To Young and all the others on the "IOMG too high" thread:
This is my first post as a registered SI member. It's
a thank-you and a tiny (and slightly nutty) technical
contribution.
Here's my semi-sweet tale. I'm a small-potatoes
investor (academic in the humanities, but with a technical
background, including a Caltech bachelors degree). I first
bought IOMG on 12/31/92 (yes, 1992, no typo) at 7 3/8
(that's $0.98 by today's prices, after three splits),
because I had owned and used Bernoullis for years and
thought that the company would keep its bread-and-butter
business and, being technically capable, it would benefit
from the general rise in demand for offline storage and
backup solutions. How's that for establishing my LONG-
term investor credentials?
After the 5/4 split and the 3/1 split, I was sitting
pretty (about 90% compounded growth p/a since I bought),
and I got a little antsy when I read the NYT trashing
during the winter and also saw how much Wells Fargo
debt Iomega had. I bought a Zip parallel in fall 1995
and installed it on my Gateway P5-90. It worked out
of the box all right, but it hasn't been very fast.
IOMG tech support stank, and so did their documentation.
I called, faxed, bought the I/O board they recommended
to speed the thing up, etcetera, all to no avail. I also
had some trouble with their tech support in the old
Bernoulli days, and also thought their documentation
that came with Bernoullis was terrible. Nonetheless,
the Bernoullis and the Zips are good products, without
serious competition, so I use them despite these headaches.
I decided in mid-March, though, that the stock would
probably peak out in the near future, because Iomega
couldn't keep up with demand and would fail to exploit
all its opportunities 100% effectively, so I sold out
at 19 1/2 (or half that in today's share prices,
following the 2/1 split). That was on Friday.
First thing Monday morning, H&Q issued their strong
buy recommendation. I should've bought right back
in and eaten the commissions, but I didn't. It was
the first $75,000 mistake I've ever made. To add
insult to injury, the Epson Zip drives hit the local
COMP-USA shortly thereafter, and I knew that the
IOMG management was doing better than I'd thought
concerning the expansion of capacity and similar
issues.
When the split hit in May, I decided I'd made a
mistake and bought back in right after it, at 46 1/2.
The same day I bought in, I discovered this thread.
It's been a terrific help. Thanks much. Using
what I've learned here, I watched as the secondary
happened and then decided to buy more the moment
I saw just a tiny slide back up, because I'm now
convinced by Young's and Mary C.'s and others'
analyses. (Okay, I'm not _quite_ as bullish as
Young, but is anybody?) I'm happy to say that
I bought again Monday morning at 39 7/8, just
about an hour before the IBM Aptiva press release.
It was very gratifying to get a 20% paper profit
before the close of business that first day.
Thanks, gang. If only I'd discovered y'all last
February or so....
It's clear that my concerns about the Wells Fargo
debt are now ancient history. I think it's still
true that Iomega's tech support stinks, but that
should be less and less of a factor as the drives
become OEM items instead of aftermarket add-ons
by techies like me. The Zip disks are about as
indestructible as such a medium can be, and the
drive, once installed and working right, works
flawlessly. There's zero competition. Zero.
This from a guy who bought his first PC in 1979,
folks, years _before_ the IBM PC came out. (It
was a Northstar Horizon, for those of you techies
out there, and I wrote my dissertation on it.)
Now, for my odd little technical contribution.
I put IOMG's revenue results for the past five quarters
into an Excel spreadsheet and fitted the data to an
exponential growth curve. The actual and predicted
figures are as follows:
Quarter Q-Revenue Q-Revenue
Ending (Actual) (E-Trend)
04/02/95 $40.1 $36.9
07/02/95 $52.6 $57.6
10/01/95 $84.7 $90.0
12/31/95 $148.8 $140.6
03/31/96 $222.0 $219.7
07/01/96 $343.2
10/01/96 $536.3
12/31/96 $837.9
04/01/97 $1,309.2
07/01/97 $2,045.6
10/01/97 $3,196.1
12/31/97 $4,993.7
You'll notice that the data fit pretty well for
the five most recent quarters for which we have
actual figures, and that the projection for
96Q2 is about $10 million more than the optimists.
I'm something of a quantitative historian
by trade, and I've done a lot of historical
analyses of things that grew exponentially in
our society, at least for a while (e.g., the
number of members of the American Chemical
society, 1876-1980; see Thackray, Sturchio,
Carroll, and Bud, _Chemistry in America,
1876-1976: Historical Indicators_, published
in 1985). Things grow exponentially
when they're filling a new niche and have
sufficient means to provide the relatively
unlimited demand. They stop doing so, and the
curve becomes the classic S-shaped logistic
growth curve, when either saturation of the
niche sets in or they lose one or more of the
factors they need to keep growing exponentially.
(For example, bacteria colonies will top off
when they run out of food.) Unquestionably,
some day IOMG will hit saturation. It could
come because it hasn't any more manufacturing
capacity, or because it already has a Zip in
every PC on every desk with 20 Zip disks
alongside. (Young is smiling here, no doubt.)
Or it could come because of lots of other reasons.
I don't know when or how the saturation will
set in, of course, and neither does anyone
else, but we can be sure it will. If not,
then the revenues for 1997 will exceed $11.5
billion, by the current calculated curve, and
soon the planet will use all its resources to
do nothing but manufacture Zip drives. (Great
fantasy, that.) I suggest that one thing for
us to monitor is simply when the actual figures
for each quarter start to dip down from the
current calculated pure exponential curve.
When they do, we'll know that saturation is
beginning, and that'll give us one tiny little
hint about what "maturity" will look like for
the Zip product. Sure, it's a crude kind of
analysis, but it's a whole lot simpler than
second-guessing EPS, market cap, etc., etc.
I'll keep you posted on it if you like. In
the meantime, if the July Q2 news hits anywhere
close to the $343 million projected on this
very, very crude curve-fitting, then we all
know that IOMG is still capitalizing nearly
perfectly on a wide-open market. Remember,
though, that this kind of curve-fitting is
extremely crude work.
Sorry this is so long. I promise to
be briefer henceforth. And thanks again.
Investing by parallel-processing human analysis
is sure easier than doing it alone, and you
folks know a whale of a lot more about silicon
stocks than my broker does. I now have a
healthy skepticism of the standard media
channels and won't be stampeded by any old
NYT article again.
Cheers, Tom Carroll |
