<<Iomega, using a seperate technology than the rest of the market, cannot afford to spend the money it takes to keep up. Iomega is simply not big enough of a company to do it. But they have to. Iomega is being left farther and farther behind.
Plus, last I heard, Iomega was firing people. This doesn't seem to me that their R&D department is growing to meet the challenge.>>
stick with the sandydisk posts and forget the philosophizing. your free research on Sandisk has been helpful. your philosophy on industry trends isn't of much help. If Toshiba had such a wonderful R&D department they would have invented the Zip drive and garnered over $7 billion in revenue from it, even as IOM has done. Iomega was significantly smaller in 1995 when the Zip was originally conceived and brought to testing. IBM's R&D department at the time was chastised for not conceiving the idea. What was IBM engineers doing that they couldn't think up the zip? They were working on MR and GMR which was more important than giving consumers what they wanted.
In the end it's not 10, 20, 30, 40, 50 or more Red Barron all night party Gigs being placed on a single 4 inch X 4 inch piece of refined sandpaper for storage; it's what does the public want and and what cost?
Iomega is working on what could be very explosive, promising programs. It's only a matter of time.
As for the zip: As more zips are sold, the divergence bw the loss leader drive and the highly profitable disk continues to widen. Do some quick math. 33 million zip drives this year with, say 200 million zip disks total sold. 48 million zip drives next with zip disk sales rising to 300 million total (3 disks per new drive sold plus 2 disks per exisiting drive). 66 million zip drives the next with 350 million zip disks. This allows for little increase in the actual number of zips sold per month, and absolutely no increase in the number of zip disks sold per drive over the same time; yet the profit margin from the disks at over 55% goes from $275 million next year to $415 million the following, or 50% growth; and profit per share goes from $1.03 to $1.58 for the zip disks alone. important is proportion of zip drives sold to the proportion of the increase in zip disks, i.e., 12:75 (this year), 15:100, 18:150. While the increase in the total drives sold each year is fractional, the increase, due to the compounding affect, in the number of zip disks sold each year is much greater; thus profit picture with time becomes rosier.
thus, the addition of each loss incurred from a zip drive decreases relative to the profit earned on each subsequent disk sold. it's only a matter of time for profit to improve.
Even if you increase the number of zip drives beyond the formulation so that the loss leader (the zip drive) continues to dent the zip disks' earnings, the affect is still only temporary and latent affect for earnings much higher in the end.
IOM's problems currently relative to earnings, as they've stated, is zip drive parts shortages (not able to fill the 250 demand), and weakening jaz sales - i.e., too many laborers for too few jaz sales. Since 60% of jaz costs are labor related, you only need to bring the labor picture back into focus with current demand in order for the jaz profit picture to improve.
The only other drag on IOM's earnings are new product intros. They seem to been careful (too careful) in this department; but given their experience over the past two years have gained a wealth of knowledge as to how to survive difficult conditions - look at other drive makers' bottom lines; only QTNM and Seagate look to be doing okay there; and mainly because they captured their costs, or brought them in line relative to current demand structures, even as IOM is doing.
PS. (What IOM failed to do in the beginning was attempt to make a profit on both the zip drive and the zip disks (pressure from analysts and other heavies in the market, I believe). They should have gotten the zip drive into the market by larger truck loads early on (given into to Compaq and Gateway demands for lowered pricing even as Imation has done in an attempt to revive the LS120). Then, of course, they would have been much further along on the scale of drive to disk proportional sales and profit. - all easier said that done) |
