OCZ Technology Group Inc. (OCZ:US), a maker of solid-state disk drives, has retained Deutsche Bank AG to help evaluate strategic alternatives.
The company will amend a loan agreement with Hercules Technology Growth Capital Inc. because it didn’t meet certain financial requirements, San Jose, California-based OCZ said today in a statement.
OCZ shares have slumped 85 percent since mid-2011, battered by management turnover, a shortage of memory chips used in its products, and a U.S. probe of a customer-incentive program. Potential buyers could include Western Digital Corp., a maker of hard drives, Micron Technology Inc., which produces memory chips, or chipmaker LSI Corp., according to Joel Achramowicz, an analyst at Merriman Capital Inc.
“Some kind of storage company has got to take a look at it,” Achramowicz, who has a neutral rating on OCZ shares, said in an interview. “At one time, the company was really active and dynamic, but it’s been a really difficult saga for them.”
The shares plunged 16 percent to $1.60 at the close in New York. They were unchanged this year before today.
Under an amended agreement with Hercules, approximately 3.9 million warrants will be canceled, OCZ said in the statement. The loan will now be payable on June 1, 2014, and will include a fee of $6.5 million. OCZ also said it raised $13 million in a private placement of senior secured convertible debt and warrants.
“There’s potential dilution,” Achramowicz said. “This is a messy situation, and unless you dig into the forensics of the accounting you don’t really know what could happen.”
Scott Harlin, a spokesman for OCZ, didn’t immediately respond to a request for comment. Representatives for Western Digital, Micron and LSI also didn’t immediately respond to requests for comment.
Founded in 2002, OCZ makes storage drives for use in mobile phones, personal-computers and gaming consoles, as well as data centers and storage-area networks. The drives, employing flash-memory semiconductors and technology with no moving parts, are faster and more efficient at storing and accessing data than the traditional hard-disk drives that rely on spinning platters to hold information.
OCZ has struggled to bolster revenue amid a shortage of memory chips used in its products, and last year disclosed an investigation by the U.S. Securities and Exchange Commission of a customer-incentive program that forced the company to put off reporting quarterly results. Sales are on track to fall 10 percent in the 2013 fiscal year to $329.5 million, according to the average of analysts’ estimates compiled by Bloomberg.
The company said in July that it expected to become current with its SEC filings by the end of this month, after an earnings restatement process that took longer than expected.
OCZ named Ralph Schmitt chief executive officer in October, succeeding Ryan Petersen, who stepped down the previous month. In March, OCZ named Rafael Torres as chief financial officer, replacing Arthur Knapp, who retired.
“It’s a distressed company,” Joe Wittine, an analyst at Longbow Research who has a neutral rating on the shares, said in an interview. “OCZ is down to a few options now.”
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