either you didn't understand what was written or you have no viable alternative answer. what is relevant to IOM's profit is the relationship of the sales mix of zip drives to zip disks, not your pedandering down the lane of presuppositions and fantasy. I was discussing IOM's future profit picture, not your dudley doright views of alternate technologies.
your contention is that zip drives are falling - fine, let them fall. that would mean that the loss IOM is experiencing is also falling; we know they are making at least 55% profit margin on disks; so if the loss leader sales are falling the loss at IOM is falling and earnings are going up as zip disk sales will continue regardless of the number of zip drives sold; it's the profit mix that makes them money. You decrease the profitless (loss) item, you make more money. So you premise that zip sales are falling is only beneficial to IOM. The sales of the number of zip disks will continue unabated into the future for at least two years and then begin fallilng too over time if zip drives sales are falling. Nevertheless, the zip disk sales weight goes up, the zip drive sales weight goes down; profit increases.
If, as is actually happening, that zip sales are rising, albeit slower than some anticipated, then their wieghted zip drive sales losses continue ONLY for as long as both intersect at the optimized point on the graph where the profit from the zip disks begin to outweigh the loss on the zip drives.
If IOM successfully introduces new products into the mix that also creates an initial loss, but controls the product intros successfully (they've learned a few things over the past few years) so that any negative affects are short lived, then the potential for profit from new product intros are greater and quicker relative to their learning curve.
Stan Corker's (Emerald) statement that zip disks are really "nothing more than a future compounding profit annuity" is still true.
I'll write more about the zip disk sales margins later. I've got things to do. Your ideas are only valid if backed up with numbers, and they rarely are. Fact is, zip disk sales are rising. Even though margins may decrease from lower prices, the overall profit increases X the total number of disks sold. What is important then, is the number sold and a healthy profit maintained. |
