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OCZ share price tumbles

Firm was unaware of impending loss
Wed Oct 10 2012, 17:49
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STORAGE VENDOR OCZ is in the midst of a crisis after announcing that it will suffer a loss, appointing a new CEO and seeing its stock price plummet more than 40 percent within an hour.

Known for its solid state drives, OCZ told investors that its earnings forecast did not account for customer incentive programs that when taken into account will not only result in a "significant net loss" in its second fiscal quarter of 2013 but that it will also post negative gross margins, losing money on products it sold. The firm rushed to appoint Ralph Schmitt as CEO but that didn't stop the firm's share price from falling by over 40 percent at the start of trading.

OCZ's revised financial outlook is extremely bad news not because of the loss it expects to incur but the fact that it is still under review, with the firm citing the delay being "principally due to the impact of customer incentive programs which were discovered subsequent to the preliminary announcement during the normal close process". Essentially OCZ wasn't aware of its liabilities, something that casts doubt on the validity of the firm's financial reports, causing investors to run for the hills.

OCZ didn't waste time in appointing a new CEO, with Schmitt taking the reins immediately. He said, "We will overcome some near term tactical challenges, and we will focus relentlessly on increased value to both our investors and customers. We have an amazing opportunity in front of us and we will take full advantage of our position, products and people to be successful."

Schmitt's biggest problem is not the impending quarterly financial loss but the impact on the firm's reputation in the eyes of investors. Repairing the damage is a task that could take OCZ several quarters if not a year or more. µ

 

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