Salt Lake Tribune Headquarter is about an hour away from
Iomega Headquarter.
*********************
Wednesday, October 23, 1996
IOMEGA'S TURNAROUND HAS INVESTORS SMILING AGAIN
BY STEVEN OBERBECK
THE SALT LAKE TRIBUNE
Suddenly, the zip is back in Iomega's stock.
Shares of the Roy, Utah-based manufacturer of Zip drives appear on the rebound, climbing from a low of
$13.03 on August 21 to close as high as $25.85 on Oct. 16.
On Tuesday, the stock closed at $22.12, down $1.12 for the day.
The recent rebound in Iomega's price, a report indicating the company earned $12.8 million in its third
quarter ended Sept. 30 and plans to list shares on the New York Stock Exchange finally are giving shareholders
something to smile about.
And those who believe in Iomega and its products see things getting even better. They hope a Christmas
buying spree is in store for the company's products.
``We are now approaching the first Christmas that Zip production capacity will enable Iomega to benefit
from the highest consumer buying period of the year,'' says Emerald Research analyst Jospeh E. Besecker.
Amid speculation that its 100-megabyte Zip drive eventually would replace the widely-used 4.5 inch floppy
drive as a new standard in personal computers, Iomega shares reached a one-day, all-time high of $54 on May
22, although that week they closed down $10 from that high-water mark.
The Zip drive can be likened to a removable hard drive for personal computers. Zip disks can store more
than 70 times the information that can be held on a standard floppy.
However, after Zip drive sales earlier this year did not grow as quickly as some had hoped, the price of the
company's stock plunged. Shares lost more than 70 percent of their value before hitting the late August low.
Iomega shareholders are hoping the worst is behind them.
The company's third-quarter earnings were more than six times higher than the $2.03 million it earned in the
same period a year earlier. Revenues in the quarter reached a record $310.1 million, bringing sales for the first
nine months of 1996 to $815.7 million.
``There are still doubting Thomases out there, but third quarter results should put some of the concerns to
rest,'' Besecker says.
During the third quarter the company reported it had shipped its 3 millionth Zip drive since introducing the
product in 1995.
Iomega has been a great story, says Jon van Bronkhorst, vice president and technology analyst at
Robertson, Stephens & Co.
``I like the company. I like its products and I like its market strategy,'' he says. ``But I hate the stock.''
Bronkhorst told the Bloomberg Forum last week ``you cannot predict this [Iomega's] stock.''
Iomega's stock does not trade rationally with the rest of the computer data storage industry. At its current
price, shares are trading at over 50 times earnings while the industry's premier company, Seagate Technology, is
trading at only 10 times earnings.
Securities analyst Rick Berry at Murphey, Marseilles, Smith in Atlanta says the rally in Iomega's stock is
over.
``They were entitled to a snap back rally,'' Berry says. ``But if you look at the company's earnings they were
not that great. Sure they beat some analysts' projections, but those were projections that had already been
lowered.''
In early June, Berry was the only analyst to project Iomega shares were ready to drop. He correctly
indicated at that time shares would be trading around $16 to $18 within the year.
Now, he expects the stock to return again to that $16-18 trading range.
Iomega's management recently announced plans to abandon the NASDAQ stock market for a listing on the
more prestigious New York Stock Exchange. Shares are expected to begin trading on the NYSE in the next
few weeks. |
