Just saw this, FYI:
Monday July 15 7:29 PM EDT
Iomega Corp slumps, short-seller remarks =2
Iomega, a Roy, Utah-based maker of 100-megabyte Zip disk drives for data storage, is thinly covered on Wall Street but a favorite of many Main Street online investors.
A First Call survey of two analysts shows them forecasting the company will post second-quarter earnings of 10 cents a share, up from a loss of two cents in the 1995 quarter.
"They'll be better than people anticipate -- better than the bulls anticipate -- and my guess is better than bears anticipate," Berman said.
He said he is short "because there's tomorrow and the prices have already gone down and competition is going in."
POSSIBLE LOST DATA money," he said, noting the company recently offered a rebate that effectively cut consumer prices by 25 percent on Zip drives sold as accessories.
Berman also noted the drive is subject to competition from other technologies, such as the LS-120 diskette, which stores 20 percent more data and is compatible with existing 1.44-megahertz floppy disks.
The LS-120 is being developed by Compaq Computer Corp , Matushita-Kotobuki Electronics Industries Ltd 6783.T , and Minnesota Mining and Manufacturing Co .
Asked about criticisms that the LS-120 is more expensive and slower than Iomega's drives, Berman said the new product would nevertheless put pressure on Iomega.
"I call it the ice cream effect -- at a certain stage they start melting, and the technologies just don't stay there, there's new ones," he said.
"Iomega made a great product," he added, but that product could be surpassed by rivals.
"The bulls have it that 90 million of them will be sold," Berman added, saying he had doubts. On July 1, Iomega said it had shipped more than two million Zip drives.
"They don't have to take away much of the market even to affect potential earnings," he said of Iomega's rivals.
Howard Rosencrans, an analyst at H.D. Brous, said a total of about three million "megafloppy" drives have been shipped in the Zip market.
With an installed base of some 120 to 130 operating personal computers and demands for storage rising sharply, Iomega still has plenty of opportunity to expand its business, he said.
"The market is nowhere near being saturated," he said.
Rosencrans also noted that the price of Iomega's drive is about half that of the LS-120, and he estimates it is cheaper to make.
He said Iomega already has commitments from PC makers representing 60 percent of the total annual shipments of about 60 million units to provide its drive as an option or standard feature on at least five percent of their PCs.
Iomega is expected to post third-quarter results on July 18. Officials of the company were not immediately available to comment.
-- sam.perry @reuters.com, Palo Alto Bureau +415 846 5400 |
