TO ALL: WSJ article: negative on Syquest and positive on IOMEGA!
Title: SyQuest Ships Portable Drive
Hoping for Financial Salvation
By G. CHRISTIAN HILL
Staff Reporter of THE WALL STREET JOURNAL
FREMONT, Calif. -- SyQuest Technology Inc. began shipping a 230-megabyte removable-cartridge hard drive, a product it hopes will provide financial salvation after a ruinous price war with Iomega Corp. in the removable-cartridge market.
In an interview, SyQuest's vice president of marketing, Ron Brown, said the hard drive, called the EZFlyer 230MB, has about twice the access speed and greater data-transfer speed than Iomega's blockbuster Zip, a 100-megabyte high-density floppy drive.
While offering 130% more storage per cartridge, the EZFlyer carries a suggested retail price of $299, about 50% more than the $199 Zip, the success of which has propelled Iomega's stock and market capitalization to stunning heights.
The EZFlyer's removable storage cartridges will cost about $30 retail, compared with $15 to $18 for Zip's. Removable drives are used to back-up internal drives, archive data or transfer big files.
Strategically Important
Mark Geenen, president of TrendFocus Inc., a market-research firm in Palo Alto, said the EZFlyer is a strategically important product for SyQuest. "It does three things: It provides a higher-capacity alternative to the Zip. It pre-empts Zip2, which will be in the 200 to 250-megabyte range. And it is also positioned very aggressively and cost effectively against erasable magneto optical drives."
But SyQuest is so financially wounded, some analysts doubt it has the staying power to effectively manufacture and market the EZFlyer in the retail market. When sales of Iomega's Zip drive began to zoom last year, SyQuest cut the price of an earlier model, the EZ-135, to $229 to protect market share. Sales were still disappointing,however, and SyQuest lost money on each machine.
For its second quarter ended March 31, SyQuest had a loss of $51.1 million, or $4.49 a share. Sales dropped 38% to $47.4 million. SyQuest had negative working capital in the second quarter, and now has a slightly negative net worth.
In a management shake-up in early May, founder Syed Iftikar retained his chief executive post, but the board named a new chairman, president and chief financial officer.
"They have to get in mass production very quickly and execute well," said Mr. Geenen. "Then they have to manage costs." If they repeat any of the mistakes made marketing the EZ-135, "it will be tough for them to recover."
Staying Power?
John Luhtala, the new financial chief, said in an interview that "We think we do" have staying power. "We've had exceptional cooperation from our suppliers, and I think we've done a good job of managing cash to get behind the introduction of this new product."
He added that "it was a mistake on our part to get into a pricing war with Iomega. It's been a very painful experience." SyQuest said on May 8 that it had hired the investment banking firm of Needham & Co. to identify potential strategic partners and sources of debt and equity
financing. SyQuest's battered stock then shot up to $17.875 on May 23 from a low of $4.375 before the announcement.
It fell abruptly after Mr. Luhtala denied the company was in merger talks. Shares closed unchanged at $10.75 on the Nasdaq Stock Market.
SyQuest's marketing will emphasize that the EZFlyer is a hard drive, not a floppy drive, and is bigger and faster than Iomega's Zip.
-- end of article --
Isn't it nice to see IOMEGA as the leader against whom other compare themselves?
Long on IOMEGA!
Regards,
Erik. |
