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The one thing that will kill a hardware company much faster than a software company is managing supply chain and inventory costs. I don't know the full backstor

The one thing that will kill a hardware company much faster than a software company is managing supply chain and inventory costs. I don't know the full backstory of OCZ other than seeing how the SSD segment of the storage industry has gone and the prices have obviously gone a lot lower and are more competitive. Depending on how OCZ managed their production, it would be very easy to be left holding the bag on millions of dollars of inventory. Unless you have billions in the bank, that's enough to sink a company every time.

AmVess 13y ago
They had a high rate of warranty replacements for several years...so much so that it cost the founder and CEO his job. It's pretty hard to make money when you have to provide two products for the price of one. It went on for so long that it was scary.
- programminggeek 13y ago
  Well that would totally do it. High failure rate on a low margin product is nearly as bad as having too much inventory because the effect is very much the same. Example: Say you make $10 profit on a $100 product. For every replacement product, you need to sell 9 more to make your money back on the 1 failure. So, a 10% failure rate means you are basically selling the other 90% just to break even and try to stay in business. I don't know about OCZ's margins or their failure rate, but with prices squeezing downward, I'd imagine they found themselves in a situation where they maybe had a high enough margin initially that the failure rate wasn't high enough to sink them or the failures didn't occur early enough to burn through the overall margin right away. That's not a sustainable business and the only option is to get people to float you a loan that is maybe big enough to buy time to fix the quality problems if possible. In the event that it's unfixable, no amount of money can save an upside down business model.
JohnBooty 13y ago
In addition to OCZ's reliability issues, it must have been tough to compete on price with companies like Samsung and Intel that fab their own flash memory.

AmVess 13y ago

They had a high rate of warranty replacements for several years...so much so that it cost the founder and CEO his job. It's pretty hard to make money when you have to provide two products for the price of one. It went on for so long that it was scary.

programminggeek 13y ago
Well that would totally do it. High failure rate on a low margin product is nearly as bad as having too much inventory because the effect is very much the same. Example: Say you make $10 profit on a $100 product. For every replacement product, you need to sell 9 more to make your money back on the 1 failure. So, a 10% failure rate means you are basically selling the other 90% just to break even and try to stay in business. I don't know about OCZ's margins or their failure rate, but with prices squeezing downward, I'd imagine they found themselves in a situation where they maybe had a high enough margin initially that the failure rate wasn't high enough to sink them or the failures didn't occur early enough to burn through the overall margin right away. That's not a sustainable business and the only option is to get people to float you a loan that is maybe big enough to buy time to fix the quality problems if possible. In the event that it's unfixable, no amount of money can save an upside down business model.

JohnBooty 13y ago

In addition to OCZ's reliability issues, it must have been tough to compete on price with companies like Samsung and Intel that fab their own flash memory.