My thoughts on the $50 rebate.
I took this as a very posititive sign. Once again IOMG management proved
that they are aggressive in going after goals, and not resting on their laurels
even when things are going great. A few key points:
Most important implication is that Zip supply is no longer a problem in 3Q.
Second most important implication is "Take this on the chin, LS120.
You are dead before your are even born" message to Matsushita/3M
Compag and to the PC world.
Third most important implication is that IOMG apparently already made
enough money, they think they can afford to offer $50 rebates.
1. IOMG 's decision to offer $50 rebate at this time, when supply apparently
can not meet demand, probably means that Zip supply/shortage problem
is no longer a problem, at least in the 3Q and 4Q. KE gave some hints
on this during last NY PC Expo. I expect news to lift the max. 1996 capacity
of 5 mils Zip drive to be announced soon.
2. Instead of expensive TV commercials, offering $50 rebates at this
point in Zip 's life is probably far more effective than TV commercials.
Rebates also sell more Zip drives and disks, which in turn pays back some
or all of the cost of rebate. (I believe there are also tax benefits just like
TV commercials). If supply is plentiful now, a rebate is also a direct $
"thank you" for those retailers who have been carrying Zip in volume.
3. Another guess, with the rebate, IOMG folks may be watching to see the
level of increased demand for Zip at a substantially lower price. Many PC
owners may be waiting for Zip price to drop, per previous announcements by
Iomega. This piece of data my help IOMG to lower Zip price in an optimal
fashion between now and year end.
4. I think IOMG is gearing up for huge 3Q and 4Q. Most of the recent OEM
deals are not effective until 3Q. So apparently, a lot more capacity will come
on line in 3Q and 4Q to meet demands from these new deals. I think IOMG 's
strategy here is to have a huge 3Q, so that momentum will carry into the
Christmas sales in 4Q. When OEMs see the huge sale/demands for Zip in 3Q,
they will no doubt arm mucho of their machines with Zip for X-mas sales.
Even Compag may join in 4Q, since they certainly don't want to risk losing
market share during X-mas sales for the sole reason that their PC do not have
Zips.
If supply is no longer a big problem, 3Q and 4Q will be huge, and critical mass
of Zip installed base can be reached in early 1997. Every Zip drive sold in 1996
will contribute to 1997 earnings through Zip disk sales, and the sale/earning
momentum will accelerate. It's very important to keep this momentum going
full speed if the Zip is to be the undisputed floppy standard by 1998.
5. If my memory is correct, IOMG said that their target Zip drive cost is $99
by year end. (Can anyone confirm this, too lazy to search my file) . Zip disk target
is $5, but I don't remember if there was a target date. After the $50 rebate,
we probably will a price reduction, then more reductions by year end.
6. The only thing that can slow down the Zip 's quest to be the new floppy standard
is the LS120. A price between $99 and $150 by year end will ensure that the LS120
will never become a serious threat when it appears on the market. I think we are
seeing the first step from IOMG to this goal.
Young |
