Sal,
<I think that DVD has the potential to destroy IOM's core business. But it won't be this year or next (I'm assuming DVD gains critical mass in 1999). So Iomega may be OK for now, but I'm curious as to why a long term investor such as yourself regards it so highly.>
Assuming DVD gains critical mass in 1999 what will IOM's core business look like then? If all they have at that time is still only ZIP and JAZ then they will be dead. My assumption is that KE and co. will continue to develop products based on what they hear/learn from customers and at the price points customers are willing to pay. ZIP has been an outstanding success due to the way it was developed as much as the actual utility of the product itself. Many companies claim to be market or consumer driven. Iomega has been exceptional and putting this concept to work. ZIP's functions were designed and the product priced by consumers. My long term interest with Iomega rests on the current management's ability to visualize and execute this type of development. I do not consider IOM an INTC type buy and hold forever stock. It will require monitoring, but as one who places the utmost importance in strong management and leadership, I rate KE extremely high.
As for DVD prices, I think you are over optimistic on how fast prices will reach sub $100. It took CD-ROM several years to reach today's low prices. My guess is that by the time DVD's are around $150, ZIP's will be around $39 or less (much like today's floppies). Just my opinion. At anyrate, I emphasize that Iomega cannot and my guess is they will not just rest on ZIP and JAZ.
As for market tone in general, I think we finally have a point of agreement. I thought the market would react much more severe to the Intel announcement. I thought that this was just the type of excuse the market was looking for to start a swift and brutal downturn. Instead the NAZ took it very well. Either we are looking at a possible delayed reaction like you suggest or the investment community is viewing INTC's current rought time as a transitory phenomena (which is how I view it).
Keep in mind, the downturn you referrenced when INTC dropped from 74 in the fall of 1995 to 49 in the early spring of 1996 was relatively short lived and was followed by a 4x increase in the following 12 months. If INTC moves sideways or with a downward bias for the next 6 months and is followed by a similar increase, I will be a very happy camper <gg>.
Happy to keep the conversation more civil,
FF
BTW, as you might have guessed we are at odds on the outlook for the disk drive stocks. I see tremendous value (WDC and APM in particular), you think the market is telling us something. |
