" Look, if you had one shot, or one opportunity
To seize everything you ever wanted in one moment
Would you capture it or just let it slip?"
-- "Lose Yourself," by Eminem
Enthusiast-grade memory module builder OCZ Technology
Kill your darlings
So OCZ decided to kill its largest source of revenue. By February 2011, the memory division was no more and the formerly important power-supply unit had dwindled to 11% of sales. In last night's second-quarter report, SSD sales had jumped 252% year over year as the meatier unit prices widened gross margins from 4.3% to 21.6%.
Total sales doubled year over year to $78.5 million and GAAP losses turned into a tidy $0.06 of income per share. Cash flows were dramatically negative, which is something that makes my Foolish colleague Rich Smith nervous. However, that issue comes from a conscious choice to double inventory levels as OCZ doesn't want to leave orders on the table for a lack of product supply.
That gutsy choice to dump memory sticks is paying off in spades. The benefits are trickling down to investors, too. OCZ shares jumped about 14% on the news and have doubled over the past year.
And this is just the beginning. OCZ is moving on from competing mainly with SSD specialists such as STEC
From merely good to really great
OCZ certainly seized the SSD opportunity. In doing so, it gave up on an increasingly commoditized memory business and made everything about its operations better. It's like Walgreen
In more recent memory, Netflix
OCZ took Eminem's pop-culture advice to heart. I've seen enough proof of the new strategy's success to trust the new direction, and OCZ shares are trading at just 10.6 times forward earnings today. That's enough to make me invest some of my professional pride in the stock -- I'm adding an "Outperform" rating on OCZ in CAPS today and expect it to solidify my all-star CAPS rating even further in the next few years. Play along at home -- CAPS is a free, fun, and informative service.
What can the company do for an encore? To find out, add OCZ to your Foolish watchlist -- a steady stream of news and Foolish analysis on the stock will make sure that you don't miss a beat. Get started now!
Fool contributor Anders Bylund owns shares of Netflix but holds no other position in any of the companies discussed here. The Motley Fool owns shares of Western Digital. Motley Fool newsletter services have recommended buying shares of and creating a bear put spread position in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.