THE MOTLEY FOOL
(FOOL GLOBAL WIRE)
by Tom Gardner (TomGardner)
The rage today on the Street was Iomega, which traded 16.7 million (NASDAQ-counted) shares, or over 10% of its float. The stock is now down 38.8% over the past six market days.
America Online and, particularly, Iomega have taken comparable dives heading into equity-option expiration days over the past twelve months. Regular readers of this forum have noted the swirl of Rumor that twists through our digital home each rotation. . . a storm quite familiar to veteran investors on Wall Street. (i.e. We're not talking about an online phenomenon here.)
As you know, we don't invest in options. We don't like to pay hefty premiums; we don't believe in applying arbitrary time horizons to the management of our savings; and we're not interested in an all-or-nothing scratch of the ticket, spin of the wheel, or toss of the bones. In fact, don't ever expect Big-Daddy Options to get a Father's Day gift from us. And we won't be sending any Get-Well cards to Big-Mama Options if there's a crackdown on this vehicle.
Options add substantial price-volatility in the marketplace. And that volatility, in our estimation, is principly tied to rumors, a methodical utilization of those rumors, active trading, and pricing manipulation. It consistently does not reflect---in our minds---the financial fitness or underlying business potential of public companies. For those who have been active participants in Fooldom over the past year, the system is transparent:
I. Innuendo fed into the information flow ahead of expiration
II. Heightened trading activity
III. Often sharp and inexplicable price declines
IV. The falling off of chatter
V. A pricing rebound.
Followers of Iomega---investors, regulators, market aficianados---would do well to analyze the volume-and-pricing patterns of Iomega during the weeks preceding equity-option expiration day. Then, link that information to media coverage---print, television, radio and online---of Iomega during those periods. Then, for the sheer pleasure of it, try to tie the information back to its original sources. That would make for quite a story.
It's like a metronome, tick-tock-tick-tock-tick: Methodical rumoring, active trading, price collapse, rebound.
But not all during market hours today was gossip. News came flying out of Tokyo as Hitachi-Maxell Ltd. and Mitsubishi Electric Corp. announced plans to manufacture products based on Compaq's LS-120 technology---a Zip competitor. Avid storage technologists remember that Iomega sold this technology to Compaq in 1994 when they deemed it too expensive for the consumer marketplace. But the origin and the costs of it were lost in the rumbling today, as was the reality that at present Compaq's drive is only supported by Compaq itself, Matsushita-Kotobuki Electronics, Ltd., 3M and O. R. Technology.
In the other corner, Iomega appears to be in position to systematically drop prices on its drive as a result of original costs and increased automation, and the Company has OEM deals inked with Hewlett-Packard, Packard Bell, NEC, IBM, Acer, Micron, and Power Computing.
After market close, Iomega added Unisys and Japan's Bandai Digital Entertainment Corporation to the list. The Unisys deal is eye-catching as the Company announced that it would feature the Zip drive as a "standard feature into select models of its new Aquanta line of customized PCs, as well as offer Zip as an option across its entire range of personal computers beginning in the third quarter of 1996."
Iomega also announced the arrival of two new accessories, the ZipUnleased battery pack and the PCMCIA-SCSI Zip card, and plans for its IomegaReady support program. Word in the IOMG folder is that after-market trading was sitting around $31 as of 5 PM tonight, up $5.
No doubt all of this is being covered with considerably more sophistication than one small Foolish brain could---right there in our Iomega folder, accessible via our "Messages" bar along the bottom of every screen in Fooldom. I again emphasize the beautiful quality of this medium, where individual and institutional investors can share insights in real time. The analysis in that folder is without question going to arrive faster and show greater expertise than you could find on any other media platform. The world is going interactive, with bushwackers clearing pathways for information to flow evenly.
Tom Gardner, Fool
Transmitted: 6/18/96 8:15 PM (foolport) |
