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Non-Tech : Any info about Iomega (IOM)?
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To: who wrote (3403)6/24/1996 4:47:00 PM
From:    of 58324
 
George:

Here are my assumptions:

1) IO's zip and jaz become standards
2) Disk drive shipments reach 150 million units per year in 1998.
(I got this number from an industry forcast)
3) Price of the then available zip product (400MB?) and jaz product
(5GB?) product remain at $200 and $600, respectively.
4) Revenue from the media equals revenue from drives.
5) Number of zip drives sold equals number of jaz drives sold. And
this sums to 150 million units.

The above being true yields drive revenue of 75million * $200 +
75 million* $600 = $60 billion.

To this I add $60 billion for the media to get a total revenue of $120
billion.

Now, Iomega stated in their FY 95 annual report that the margins for
zip and jaz products will not reach the 40% levels which they
enjoyed on the Bernoulli product line. So, if I take this as the
maximum margin, then I get $120 billion * 0.4 = $48 billion profit.
(If I recall correctly, their stated margins were under 30%).

Dividing through by 120 million shares outstanding and then factoring
in a P/E of 20 gives a share price of $8000.

$8000 is a 266X price move, more or less.

It will not take an Alan Ableson or even a Dan Dorfman to poke all
sorts of holes in my best of all possible worlds assumptions. So,
I scale my hopeful expectations downwards by a decade and arrive at
a share price of $800 by the end of 1998. I will be overjoyed if
this happens, but not especially surprised.

If I thought the best I could hope for is $105 per share in 2-3
years, then I would probably bail with my profits now, since the
risk/reward ratio would be too high for me.

Chris
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