OCZ Didn't Deserve This Huge Drop

Oh dear. Mr. Market is asleep at the wheel again.

The distracted driver's latest victims are shareholders of OCZ Technology Group (NAS: OCZ) . Shares are falling nearly 10% in early trading after posting a perfectly passable third-quarter report.

Sales jumped 94% year-over-year thanks to OCZ's timely all-in bet on solid-state storage devices. Gross margins are on the rise and the non-GAAP net loss of $0.03 is only half the size of the year-ago deficit.

The numbers alone should be enough to keep OCZ's shares stable today, but it only gets better. Management isn't satisfied with resting on its growing pile of laurels, but keeps planning for aggressive growth.

You may have heard that Intel (NAS: INTC) is pushing its Ultrabook system concept with all its might at this week's CES trade show. OCZ hooks into that effort for a cut-rate ride on the chip giant's coattails; OCZ drives have been certified by Intel for Ultrabook use, and already selected to ship in the first Ultras by LG Electronics.

But why stop there? The company also announced the acquisition of virtual storage specialist SANRAD for $15 million worth of OCZ shares. At the cost of a modest 4% share dilution hit, this positions OCZ as a ready-made VMware partner, ready to pounce on the fantastic virtualization and cloud computing markets.

Finally, OCZ is hiring engineers at the speed of light, quadrupling its research staff in just 12 months. "This higher level of investment in R&D has resulted in advantageous competitive position," said CEO Ryan Petersen, "as we continue to release innovative products that meet the needs of our customers and as we move to our own internally developed proprietary technology, supporting our strategy of building barriers to entry."

That's the kind of investment that pays real dividends down the road, especially in a still-emerging slice of the technology sector.

Look, some 45% of this stock was sold short as of the latest available reckoning. I understand that emotions run high around this controversial company. OCZ isn't profitable yet, and many investors don't quite understand the point of replacing hard drives with memory chips anyway.

In my opinion, OCZ is doing all the right things. The company leverages cloud computing and a whole new take on enterprise storage all at once. And don't forget that OCZ has some mighty muscular friends -- Intel and VMware -- to help push the sales cart these days.

If not for those lovable trading and disclosure policies we swear by here at the Fool, I'd be happy to take advantage of this poorly motivated drop today. But this still isn't the finest investment opportunity on The Motley Fool's radar today. This special report will show you who bagged that honor, and it's free to download for a limited time.

At the time this article was published Fool contributor Anders Bylund holds no position in any of the companies mentioned. The Motley Fool owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Intel and VMware, and have also recommended creating a bull call spread position in Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.

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