IOMG on pricing strategy. Reposts.
This following is a repost on AOL MF on H&Q conf. call in April. If I
remember correctly, the entire interview was posted on this thread
in April or May.
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Subj: From the 1st Q Conf. Call
Date: 96-07-03 14:53:35 EDT
From: Yogel
From the 1st Quarter Conference Call (Regarding Price):
KE: At the moment we're still selling Zips for the $199 retail, our street pricing.
Some people bring them down to $189. But we're still, for the most part,
being held up at $199. I think in Europe it's closer to $220 or $230.
We've really not taken any price action on the external drives. However,
as we've stated repeatedly, we will (an I stated it earlier in this conversation)
continue to be aggressive on pricing going forward. We had stated,
when we were on the road tour, that over the next 18 to 24 months
we hope to take Zip drives to $99. And, it is for the full intent of (1)
Being the market leader, and (2) developing the overall market. So,
you will see us taking price actions in the future. AND AT TIMES IT
MAY APPEAR INDEPENDENT OF DEMAND. I know that some
people, and I see that, we still cannot meet the global demand on Zip.
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For those new to this board.
Back in 1995, IOMG announced a 4-phase marketing plan for the Zip and
Jaz. So far, they have followed and executed the plan exactly and
flawlessly. The price cuts are parts of the plan.
IOMG 's goal is to sell tens of millions of Zip drives and hundreds of millions
of Zip disks. The 2+ mils Zip drives sold so far is nothing but a drop in
the bucket in the longterm plan.
A price drop affects the top and bottom lines only if unit sales do not
increase in proportion to the price drop. Zip price drops by 25% with the
rebate, Jaz price drops between 17-20%. This means that for revenue
to stay the same, zip sale must increase by about 33% and Jaz by 25%
over 2Q, respectively. But with 1) most OEM deals effective in 3Q, 2) big
price drops spurring higher demands, 3) typically huge X-mas sale in
4Q, and 4) apparently higher production capacity -- Zip and Jaz unit sales
in the 3Q and 4Q should increase drastically over 2Q96. In my opinion,
revenue and earnings will be huge in 3Q and 4Q. The more Zip and Jaz
drives sold, the bigger the earnings and better net margin because of
disk sales.
Zip unit sales in 2Q96 alone should be more than the previous 4 quarters
together (about 1 mil). Unit sales in 3Q and 4Q should be several factors
higher than 2Q, and the price drops are designed to make sure that will
be the case.
I am looking for exploding numbers in 3Q and 4Q.
Young |
