OCZ to Stop Making Some DRAM [WSJ]

[xVeinx]

OCZ to Stop Making Some DRAM
By TESS STYNES

OCZ Technology Inc. is discontinuing the production of some lower-margin DRAM products as part of a shift to focus on higher-margin specialty and high-performance memory products...

The company's commodity DRAM module products in the past year and a half accounted for about 70% of DRAM revenue while average gross margins have been less than 3%, OCZ said Tuesday. DRAM is a popular form of memory used in personal computers.

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[zanzabar]

what will ocz stop making exactly, they cannot make real high end parts since no one makes the chips for good ddr3 any more and i dont think that they sell anything bulk jdec but jdec cost the same as 1600mhz cas9 now so i dont see what they will drop

[cegras]

Well it wasn't like they could've competed with OEM giants like Kingston anyways.

[Russian]

Honestly, it looks like they're pushing SSDs really hard. SSDs or bust?

[SKYMTL]

Makes sense to me. The margins on mainstream products just aren't enough and R&D money could be better spent on a rising star like SSDs.

[Tony]

LOL let me explain:

to begin with we made nothing but enthusiast parts, 8:1 in favour of high end.

Over the yrs that moved to around 50/50 split value and enthusiast.

The market has become over saturated with low end parts, no money in it any more...so we are going back to our roots...back to the enthusiast.

SSD is the big push as commented here, the gains you see on your system are far higher with the addition of an SSD than the addition of a 2100MHZ ddr3 kit, that said some just have to have the best of everything and we are actively going back after those people.

Just the really low end parts are getting culled though to start.

[hecktic]

sounds good enough to me... although I must admit the low end parts like memory were always cheap... I remember 4gb ddr2 kits for $10 after rebate (sometimes Free after rebate)

[Manicdan]

i might be paraphrasing a little but this is what i herd:

OCZ is all about the pimp PCs, we aint supporting no lame bare ass RAM, you need to cover that up with some heatspreader bling. If you dont like no sparkly sticks, then you best not be buying from OCZ as we only be selling the expensive silver plated sticks.

[Ao1]

...so we are going back to our roots...back to the enthusiast.

Not according to OCZ’s recent quarterly report:

Today, as part of a diversification strategy which began in fiscal year 2009, our product mix is significantly more weighted toward the sale of SSDs and the SSD product line has become central to our business. As a result, our target customers are increasingly enterprises and original equipment manufacturers (or “ OEMs ”).

http://www.faqs.org/sec-filings/1007...ROUP-INC_10-Q/

OCZ Technology Becomes an Official Silicon Graphics International Corp.(R) Supplier of Enterprise-Class SSDs for Integration Into High-Performance Computing and Server Storage Solutions

http://finance.yahoo.com/news/OCZ-Te....html?x=0&.v=2

[breakfromyou]

Good. They seem to have quality control issues with their low end products anyway. Any of the 1600 Gold kits I pick up, I usually get a bad module and end up having to switch it out 2-3 times before finally getting one that passes testing. No offense Tony, but where I work, people are starting to dislike OCZ due to these issues :\

[Etihtsarom]

OCZ might think about making some "value" line with specs comparable to the vertexes. The current value stuff like onyx and even agility is just not worth the price they command.

[Praz]

Good. They seem to have quality control issues with their low end products anyway.

I'll hate to see the low end go away. OCZ Gold CAS 9 1333MHz memory in the screenshot below. I'm currently running them in a P55 board at 1333MHz CAS 7.

click for larger image

[saaya]

this sounds confusing to me... everybody constantly drops low margin products, thats called phasing out and nothing special... so why did they announce this?
and low margins for mainstream memory... well DUH, what do you expect thats nothing new... and ocz has been very aggressive in pushing down prices with their mainstream memory... it seems really odd now to that they managed to capture a large market share by fighting for it agressively, to give it up again... and why would you publicly announce it?

sounds to me like this is meant to make stock holders think they will focus on higher margin products, which means they will have higher profits in the future...

but while 3% sucks, hey if you sell millions of dollars worth of memory each week, those 3% are nice to have and giving them up cause its ONLY 3% doesnt really make sense... its not like there is more money in highend memory... higher margins yes, but with the much lower volume it ends up being a lot less money... and when you want to sell highend memory you need to bin and get rid of the not that great parts, thats why you NEED a mainstream leg to stand on if you seriously want to compete in the highend segment when it comes to binning hardware... weird announcement...

[Manicdan]

walmart survives off what, under 2%
you cant even give employees a 25 cents raise without that company mathematically going under

[Ao1]

this sounds confusing to me...

Why tie up cash on low profit sales when you could invest the same cash on sales that generate higher profit? Most companies nowadays have to think about maximizing returns with existing cash flow rather than increasing sales with unobtainable cash. What OCZ try to do makes sense and if they get on the SSD enterprise and OEM bandwagon it will take them further than they could ever go selling low margin ram.

[generics_user]

yup; their low end pretty much sucks...

my g.skill ECO clock better at 1.35v than the Gold kit i tried at first @1.65; at the same price point...

some time ago OCZ was the best (remember the VX DDR1 series?) but now corsair pretty much owns the high end with their dominator series (50% of the high end market?!) and g.skill took over the low-mid range... (especially if you consider recommendations on some forums...)

[uOpt]

I think this means they found a business path to get rid of chips that binned low.

(instead of putting them into cheaper modules)

[saaya]

Why tie up cash on low profit sales when you could invest the same cash on sales that generate higher profit? Most companies nowadays have to think about maximizing returns with existing cash flow rather than increasing sales with unobtainable cash. What OCZ try to do makes sense and if they get on the SSD enterprise and OEM bandwagon it will take them further than they could ever go selling low margin ram.

yeah but then you phase out memory, or dont launch certain products cause it just doesnt make sense... but why would you announce that?
its like announcing that they wont invest in a project that they wont really make any money off... well duh! :P

im still confused...
their original strategy was quality, ie highend, then they switched to market share because highend is low volume and there isnt much money in that... so they didnt have a lot of really good highend memory for a while but gained market share... and now they are switching back giving up that market share again? and then what? once they captured the highend again they will give that up and go for market share again?

I think this means they found a business path to get rid of chips that binned low.
(instead of putting them into cheaper modules)

that makes sense... i hope they dont rely on another company to do the binning for them though, cause as soon as they do, it wont take long for that company to sell higher bins themselves under their own brand instead of selling it to ocz

[Ao1]

I’d say their strategy has been low volume but high profit margin markets and somehow they ended up in a lower margin profit market due to competition.

The enthusiast market for ram was obviously once a high profit margin market that has subsequently deteriorated and become less profitable. SSD is therefore the new ram. When SSD becomes less profitable it will be something else.

That financial statement also states the following:

“Historically, we primarily sold high performance memory modules to individual computing enthusiasts through catalog and online retail channels. However, SSDs have emerged as a strong market alternative to conventional disk drive technology and SSDs are rooted in much of the same basic technological concepts as our legacy memory module business. “

The intent appears to be to move away from the enthusiast niche market to the niche market of enterprise. Again this seems to make really good sense. The value proposition of SSD performance at currently pricing levels for enterprise markets is high. Much less so however for the enthusiast.

I think it is a good move. They are already saying in that report that their top ten customers represented approximately 57% of net revenue.

[Peakr]

Good. They seem to have quality control issues with their low end products anyway. Any of the 1600 Gold kits I pick up, I usually get a bad module and end up having to switch it out 2-3 times before finally getting one that passes testing. No offense Tony, but where I work, people are starting to dislike OCZ due to these issues :\

Amen to that. The last three kits I bought from OCZ. A gold, platinum and a set of reapers had bad sticks in them. Had to return the golds twice before they sent out ram that worked. Glad to hear they're getting out of this market.

[saaya]

I’d say their strategy has been low volume but high profit margin markets and somehow they ended up in a lower margin profit market due to competition.

right... they SOMEHOW ended up selling high volume entry level kits...

its great that they focus more on ssds, i still dont get why they have to give up dram to do that, and why they are making a public announcement about it...

Amen to that. The last three kits I bought from OCZ. A gold, platinum and a set of reapers had bad sticks in them. Had to return the golds twice before they sent out ram that worked. Glad to hear they're getting out of this market.

i have heard a couple of complaints about their quality in recent years...
but in this case it might actually not be oczs fault, was it sealed? shops, especially in the us, tend to just put refurbished parts back on the shelf instead of doing even a basic test of functionality...

[Peakr]

i have heard a couple of complaints about their quality in recent years...
but in this case it might actually not be oczs fault, was it sealed? shops, especially in the us, tend to just put refurbished parts back on the shelf instead of doing even a basic test of functionality...

It's possible. Their ram generally comes in a plastic container anyone can pop open so no way of telling unless you saw fingerprint smudges or physical damage. But there was the two pairs I RMA'ed that came back bad.

[Baron_Davis]

LOL let me explain:

to begin with we made nothing but enthusiast parts, 8:1 in favour of high end.

Over the yrs that moved to around 50/50 split value and enthusiast.

The market has become over saturated with low end parts, no money in it any more...so we are going back to our roots...back to the enthusiast.

SSD is the big push as commented here, the gains you see on your system are far higher with the addition of an SSD than the addition of a 2100MHZ ddr3 kit, that said some just have to have the best of everything and we are actively going back after those people.

Just the really low end parts are getting culled though to start.

I wish all companies did this.

Go big or go home. Too much mediocrity in the world.

[Ao1]

right... they SOMEHOW ended up selling high volume entry level kits...

Define high volume. I don’t know what OCZ’s market share of ram is but I would suspect that even their entry level ram was a comparatively very small part of the overall ram market. OCZ are only a small player in the bigger picture of things so they need to be in niche low volume/ high profit market to survive. Regardless however the take away for me is that they seem to be shifting from the enthusiast to enterprise market.

If you end up with low (comparative) volume and low profit you can only cut costs to try and become more profitable again. That is usually a slippery slope, so better to focus on more profitable business where you don’t have to go that way.

[Serra]

This is very good news to me.

I remember a time when you could say you were running OCZ memory and regardless of the exact type, everyone knew that meant you were automatically playing with something top-tier. OCZ definitely took a reputation bashing by playing in the lower-end pools, and hopefully they have finally realized that it was starting to effect the values their company was originally built on and did so well by.

Bringing along SSD's into an even more prominent role in their future is, I think, also a good move. OCZ is certainly positioned well to do it, and by every indication that market will see substantial growth as we go forward. Plus we can hope that this renewed focus on high-end parts will further energize their SSD division and allow them to continue to bring us newer, faster, and more innovative drives .