Brent, the July 7. edition of Forbes arrived in the mail yesterday.
On page 426 Caroline Waxler writes:
ZIP zapped?
Is Iomega about to make another run for the stars?
Shares of this $1.2 billion (1996 sales) manufacturer and seller
of computer disk storage systems are up 18% this year, to a recent
20 5/8. Bulls predict another moon shot for the stock, like the
one in 1996 that took it from 9 to 55.
Streetwalker thinks not. The NYSE-listed stock, a favorite in
internet chat rooms, looks vulnerable. Company is facing
increased competition and slower PC sales.
Iomega's main product - the Zip drive -, which stores data for
a mass market audience, hasn't had much serious competition. Until now. A contender, the LS-120 drive, is is ramping up - a bit slower
than expected - and is backed by a powerful consortium including
Compaq, MKE, a Matsushita subsidiary, Imation and OR Technology.
Though LS-120 is more expensive than Zip, the product has more
storage capacity and is compatible with conventional floppy disks.
Iomega thought floppies were on the road to obsolescence, but 4 billion were shipped last year. In the race to convince OEMs
what to install in their in their laptops, even Iomega fans
concede LS-120 may have an advantage because of its backers.
P.S: The LS-120 installed in laptops is smaller and withstands
heat better in high-end models than the Zip.
Iomega's Jaz product, a high capacity drive targeted to
professionals, has got the industry talking because of reliability
problems. A large Japanese electronic-keyboard maker that had been installing Jaz in its machines, Roland Corp., stopped using the
drive last year. And in April Iomega had to recall 75,000 cartridges for kinks; analysts reduced quarterly earnings estimates by 10%.
Iomega's PE multiple of 23 looks rich given all this. One money manager thinks these shares should trade around 10. If you want to short it, shares are borrowable. Since the stock moved off NASDAQ,
a short squeeze is less of a threat.
Rocky could have written this.
GM |
