To Thread:
I have not followed this stock very closly, but after reading this article a couple of weeks ago in Barrons, I have been considering shorting IOM. I'm sure this has been talked about already, but I do not have the time to go thru all the old posts. I would like to hear how people feel about this new drive from Sony and how it may or maynot efferct IOM, Thanks
interactive.wsj.com
Equally intriguing, though not as well publicized, was the new 3 1/2 -inch drive from Sony and Fuji Photo called HiFD, for high capacity floppy drive. It's a product that has the potential to create a serious shift in the way computers handle removable storage. HiFD discs look exactly like the 1.44 megabyte floppies now in common use. The difference: They store 200 MB per disc. Importantly, the drives are 100% backward compatible with 1.44 MB discs. They'll play both standards easily.
Sony, which expects to introduce the new drives in the first or second quarter of next year, says the standard will also be supported by Teac and Alps Electronics. Eventually, if all goes according to plan, the new standard could replace the much lower capacity drives that now come with every personal computer. The other implication of the new drive involves Iomega, maker of ZIP drives, backup storage systems for personal computers. Sony says an HiFD floppy will have twice the capacity of a ZIP cartridge, with much faster data transfer rates. The company plans to price the new discs a tad higher than the ZIP cartridges, but not much -- and remember, it can handle older floppies, which the ZIP can't.
In short, HiFD looks like an Iomega killer. And Iomega looks like a pretty fat target. Last week, Iomega shares were trading at about 32, having more than doubled since March, boosting the company's market cap to about $4.4 billion. According to Zack's, the Street expects Iomega to earn about 89 cents a share this year, and $1.25 next year. Trading at close to 26 times estimated earnings for next year, Iomega is far, far more expensive than others in the data-storage sector. And now it faces a huge new challenger in the market for removable storage.
Now, to be fair, Iomega had a new product of its own to show off at this year's edition of Gridlock in Gomorrah -- a line of ultra-small drives called Clik! targeted at digital cameras and hand-held computers. (At its Comdex booth, Iomega gave away annoying little clicking gizmos and promised to give away prizes to a lucky few spotted wearing a Clik! button while clicking their clickers. It's a wonder they didn't incite violence.) None of the gazillions of digital cameras we saw at Comdex made use of the new Clik! drives, though, and ZIP drives still account for most of Iomega's revenues. Iomega, which still likes to claim the ZIP drive will replace the floppy drive, now faces the prospect that the floppy will, in fact, be replaced by a super-duper floppy with backwards compatibility. Just why you'll need a ZIP drive when that happens isn't clear.
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