Needham & Company Reiterates a 'Buy' on OCZ Technology (OCZ); SandForce Acquisition By LSI Underscores Valuation Gap Between OCZ Shares & Market

Needham & Company reiterates a 'Buy' on OCZ Technology Group (NASDAQ: OCZ) price target of $14.00.

Needham analyst says, "In our view, once OCZ acquired Indilinx (a private controller company) earlier this year, M&A was the likely outcome for SandForce. OCZ made clear its intention of over time migrating increasingly to OCZ controllers vs. using SandForce. We believe OCZ and SandForce signed an agreement shortly after the deal to ensure continued supply for existing OCZ products for a period of time (undisclosed). Further, the level of patents controlled by OCZ (and shared between the two) show the deep relationship that should remain post-LSI. Consequently, we were not surprised that OCZ announced after the close that it DID NOT EXPECT ANY negative impact from SandForce’s acquisition...We believe the most interesting element of the acquisition is the price of $370M, which we estimate is 5-7x C11 sales and is nearly the market cap of leading pure-play SSD company OCZ (currently $383M). Using the take-out valuation, OCZ would be worth $25-35 per share."

For more ratings news on OCZ Technology Group click here and for the rating history of OCZ Technology Group click here.

Shares of OCZ Technology Group closed at $7.40 yesterday.

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