During OCZ’s [NASDAQ:OCZ] fiscal 1Q 2013 earnings call last Tuesday, Ryan Petersen, CEO of OCZ Technology, made a pre-announcement regarding OCZ’s subsidiary, Indilinx. He stated the following during the earnings call with a transcript provided thanks to SeekingAlpha,

"Now, moving on, let me take a short – give you a short update on our product development front. I think it’s important to point out that we?ve recently gave out our next generation Barefoot 3 controller and expect to receive sample silicon back from our foundry partner TSMC in coming weeks.

And as such, we expect to begin sampling SSDs on this controller in the August to September timeframe. We expect to have SSD sales related to Barefoot 3 in the third fiscal quarter.

Initial specifications indicate that Barefoot 3 will support a significant performance increase over our current products and as its primary IT blocks are now licensed from a third party, it provides additional incremental cost benefits to OCZ. The Barefoot 3 controller utilizes our internally designed Aragon 400 Megahertz 32-bit processor, which for Barefoot 3 was implemented in TSMC’s 65-nanometer GP process.

The Aragon core is the world’s first SSD optimized processor and supports an SSD specific risk instruction set, allowing most instructions and branches to be executed in a single cycle.

When implemented in SSD controller, this gives the core a much higher performance than when using an off-the-shelf embedded safety field. And this design opens a world of new possibilities for game changing SSD solutions as it supports unprecedented levels of processing power."

Looking at this announcement, we believe that OCZ has finally built their own controller rather than utilizing another company’s controller, which has been one of the main criticisms of OCZ as a company that claims to be a leader in SSD technology. As stated above, OCZ plans to start sampling these controllers in SSDs in the August to September timeframe and expect to start shipping them in the fiscal 3Q 2013 which represents the calendar 4Q 2012. This means that OCZ is gunning for the holiday shopping season and is hoping to sell a lot of their own Barefoot 3 controllers in their SSDs this holiday season.

Hopefully, this move will help OCZ gain some more legitimacy with investors and enterprise customers as this signals that OCZ is finally capable of delivering their own controller. Once we begin to see performance figures from OCZ, we will then start to see what kind of performance OCZ’s own controller can deliver in comparison to the nearly ubiquitous SandForce controllers from LSI as well as Marvell’s own controllers which Intel, OCZ and Crucial have utilized for their SSDs in the past. We are hopeful to see some custom enterprise-based solid state solutions from OCZ in the coming months, as the majority of gross margin will come from those products rather than from consumer products.

Our biggest concern with OCZ is the fact that they have been deeply discounting their own SSDs in order to maintain sales levels and to drive revenue. We do not believe that OCZ’s record revenue is necessarily a good thing unless they can improve their gross margin beyond the current level of just 25 percent and actually start posting earnings instead of losses. A simple trip over to Newegg.com shows how deeply OCZ has been discounting their own SSDs and why OCZ is able to sell so much product. Out of 112 listed SSDs on Newegg, only 10 were not discounted. That represents a discount rate of over 90% on their SSDs which cannot simply be explained away by saying that these SSDs are being phased out by newer models, that would mean that 90% of OCZ’s products are being discontinued. As such, the company is posting strong growth – but the buying market share strategy is never a good one – just ask AMD and their moves in the graphics BU.

The story with OCZ’s enterprise drives on Newegg is a slightly less painful one, with only 13 SSDs being represented (after all, Newegg isn’t necessarily an enterprise sales website). Out of those, only 8 of the 13 SSDs listed have been discounted, however, the ASP and average discount are also much higher on these products.