IBD Blurb:
>>>>>>>>>>>
IOMEGA CORP. dove 5 1/2 to 21 on more than 22 million shares, making it the
Nasdaq's most active. The Cabot Market Letter reportedly removed the maker of portable disk drives from its model portfolio, citing declining momentum. Iomega's stock is down 59% since May 23. The Cabot letter is facing regulatory scrutiny over some of its recommendations.
Iomega's year-over-year sales growth has been accelerating for six straight quarters. Profits have also improved steadily since September. PRESSTEK INC., another Cabot favorite, shed 8 to 60.
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>>Subj: Drive Costs (Yes again)
Date: 96-06-26 23:03:49 EDT
From: IGOMEGA
As I am sick of being flamed (mostly privately) for my earlier drive cost analysis, I have attempted to create an analysis which uses none of my own assumptions and doesn’t require complicated math. The assumptions I use are mostly from Fernando Pineda.
The following data is used for my analysis:
Q1 Zip Revenues: 162M (Fernando)
Zip Disk Cost: $2 (MF Chiros)
Q1 Zip Drives: 753K drives (Fernando)
Q1 Zip Disks: 7.147M Disks (Fernando)
Total Zip GM: 28%-32% (Picked out of thin air but based on previous
quarters)
The following are my calculations:
Calculation for total Zip Cost of Goods sold (assume GM=28%):
Revenue*GM=Gross Profit
162M*(.28)=45.36
Total Zip CGS=162M-45.36M=116.64M
subtract the CGS of the disks:
Cost of disks*total disks=Disk CGS
(2*7.147m)=14.294M
What remains is the CGS of the drives:
Total CGS-Disk CGS=Drive CGS
116.64M-14.294M=102.346M
Divided drive CGS by the number of drives to get cost per drive:
102.346M/753K=$135.91
Using the same theory, but plugging in a different GM gives the following
table:
GM0.28 Drv Cost135.9177
0.29 133.7663
0.3 131.6149
0.31 129.4635
0.32 127.3121
0.33 125.1607
Fernando estimates drive revenues at 110 per drive. I think that is rather
low. 120 looks better, but IO is still posting a loss per drive either way.
I would like to note that I am only trying to add helpful information here
that we can all use. Most of the responses I have received from my previous
analysis have ranged from disbelief to accusing me of being a manipulating
short. NOT ONE RESPONSE CONTAINED NEW ANALYSIS TO REFUTE MINE. I would hate
to think people are so in love with this stock that they refuse to run the
numbers on their own.
One person, Pat Keeler did note that Zip was profitable even when the
majority of sales were drives only. To this, I agree. But I believe IO was
commanding a higher premium for the short-supply drives back then and the
higher revenues allowed for greater profit. As always, I look forward to
informed discussion on this and am interested in hearing other points of
view.
Patrick Grinsell
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>>Subj: Re:H&Q Conference
Date: 96-06-26 21:47:16 EDT
From: RB61
HandsomeEd,
<<Todd Bakar, storage analyst at H&Q, held a institutional conference call at
10:00 am this morning.
I was not in on the call, but spoke to two people (my H&Q broker was one) who
were.
.....
Both individuals who summarized his call this morning said it was the most
bullish they've heard him on Iomega so far. He reiterated his "buy"
recommendation.>>
I got to listen to a tape of part of the confernce call. Bakar was indeed
very positive. He indicated that the tie ratio on the Jaz disks were in
excess of the tie ratios of the Zip which were running at 10:1. This qtr
could be a real surprise on the upside.
Also, Emerald Research issued an update after the close today. They
reiterated their *Strong Buy* of IOMG. Indicated that risk tolerant
investors should take advantage of the situation.
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