Trading Statement
Basically OCZ Technology Group Inc has warned investors thats full-year pretax will be significantly below market expectations, but said it is confident of strong trading in the next three months...OCZ Technology Group, Inc. (“OCZ” or “the Group”, AIM: OCZ), a worldwide leader in innovative, ultra-high performance and high-reliability memory, announces a trading update for the period ending 29 February 2008.
The strong trends seen in the first half of the calendar year with new customers and increases in net sales continued into the third and beginning of the fourth quarter of the calendar year. The Group reported revenue up 93 per cent. to $50.0 million and underlying profit before tax of $2.1 million in the six months to 30 June 2007.
The Directors expect record revenues and unit volumes for the 14 month period ending 29 February 2008*. Unit volumes for the 12 month period ending 31 December 2007 are expected to exceed internal budgets and the assumptions upon which current market expectations are based. However, and in line with most other participants in the industry, a significant fall in the DRAM spot market over the same period has contributed to lower than expected revenues, gross product margins and profits.
The cost of DRAM influences pricing of the Group’s memory products. Significant falls in the DRAM spot market, with the resulting reduction in the average selling price (“ASP”) of DRAM memory products, have resulted in lower than expected revenues, gross product margins and profits. The average ASP per unit was reduced by approximately 42 per cent. from the first quarter to the third quarter of the calendar year. From an average ASP per unit of $125 in the first quarter of the calendar year, the Group experienced an ASP of $57 in September, which recovered to $68 in October. The Board is not expecting any significant increase in memory ASPs in the short term.
The Group has been affected by the slower than expected user adoption of Microsoft’s ‘Vista’ operating system. This has resulted in lower than expected demand for the Group’s highest margin memory products to support upgrades. However, the Group experienced strong underlying demand achieving record revenues and volume units in September and October. Unit volumes in the ten months to October 2007 were approximately 155% greater than the corresponding volume in 2006. These increased volumes have also increased the Group’s headcount and distribution costs resulting in increased operating costs.
The Group now expects net sales to be slightly lower than market expectations and pre tax profits to be significantly below market expectations. The Group expects a gross margin of between 20 and 22 per cent. Existing market expectations relate to the 12 month period to 31 December 2007.
The Group’s manufacturing facility in Taiwan is now fully geared to cope with the increasing demand for OCZ products. The Board is confident of strong trading in the next three months which is the Group’s busiest season.
Memory products currently account for approximately 80 per cent. of the Group’s turnover. As a result of the acquisition of PC Power & Cooling in May 2007 and, more recently, the acquisition of high performance laptop and desktop computer systems maker Hypersonic PC, the Group continues to diversify its product range and leverage its reputation in the high performance PC sector.
The Board’s belief in the growth prospects for the Group in the medium and longer term remains undiminished by cyclical fluctuations in the price of DRAM. Continuing strong demand for OCZ’s memory products around the world, together with product diversification, reinforce its continued confidence in the Group’s strong growth prospects.
At the same time OCZ Technology Group Inc said its chief executive Ryan Petersen has lifted his stake in the company to 23.46 pct with the purchase of 100,000 shares or 0.19 pct in the company at 68 pence each. Ryan now owns 12.1 million shares or more than 23% of OCZ common shares.
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