Michael, I've heard that the SparQ is not a sure thing. The reason for this is that the cost of Spar Q is dependent on Syquest completing a plant in China. Syquest needs additional financing in order to complete the plant. They are thus intending to issue more shares on a debenture or Regulation S basis (not a favorable arrangement for shareholders) in order to build the plant. Once the plant is built which is expected to be sometime next year they will move forward with lower cost production of the drives/disks. They are attempting to lower the cost of the production of the disks by using China's lower manufacturing cost basis as the springboard for the product. The product itself is not a new technology.
All the above is dependent first on Syquest continuing a favorable relationship with Legend. There is a problem here too though. The Chinese Govt. has been well known for giving a handshake (letters of intent) for a deal and not following through. The Chinese Education Dept. have agreed to purchase an initial small amount of Syquest drives as "bait" to get Syquest to force Syquest's hand to plant in China. So here we have a catch 22: Syquest can't build the plant without additional financing, if Syquest can't build the plant they can't build SparQ at the price points they've suggested.
Some of this is speculation, some not, of course. Iomega has gained a significant foothold in China not only through Hong Kong and Shanghai but also through southern China where new computer plants are being build (or transferred from Thailand). It is also well known that Dell. HP, and Compaq's new plants in southern China are offering Zips as standard and optional on the systems being sold in China. Zip is much more prevelent in China right now than Syquest by a very large margin. Currently it is more important to a Chinese to own a computer than it is to own a car as computer sales in China are growing faster than any other part of the world.
So, some of the shifting on SparQ is comparable to the shell game wherein if Syquest doesn't guess under which shell the bean lies, they lose. There are many risks associated with this venture relative to the Chinese and certainly for Syquest shareholders. No doubt Syquest execs have been talking up the potential SparQ arrangement with China, but much depends on investors in the U.S. and abroad (through potential Regulation S share offerings) supplying the capital for Syquest to move forward.
For this reason, I believe, Syquest placed the information on their web sight, but then suddenly removed it as possibly the Chinese have been hedging on further dealings given Syquest's financial condition. I've never known China's Govt. to do business in a big way with a company on the verge of bankruptcy (China has been an area I'm somewhat familiar with through past dealings). |
