OCZ Exits DRAM Chip Business to Focus on SSD

Noting the decline in memory prices and revenue, OCZ Technology has accelerated plans to exit the DRAM business altogether by the end of February.

OCZ Technology will withdraw from the memory business altogether to focus on its solid-state-drive business, the company said, as part of its fiscal 2011 third-quarter announcement on Jan. 10.

The company had announced in August that it will stop making lower cost memory products for budget-conscious buyers, but would continue to sell high-performance memory. However, since that announcement, "there has been a well-chronicled, continued weakness in the global DRAM market," OCZ said.

After balancing the capital needs of the company's SSD business against the DRAM market weaknesses, the board decided to "accelerate" plans to "exit completely from the DRAM module business" by Feb. 28, OCZ said.

"OCZ has spent the last year focused on transforming the company from being a niche provider of DRAM modules into being a leading SSD provider," said Ryan Petersen, the CEO of OCZ Technology, on the earnings call.

OCZ reported net revenues of $53.2 million in the fiscal 2011 third quarter, of which $41.5 million, or 78 percent, was generated by the SSD business. "Our focus on SSDs has proven successful," said Petersen.

In contrast, the company had severe losses in the DRAM division, reporting $6.26 million net revenue in fiscal Q3 2011, compared with the net revenue of $22.04 million during the same quarter in 2009. Net revenue from SSD sales dramatically soared, from $2.16 million in 2009 to $41.47 million this quarter. The strength of the SSD business is "reinforcing our decision to discontinue our remaining DRAM products," said Petersen.

With DRAM prices falling, OCZ's move makes sense for stockholders, but it also means customers will no longer be able to buy OCZ's popular Blade and XTE series memory products. However, OCZ will continue to fully support its memory modules, said Alex Mei, chief marketing officer at OCZ. The company will provide service and support, as well as honor the lifetime warranties with replacements, credit towards another product, or refunds, Mei said.

All memory products already in its pipeline will be launched and the company will go ahead and sell off its existing inventory, "and then no longer be in the memory business," said Alex Knapp, the company's chief financial officer. He said the company wasn't likely to sell the remaining inventory at a discount.

Calling the market opportunity for SSDs "significant," Petersen said SSD revenue growth and continued development of SSD technology "remains our primary focus." As the "key to long-term profitability," OCZ plans to increase investments in both research and development, sales, and marketing, he said.

OCZ previewed new SSD drives based on the latest SandForce SF-2000 controllers at the Consumer Electronics Show, in Las Vegas, recently. The Vertex 3 SSD series and the Z-Drive R3 SSD both had impressive performance numbers.

OCZ Technology was not the only company showing off its SSD drives at CES this year. Micron, Intel, Toshiba, and Corsair all made significant SSD announcements.

OCZ Technology has been in the memory business since 2002. In recent years, it had expanded into SSDs, producing both controllers and enterprise-class drives.