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OCZ bankruptcy may yet ignite bidding war

OCZ Technology's pending bankruptcy filing may start a public-auction bidding war among disk manufacturers looking for entrance into the SSD market.

Industry experts see solid-state drive (SSD) vendor OCZ Technology Group Inc.'s bankruptcy and pending asset sale to Toshiba as a continuation of the consolidation that has gone on throughout the past year rather than a bad omen for the flash business.

"I don't consider this anything but business as usual," said Arun Taneja, the founder and consulting analyst of the storage industry consulting firm Taneja Group.

"We're in a high-tech business. Companies are created based on ideas and the attitude that 'I can do it better.' But we all know that there's going to be fallout, and not all ideas are good, and not all executions are good. So it's just like what we see in the rest of the storage industry where companies are created and they either thrive, get picked up as an acquisition, do an IPO, or they flunk out."

There has been an active market for flash technology this year, with a slew of acquisitions of startups and companies that have already gone public. They include Cisco's September acquisition of all-flash array provider Whiptail and Western Digital's purchase of then-troubled SSD manufacturer sTEC Inc. in June.

OCZ released a statement last week that said Hercules Technology Growth Capital Inc., one of OCZ's funding partners, took control of OCZ's bank accounts as part of the OCZ bankruptcy filing. The statement also indicated that OCZ and Toshiba have "substantially come to an agreement" on a sale of OCZ's assets to Toshiba in a bankruptcy proceeding.

There was talk that Toshiba Corp. was considering acquiring OCZ for close to a month. OCZ had struggled to reach profitability, and former CEO Ryan Petersen resigned in September 2012 amid rumors that he failed in his quest to sell the company to Seagate.

The Toshiba deal to purchase OCZ out of bankruptcy is subject to several factors, including the acceptance of the agreement by a bankruptcy judge and an "auction process conducted under the relevant provisions of the United States Bankruptcy Code." OCZ's statement said it would liquidate if the Toshiba deal falls through. That means another company can make an offer for OCZ's assets prior to and during the public auction process.

Greg Schulz, founder and senior analyst for the Stillwater, Minn.-based StorageIO Group, said he would be "shocked" if at least one other company didn't make a run at OCZ as well. "I wouldn't be surprised [if] Seagate were to step in and take a run at it."

Toshiba and Seagate are natural fits for OCZ's SSD business because neither has yet to make a significant splash in the enterprise SSD market.

Schulz and Taneja agreed that the SSD market is still relatively young, and this recent activity is a normal adjustment. "The SSD market is far from imploding," Schulz said. "What you are now seeing is the reality of the SSD market. We're just scratching the surface of where it will be in five, 10, 15, 20 years. We're just in the infancy of it."

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