Tuesday, May 28, 2013

OCZ Needs to Leverage their Brand and Get Out of the Price War

OCZ has fallen on troubled times. The stock price plunged in the latter half of 2012, and it now rests in the ~$1.30 range, losing nearly 75% of its value year over year. The depressed stock price is due in large part to the company's failure to report earnings, prompting threats of de-listing from NASDAQ. Beyond these accounting woes, OCZ faces another huge obstacle; the SSD market is a crowded place. While OCZ makes fantastic solid state drives featuring their own in-house controller, they are finding it difficult to compete with Samsung on price. Samsung not only produces their own SSD controller, but they also manufacture their own memory chips, which helps them keep costs down. With Seagate recently entering the SSD market, things are only going to get more difficult for OCZ to price their drives competitively.

The OCZ brand, along with their PC Power and Cooling branded power supplies, does have a history of success with PC hardware enthusiasts. When I first got interested in PC hardware, OCZ was one of the most well known brands of high performance DDR memory, and PC Power and Cooling was the undisputed "premium" brand of power supplies. I feel that OCZ has tarnished their brands by focusing too much on cutting costs and trying to offer more appealing prices for a broader market. Given the decline in the industry in general, I think it would be a smart move for OCZ to go back to their roots as a high performance brand. Their will always be enthusiastic PC builders who want the best hardware, whatever the cost, and I think brand awareness (which OCZ already has) is the biggest barrier to entry to this market segment. OCZ should revamp their product lines by sourcing parts with top-notch performance and reliability and pass these additional costs onto the customer with high prices. OCZ cannot compete on price with giants like Seagate and Samsung in the value SSD market, but they can carve out a profitable niche as a high-performance high reliability brand.

EDIT: My article originally stated (incorrectly) that Seagate used their own controller and manufactures their own DRAM. They actually use Toshiba/Samsung memory and Link A Media Device’s LM87800 controller. Seagate should however maintain a DRAM price advantage over OCZ due to their undoubtedly larger order volume.

Thursday, May 16, 2013

Android Studio Won't Open on Windows? Here's how to fix it.

Android Studio, a new IDE for Android Development, was recently announced at Google I/O 2013. Versions for Windows, Mac, and Linux are available for download on the Android developer website.

I was excited to try out the new IDE, but I could not get the application to open on windows. I filed (along with lots of other people) a bug on the problem and today a workaround was posted in the bug thread. Apparently the problem can be solved by setting your JAVA_HOME environment variable.

Here are the steps for setting the JAVA_HOME environment variable (thanks to Marko for posting these steps):

Open Control Panel
    In the top right search box type environment
    Click the search result that says Edit the system environment variables
    In the System Properties window, click the advanced tab
    Click the Environment Variables... button on the bottom
    In the Environment Variables window, under the System Variables heading, click New...
    In the Variable name field type JAVA_HOME and the Variable Value field type C:\Program Files\Java\jdk1.7.0_21\ (if that folder doesn't exist, you may have the 32 bit version of the JDK installed in which case you'd add C:\Program Files (x86)\Java\jdk1.7.0_21\)
    Click OK, OK, OK.
    Double click the Android Studio Setup exe.
You may have to modify the value of the variable depending on what version of Java you have installed and where you installed it. It turns out I didn't even have JDK installed so I had to take care of that first. These steps solved the problem for me and I was able to run Android Studio, no re-installation required.

From the discussion in the bug thread, it looks like Google will likely address this issue during the installation process in future builds.

Thursday, May 9, 2013

The International 3 Ticket Sale; Where did Valve go Wrong?

A buying frenzy erupted on Tuesday morning when tickets for The International Dota 2 Championships were released in the game’s online store. Players and fans of Valve Software’s popular online game overwhelmed the company’s servers in a scramble to purchase the approximately 2,500 tickets to attend the live event in Seattle on August 7-11, 2013. The massive spike in traffic was more than the Dota 2 online store servers could handle, resulting in delays, timeouts, and failed transactions. The $50 tickets sold out in short order, and almost immediately began appearing for sale in secondary markets for more than $200 each, indicating some portion of the initial purchasers were looking to turn a profit rather than attend the event.
While failed servers and profiteering ticket scalpers are not unusual when only a limited number of tickets are available for a popular event, many were frustrated that Valve did not foresee these issues and take measures to prevent them. The Dota 2 community on reddit, for example, was flooded with posts complaints about the sale. Did Valve underestimate the load on their servers? Should they have planned to hold the event in a larger venue? Could they have thwarted the plans of scalpers buy imposing buying limits and preventing purchasers from reselling tickets?

I would like to discuss these three main complaints in further detail.

Server Load

Server crashing buying frenzies are commonplace online. It is not because the technology to combat them does not exist. It is not because companies don’t know how to predict traffic volume and provision resources to accommodate it. It is because it is not always in the best interest of a company to pay the costs required to handle traffic spikes. As long as a supply limited item sells out, the company makes the same revenue, regardless of how terrible the website experience is for the customers. If enough people are willing to purchase the item despite the technical problems, why should the company eat in to their own profits paying for the resources to handle temporary traffic spikes? Valve maximized their profits by not having sufficient server capacity.

Insufficient Supply of Tickets

In the case of The International Dota 2 Championships, Valve has the luxury of monopolistic pricing. Nobody else can supply tickets, so valve can set the price at whatever they want it to be. Given this fact, there are two ways to address this issue, either increase ticket price to decrease demand, or hold the event at a larger venue. I think Valve probably had good reason to do neither. It would have been more expensive to rent a larger venue, and they would presumably have to charge less per ticket to fill it. It is certainly possible that the margin cost of a larger venue is greater than the marginal revenue from increased ticket sales at a lower price. In terms of pricing in the current venue, I think Valve could have charged more than $50 per ticket and still sold out while reducing the number of problems due to excessive demand. The problem is, they knew they could sell out at $50 per ticket because they did it last year. They did not however know they would sell out at $51 per ticket. I am 99% sure they would have, but raising the price any amount increases the risk of not selling out. And if they fail to sell out they miss out on a lot of revenue in other areas. Sold out events are more exciting for the teams competing, more exciting for the fans, more exciting for those at home buying compendiums at $10 each, etc. This hype translates into more people playing and spending money on the game in the future. A concerted effort to estimate the maximum price they could charge and still sell out would have cost money, and they may have made an appropriate profit maximizing decision to keep the price at $50.


Eliminating secondary markets is a terrible idea. If people buy tickets and end up changing plans and not attending, if they cannot resell their tickets, it creates empty seats at the event which as I already discussed is undesirable. Scalpers also provide a service to people who are willing to pay excessive amounts to attend the event and did not manage to buy what appears now to be an underpriced $50 ticket directly from valve.