Rod, I wanted to make a comment in regard to your puzzlement over the Matsushita licensing deal viz a viz the "give away the razors make money on the blades" analogy.
The analogy is apt only because Zip drive sales do drive annuity sales of the more profitable disks. However, Iomega DOES make money on the drives. KE has stated that they will not sell drives at a loss, and that they are still making money on the drives even with the rebates in place, and that they will still be making a profit on the drives once they have reached their target price of $99 retail.
If Iomega can make money selling the drives, even with these price reductions, certainly Matsushita can.
I also don't believe that this is only a hedge for Matsushita, nor that they aren't paying much for the license. My bet is that Matsushita believes there is a terrific worldwide market for Zip drives, and that they can make a lot of money selling them.
As far as Q3 earnings go, I really hope we don't get burned again by having two sets of predictions, one from the analysts on the street and another from the Net crowd. I do believe that the current earnings expectation of the street analysts is probably on the low side, because no analyst is going to stand behind a prediction for fabulous earnings growth when the company CEO has warned of a "challenging" quarter. But rather than making any predictions myself, I'm just hoping that Iomega has been able to meet the challenge.
But if anybody wants to bet me that Iomega will not meet the .10 number, I'd be glad to take their money.
- Allen Murdock |
