Emerald Research reiterates strong buy on Iomega Corp.
LANCASTER, Pa.--(BUSINESS WIRE)--June 19, 1996--Emerald Research reiterated its
strong buy recommendation on Iomega Corp. (NASDAQ:IOMG) in a report issued Wednesday.
In the report analysts Joseph Besecker and Joseph Garner stated that Iomega's business
fundamentals continue to rapidly improve and that the recent weakness in the company's shares
have presented an attractive buying opportunity for risk-tolerant, growth oriented investors.
Emerald's 12 month price target is $40 - $45 per share.
Emerald stated the following in the report:
-- Much of the speculative activity in Iomega shares has focused on perceived potential
competition from the LS-120 drive.
-- The LS-120 is not new competition. The product was announced in May 1995 by a consortium
consisting of disk drive maker Matsushita Kotobuki Electronics (MKE), media maker Minnesota
Mining and Manufacturing (3M) and computer maker Compaq Computer. Compaq began shipments
of selected high end business computers containing the drive in April 1996.
-- Emerald stated that the LS-120 compares poorly with Iomega's Zip in terms of price and
performance. The LS-120 operates at less than 50 percent of Zip's speed and Compaq's price for a
built-in LS-120 is more than double Zip at $209 versus $99 for an internal Zip drive installed on
computers made by Micron Electronics and others.
-- Emerald stated that discussions with Compaq and its distribution channels indicate that the
company has sold only tens of thousands of computers containing the LS-120 at best, versus the
over 2 million Zip drives sold by Iomega since production began in late March 1995.
-- Iomega has made significant strides in establishing Zip as the successor to the floppy drive as
the industry standard with its agreements to provide Zip drives on selected computer models from
IBM, NEC Technologies, Micron Electronics, Hewlett Packard, ESCOM, Dell Computer, Acer,
Packard Bell, Power Computing, Unisys and Bandai.
-- The limited success that LS-120 has had in OEM markets in the past 13 months and its
non-presence in the after-market makes Matsushita's announcement to bring on Mitsubishi
Electric Corp. as a second source for drive production difficult to rationalize.
On the other hand, Iomega has announced that it has capacity to produce five million Zip Drives
through its internal capacity and externally through partners such as Seiko Epson. In addition, the
company stated yesterday that it is making progress in expanding its capacity to meet after-market
and OEM demand.
-- Emerald raised its second quarter EPS estimate to 11 cents per share and 1996 full year
estimate to 57 cents per share based on strong growth of the Zip product line.
-- Emerald initiated 1997 EPS estimate of $1.20 per share on $2.3 billion in revenues.
-- Emerald stated that Iomega shares are attractive at 24x 1997 EPS estimate.
Emerald Research initiated coverage of Iomega with a buy recommendation on May 8, 1995.
Headquartered in Lancaster, Emerald Research specializes in fundamental research analysis of
small- to mid-cap companies and is a division of Emerald Asset Management Inc., a money
management firm with over $200 million in assets.
CONTACT: Emerald Research
Joseph E. Besecker or Joseph W. Garner, 717/396-1116 |
