Iomega Pays Out
By Tony Miller (TMF2Aruba)
July 21, 2003
When better than the dog days of summer to relax on the backyard hammock, cool down with a tall lemonade, and reminisce about days gone by? One of my favorite subjects is what I like to call the rise and fall of Iomega (NYSE: IOM).
Iomega, best known for its Zip Drive, made a splash in the early days of The Motley Fool. It could arguably have been the most discussed stock in our forum, and is still talked about on our Iomega discussion board. For Iomega, the mid-1990s looked like a party that would never end, as Fools far and wide delighted in split after split and a seemingly endless ride skyward.
But what goes up invariably comes down, and such was the case for Iomega. The proverbial bottom fell out as competition made the Zip Drive and its sister products yesterday's news. The sell-off got so severe that it prompted a 1-for-5 reverse split in 2001.
The company has been relatively quiet since. Until last Thursday, that is, when this Fool was surprised to read an announcement unlike any I'd ever seen. I was so surprised that I read it twice, then searched for corroboration. Iomega announced a one-time cash dividend of $5 per share? Might managment be running a few megabytes short of a full Zip Disk?
Here's a particularly curious quote:
"Iomega said it considered using the cash for acquisitions, but was unable to find anything that offered both attractive returns and limited downside risk."
Now, I'm a few credits short of a business degree (OK, I'm all credits short of a business degree), but I find it curious that a company like Iomega wouldn't feel the need to either invest its cash elsewhere or simply put it toward research and development.
I'm not exactly complaining. I'm a shareholder. My little cupful of 350 shares entitles me to a $1,750 payday in October -- a nice Halloween treat for sure. The cynic in me, however, wonders if management is betting that this incentive will spark new shareholder interest, and thus boost the stock price.
If that's indeed the agenda, and all Iomega has up its sleeve, Halloween could bring more tricks than treats for shareholders. I mean, once those dividends are paid, will shareholders be motivated to stay invested? Will this be an early Thanksgiving for the company and its investors, or will Iomega fall with the October leaves?
I hope it's the former. I've watched the company play the part of the turkey through the years. It would be nice to finally enjoy some of the trimmings. |
