Stephen,
I too think you bring up some of the questions any new investor should be wondering before they hop on this rollercoaster.
"Also their extra Zip cartridges had a $20 rebate on them. (So much for making all their profit off of the disks and not the drive. Looks like they just dropped the price of disks by 10%)"
A price drop on the disk is not unexpected. Since the introduction of the 100MB Zip disk in March, '95 the disk has dropped from $19.95 to between $11-13. If you have followed the industry you probably know about "Moore's (Intel) Law" which states, basically, that products in the computer industry must evolve every 24 months (Grove's Law has since changed this to 18 months and shrinking). If you look at the evolution of the better products in the industry you will see that this bears out -- so why the price drop. IMO IOMG is about to release their next generation Zip -- it will be 18 months at the end of September. To do this they need to get their Zip100 house in order -- I would suspect by Q1,'97 (or earlier) we see a $99 zip100 and zip disks at about $8-10. Then we will see the introduction of a 200 or 400 MB Zip.
"Challenging earnings" I agree. Until IOMG comes out and changes this statement I too am looking towards a challenging Q3. I'd rather be pleasently surprized (sorry Mark - had to do that for you). Q3 is notoriously bad in this sector and that will never change -- except for "September Buys" in the Goverment market there really isn't much of an uptick for any tech product in this quarter -- so the use of challenging (a term many of the tech CEOs used in their Q2 earnings release) is quite appropriate. I would recommend that you not wait until the holiday buying frenzy to jump in. IMO the "challenge" statement has already been reflected in the price.
"Backing Up" Great point. In fact the penetration of DC2000 tape drives (Ditto class) have only reached 10% of all desktop computers. The proliferation of the LAN in the the corporate environment may have given users a false sense of security -- buying backup is like buying insurance -- the big yawn. Zip is more than a backup device so I think you may mean Ditto in your thoughts. Ditto, though boring, has managed in three years to become the market share leader in Europe and become number 2 in the US. Pretty amazing for three short years. Their positioning -- "It's like insurance for your stuff". IOMG knows its marketing.
The only argument I can make for the adoption of Zip is that a high percentage of the initial Zip purchases were from the average Joe consumer, 41 years old, $40k+, new home computer user, not a techie (based on installed base research info). On the Jaz front, the product was just launched in July so naturally IOMG is targeting the early adopter, hard core power user. This is a very profitable target (see SYQT in the early days) that is only growing in numbers. AS the Jaz ramps and the price drops I can see the Jaz replacing the hard disk (apparently I'm not the only on -- check out an earlier post of mine about Jim Seymour's article in the September 21 (I think) issue of PC Magazine).
Obviously mine is a marketing slant, but that's me. Hopefully you will see the paradigm shift that is taking place and not be swayed by a slow period of growth -- both from a company and a stock perspective.
good luck
trakker |
