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Non-Tech : Any info about Iomega (IOM)?
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To: Cogito who wrote (4196)7/10/1996 11:20:00 PM
From: Fred Fahmy   of 58324
 
Allen,

>>Yes, Gabe, Iomega does get royalties from the sale of Zip disks manufactured by other companies....<<

Is this interpretation of Iomega's relation to the "other companies" a guess or a fact? Receiving royalties usually implies receiving the smaller portion of the profit. I would have thought that it would be the other way around. Iomega would pay these other companies a relatively small fee for manufacturing (assembly cost only, not parts) the disks and then would sell the disks to the companies. The companies would put their logo's on and sell at whatever price they choose. In essence, the companies would be acting as Iomega's vendors and disk customers. In this arrangement Iomega would be getting the majority of the profit. The question of royalties vs. selling disks has been raised before. If a definitive response has been posted, I don't remember seeing it. So, I ask again, do you know for sure that this is indeed a royalty arrangement?

BTW, having all of these other logo'ed disks is great for Iomega's strategy of standardizing ZIP, even if it does reduce disk margins. They definitely are NOT repeating the mistakes of Sony and Betamax or IBM and Microchannel Architecture. In these cases, each company lost the war on standards even though they were first and in the case of Betamax better. They lost the war because they were greedy and weren't open with their technology. Other companies in these respective industries got together and established their own standards (VHS for Sony competitors and EISA Bus for IBM clone manufacturers) and the rest is history. KE and his team are solid.

Happy investing,

FF
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