Frank,
You say>>
If Iomega's product cost structure is for "a $99 Zip and $5 Zip disks in the future", there can't be
enough profit in the product to justify a $6 Billion Market Cap. Iomega will be committing suicide
to sell at such a low profit margin. Really successful companies make their products for a cheap
price and sell it for a healthy profit. 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.<<
Give us your projections on when iomega will lower the price (since it hasn't yet); give us your estimated cost of production for zip and zip disks, jaz and jaz disks, and ditto. Make sure to take into account the normal reduction of costs that we see with increasing economies of scale, ie. 15% for every doubling of production. And, corrrelate that with the estimated increase in sales at those prices as stated by KE (4x to 10x sales increase). Tell us what you come up with instead of vague assertions. The current tie ratio, real facts, is ten to one. Take that into account too. Also, make sure to take into account European and Aisan sales which have just begun to develop. And, Acer's Net box, it may be the Nintendo of the future and the PC for the less developed nations and...
Basically iomega is currently valued at 1.7 billion 96 sales X 3 = 5+ billion. This is not high and especially when you consider their prospects for 97 and beyond. They control the next floppy standard and I'm sure they know just how to milk that for all it's worth.
Ken, long since Nov 95 |
