Stop Ignoring OCZ Technology
Harsh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If you are looking to add a tech stock to your portfolio, OCZ Technology (NASDAQ: OCZ) is surely an option to consider. The company earns its bread and butter by designing, making and selling solid-state drives (SSD) and this is what compels me to take a closer look at it.
Riding the growth of SSD and mobile computing
It’s no more a secret that mobile computing is going to make our lives easier in the near future. The revolution has already started and you can yourself feel it by taking a look at the smartphones, tablets and ultraportable computers around you. In addition, cloud computing is really gaining ground. The astonishing growth of the cloud has raised the need for data centers wherein your data will be tucked away on a remote server.
But how will you store your data on these platforms? Tablets and other mobile devices need a storage device which should be small enough to fit in its innards. Also, data centers require a cost competent storage option which will enable them to store large amounts of data. This is where SSDs come into the picture, and so does OCZ. All these areas of application have opened up a huge market for SSDs, which is expected to grow at a phenomenal rate of around 50% every year till 2015.
So we see that the industry’s prospects look bright. And once I take you through OCZ’s numbers and moves, you will see that the company is well seated for a good ride ahead.
OCZ really put some pedal to the metal in the third quarter of fiscal 2012, almost doubling its revenue to $103 million. But what impressed me the most was the way OCZ expanded its margins. Manufacturing costs were kept on a tight leash and gross margin strengthened to 22% from 17% in the corresponding period last year. And if expenses were incurred, they were usually related to the company’s expansionary moves such as acquisition of SANRAD and Indilinx or increasing the R&D headcount.
The stupendous top line growth in the third quarter helped OCZ to almost wipe out its loss of $8 million which stood in the books in the same quarter last year. OCZ surely stole a march on its peer STEC (NASDAQ: STEC) whose gross margin shrunk some 4% and revenue dropped 38% in the fourth quarter of 2011 from last year.
OCZ has constantly been pushing itself as far as innovation and development of new products is concerned. The company recently displayed its new SSDs in Hannover, Germany and addressed the need for both Enterprise customers and makers of other devices. OCZ expects them to deliver “industry-leading performance” which will probably help them deliver another strong quarter.
The bottom line
The way I see it, OCZ Technology looks like a decent investment. The swiftly growing SSD market and the mobile computing revolution provide a solid backbone to the company which is doing its part so that it doesn’t miss out on the fun. And this is the reason why I told you in the beginning that OCZ is a stock worth considering if you are looking to make an addition to your portfolio.
The Motley Fool has no positions in the stocks mentioned above. harshchauhan has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.