Frank, are you aware why Intel does not have major competition? Why they are still the leader in the CPU market?
>If Iomega is out to give it away just to get it in everyone's hands,
>I see this as a poor strategy that will lead the company down the
>same path that the Semiconductor
>Industry finds itself on.
The only way Iomega will insure their future is by making sure that they are the ONLY one ruling the market. If they can guarantee that today, they will guarantee profits in the future. Also, from a slightly different viewpoint, the drives are mostly an advertisement for the disks. This issue is crucial.
1. THERE IS MORE MONEY SPENT _TODAY_ IN ZIP DISKS THAN IN ZIP DRIVES.
Eventually there will be A LOT more money spent in disks than drives, and to top that off,
2. THERE IS A MUCH HIGHER MARGIN ON DISKS THAN ON DRIVES.
3. DISKS CONTINUE SALES MUCH AFTER DRIVES
4. IOMEGA IS NOT PRESSURED TO BE AS COMPETITIVE WITH DISKS, THEY ARE PRESSURED TO BE COMPETITIVE WITH THE ENTRY MARKET PRODUCT, THE DRIVE.
Their market share is small, but their earnings share isn't. This implies growth. There are a lot of people who need zips and don't know it. They are no where near saturation. So, selling at a lower price may be a solution. If by dropping the price in half, you can triple the sales, it's a bargain. If by dropping price in half you can double sales, it's still a bargain. DISKS WILL CONTINUE TO SELL, AND LONG RUN EARNINGS WOULD BE MORE THAN A MERE DOUBLE.
The comparison to the semiconductors industry is hardly fair. That is hardly a cornered market, and it is not an unrealized market.
>Furthermore, Iomega is virtually a one product company, but I won't
>even address that at this time.
Well, I will address this. Hard drive storage should not have too many flavors. There is not a hard drive storage for graphics, and a different type for games, and a different type for productivity, etc. It's not a software industry. It's all about STUFF, and HOW MUCH. The types of products do not matter, only the SIZES.
That is a GOOD thing, not a BAD thing. If one product can appeal to more people, then focusing on dropping that one product's cost is easier. If you have a product A and product B, both selling at $50 apiece, and you sell 500,000 of each, the COSTS will drop slower than if you have just product AB selling at $50 and 1,000,000 units.
Dropping costs is what technology is all about.
But their are two distinct markets to appeal to. Zip and Jaz distinctify these markets. There is not a market for a 100MB zip, a 150MB zip, a 200MB zip, a 300MB zip, a 400MB zip, a 500MB Jaz, a 850MB Jaz, a 1000MB Jaz, a 1200MB Jaz, a 1600MB Jaz, and a 2000MB Jaz.
It is a very fuzzy area between 1000MB and 1200MB, so why would I want to produce both at the same time? ONE OR THE OTHER. It's ok to turn one into the other, as a part of the evolution of the company, but it's still ONE OR THE OTHER.
By narrowing their focus, they can sell cheaper. |
