margins stated in their earnings press release.
Source of first 2 slides is the excellent OCZ presentation here: Link
Disclosure: The author is long OCZ at time of writing.