OCZ shares surge on buyout report

Reuters News
Posted: Jul 19, 2012 10:10 AM
OCZ shares surge on buyout report

By Sruthi Ramakrishnan

(Reuters) - Shares of OCZ Technology Group Inc spiked as much as 21 percent in early trade on a report that larger rival Seagate Technology Plc has offered to buy out the solid-state hard drive maker.

Fudzilla.com, a hardware industry blog, reported on Thursday that Seagate is considering acquiring OCZ to boost its solid-state drive (SSD) product portfolio. The website said a deal could be announced as early as next week.

Seagate declined to comment on the report and OCZ could not immediately be reached.

Analysts said an OCZ acquisition would boost Seagate's margins and help it establish a firmer foothold in the lucrative enterprise segment, where SSDs are gaining popularity.

Shares of OCZ, which was valued at $308 million as of Wednesday's close, were trading up 22 percent at $5.57 on the Nasdaq. Thursday's gains added about $68 million to its market capitalization.

"I'm hearing the same rumors ... I can only say that after the last quarter, when OCZ's cash situation became more challenging, they would be more willing to enter into a deal," FBN Securities analyst Shebly Seyrafi said.

Fudzilla said Micron Technology Group was also in the running to buy OCZ.

Seagate and Western Digital Corp dominate the market for hard disk drives (HDD) used in computers, but were late in adopting SSDs — a faster but expensive technology.

Shares of Stec Inc, one of the top SSD makers, were up 3.5 percent at $7.64 in mid-day trading on Thursday on the Nasdaq.

"It is plausible for Seagate or Micron to buy an SSD company," Benchmark Capital analyst Gary Mobley said.

"Seagate has been late to address the flash storage market and needs to hedge its aging HDD business. Micron would benefit from owning OCZ by selling more NAND flash."

(Reporting by Himank Sharma and Sruthi Ramakrishnan in Bangalore; Editing by Anthony Kurian, Saumyadeb Chakrabarty)