OCZ Technology Group Inc. (OCZ), a maker of disk drives that counts Amazon.com Inc. as a client, fell the most since 2010 after postponing its second-quarter earnings filing and saying revenue for the period will be “materially lower” than previously forecast.
Preliminary results for the quarter released in September also trailed an earlier projection. OCZ’S latest view is prompted by customer-incentive programs discovered since then, said Ralph Schmitt, who today was named president and chief executive officer, succeeding Ryan Petersen, who stepped down last month.
“There was such an emphasis in the second quarter from management to grow market share at all costs,” Schmitt said on a conference call with analysts today. “Hence extraordinary incentives were undertaken.”
The company needs “additional time to ensure that all the proper accounting treatment has been applied to this event,” he said.
Revenue for the quarter ended Aug. 31 will be “materially lower” than the $110 million to $120 million forecast on Sept. 5, the San Jose, California-based company said today in a statement. The company expects negative gross margins and a significant net loss for the quarter, OCZ said.
‘Smoke and Mirrors’
The earnings delay and forecast are a “reflection of smoke and mirrors from previous management,” Gary Mobley, an analyst with Benchmark Co., said in an interview today. “In order to grow market share, they were heavily rebating products in their retail channels. I think that probably was related to Petersen’s resignation.” He rates the shares hold.
Bonnie Mott, an OCZ spokeswoman, didn’t immediately return a call requesting comment.
Schmitt joins OCZ from PLX Technologies Inc., a provider of chip technology for corporate and consumer markets, where he served as president and CEO from 2008 until yesterday, OCZ said. He had been a member of OCZ’s board since April 2011.
The company has accessed its credit facilities due to a declining cash position, Schmitt said on the call today. Cash fell to $43.2 million in the quarter ended in May, from $92.3 million in the February period, according to data compiled by Bloomberg.
Following Petersen’s resignation last month, Christian Schwab, an analyst at Craig-Hallum Capital Group Ltd., had said the company may be an acquisition target.
“We believe having the founder of the company resign removes a significant hurdle in the completion of an OCZ acquisition,” he wrote in a note to clients at that time.
OCZ said it will file for an earnings extension with Securities and Exchange Commission, extending the deadline for filing until Oct. 15.
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