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Non-Tech : Any info about Iomega (IOM)?
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To: J P Cross who wrote (6118)8/16/1996 12:21:00 PM
From: Patrick Keeler   of 58324
 
Iomega can hit $0.82 for FY 97, easily.

For one, this ultra-conservative company would've cautioned the analysts to revise down by now, and the analysts had every opportunity to do so following the 2Q conference call. In fact, JP Morgan did; from $0.85 to $0.82. HD Brous went higher though.

I agree, without net margin improvement (over the current 5%) Iomega will have to do about $2.2 billion. Well, net margins should improve as more and more Jaz products are made. Jaz margins improved 3% from the 1Q to the 2Q alone. Since Jaz was below the average for Zip and Ditto, Zip and Ditto net margins must have been much higher than 5%(maybe 7.5-8%). I derive this from the fact that Iomega was able to increase R&D from 3% to 4% and take a charge for the rebate worth 1-2% in net margin, without any reduction (quarter to quarter) in overall net margin. They have stated that the goal is to get Jaz margins in line with Zip and Ditto.

Using the 5% net margin through all of 1997 and Iomega's 3Q96 sales are flat, revenues need to grow 20% per quarter for the next 5 quarters for Iomega to have $2.2 billion in trailing sales by 4Q97.

What if current Zip and Ditto margins are 7.5%, and Jaz production efficiencies bring it inline with this net margin by early 1997? Well then Iomega only has to grow 6% quarter to quarter, with 3Q96 flat, through the end of 1997. This is because they only have to do $1.44 billion in revenues to get $108 million in earnings.
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