Toshiba confirms $35M OCZ purchase plan

December 3, 2013 | 10:57

Tags: #bankrupt #bankruptcy #chapter-11 #ralph-schmitt #seiichi-mori #solid-state-storage #ssd

Companies: #indilinx #ocz #toshiba

Toshiba has officially reached an agreement with ailing solid-state storage specialist OCZ that will see its assets acquired for just $35 million - only slightly higher than the $32 million OCZ paid for Indilinx just two years ago.

OCZ has been struggling to stay afloat since making the move from a general purpose manufacturer to a storage specialist. Firmware issues with selected models of its drives hurt consumer confidence, and its acquisition of SSD controller specialist Indilinx didn't pay off as quickly as it had hoped. Last week, the company confirmed that it was to enter bankruptcy proceedings pending an acquisition offer from Toshiba when a loan from Hercules Technology Growth Capital went bad and led to a loss of OCZ's corporate bank accounts.

At the time, neither OCZ nor Toshiba would discuss details - but late yesterday both companies issued simultaneous announcements confirming the plan. Under the terms of the agreement, Toshiba will acquire the entirety of OCZ's assets for just $35 million while the OCZ brand itself will continue to operate in order to support existing customers.

For Toshiba, it's a windfall: for its cash, the company lands OCZ's Indilinx controller technology, firmware and software, company staff and a sales channel already well established.

'Over the past year, OCZ has dealt with numerous issues which have stressed the company's capital structure and operating model, posing a challenge to achieving near-term profitability,' admitted OCZ's chief executive Ralph Schmitt in a statement to press. 'The combination of NAND flash supply constraints and credit issues have impacted our ability to satisfy the demands of our customers; this combined with increased pricing pressure in our industry have contributed to our on-going operating losses. On an operational basis, we completed a complex investigation, several restructurings and a multi-year restatement that added significantly to our working capital requirements. We have been working diligently on this partnership with Toshiba and we believe that this is the best outcome under our current corporate conditions.'

'We are excited to participate in this opportunity. If our bid is successful, the combination of our leading NAND technology with OCZ’s SSD expertise will allow us to further strengthen Toshiba’s SSD business,' claimed Seiichi Mori, Toshiba's vice president in charge of storage and semiconductors. 'We value OCZ’s SSD business and technology in both the consumer and enterprise markets, and we are confident that it will reinforce our capabilities and help us to secure leadership in the SSD market.'

You may notice a key phrase in Mori's statement, there: 'if our bid is successful.' The agreement between the companies isn't a straightforward acquisition, but an auction under Section 363 of the U.S. Bankruptcy Code. As a result, the bankruptcy court is obliged to open the floor to offers from other companies - and should those companies out-bid Toshiba's $35 million, they'll walk away with OCZ's assets instead.

It's impossible to say how likely that outcome may be, but there's certainly a recent precedent: beleaguered publisher THQ, like OCZ, entered into Chapter 11 bankruptcy protection proceedings with a view to selling itself to a private investment group - a plan which backfired when the judge accepted higher bids to split the company up and sell off the pieces instead.

For OCZ, and its staff and customers, the coming weeks will prove a nail-biting time.
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