My Quick, Conservative EPS Calculation
Rod,
You're right in post #4301 that I was being
deliberately conservative. I posted that
quick calculation in response to somebody
asking if Iomega would make the consensus
estimate of $0.10 EPS for Q2. I wanted to
show how easy it would be for them to do so.
At 129mm shares outstanding, they'd have to
have a significant slide in either their
gross revenues, or their % net, or both,
to fail to make a dime a share. The reports
we've been getting on sales and production
indicate to me that that's unlikely.
Don't gauge my thinking about Q2 just on this,
though. Remember, my first posting to this thread
included a similar quick calculation--nothing more
than an exponential curve-fitting exercise--
that had $343.2 million in gross revenues for
Q2 as a high-end target to be hit if the firm
keeps on its historic exponential rise in gross
revenues since the Zip came on line. Now, if
you use that high number for its gross revenues,
but stick with a % net of 4.6%, as in Q1, and
plug in the 129mm shares, you get an EPS for
Q2 of $0.12. My original post to this thread
said that would be a very, very good showing
for Q2.
In other words, I wasn't saying in my more
recent post that the Q2 EPS would be a dime.
I was saying that I thought it would be, at
a minimum, a dime, unless something had gone
wrong. On the other hand, I'd also be very
surprised if it turns out to be more than
twelve cents. Frankly, I don't think I'll
be all that happy if it's more than twelve
cents, for fear that there then won't be
steady EPS growth from 96Q2 through 96Q3.
Okay, maybe thirteen cents if they improve
on their rather weak 4.6 % net from Q1.
We'll all know in a few days. Meanwhile,
the price continues its highly volatile
fluctuations. Doubtless it'll continue
this way until the long-term, worldwide
status of this firm's products is a whole
lot clearer to all, regardless of their
knowledge of this sector. I'm personally
confident that the Zip and the Jaz are going
to be around a long time and are going to
be relatively commonplace, though I also
think it's possible that Panasonic (that's
Mitsubishi's big retail name, of course)
and 3M will try to stomp the Zip by
dumping LS-120s below cost and launching
a media blitz. (That is, if they can get
the thing into relatively cost-effective
and reliable production at all, as Guy
Gordon keeps reminding us.) They probably
won't do that, but they may, if they think
Iomega can be crushed by hype and deep pockets.
If they do, then KE will undoubtedly respond
by sacrificing short-term earnings, coming
out with a higher-capacity Zip for $99 (and,
perhaps, a Zip/floppy combo drive to answer
the kinds of concerns Dale Stempson addressed
for us all very sensibly). The Compaq crowd
will be hard-pressed to counter that, and they
know it. They can't dump the LS-120 below cost
forever. For that reason, I think the Zip is
going to win this contest in the long run, even
if there is a D-Day-style LS-120 offensive.
The one thing I don't want is for there to
be a blowout, for Cabot to then get back in,
and then for KE to execute another split.
That would run up the market capitalization
fatally high, in my opinion, forcing Iomega
to execute flawlessly, or better (!!), to
justify such a huge market capitalization
long-term. They pushed this element of their
mix to its real limit with that last split
this spring, frankly.
Cheers, Tom |
