Winner, No one can ever accuse you of being wishy-washy! Seriously, thanks for your response. I agree that analysts are very often wrong and tend to lower expectations in order to look good. If I recall however, Iomega's earnings for last quarter were very close to analysts' estimates when the "whisper" numbers on the threads were somewhat higher. Maybe they were just lucky, but regardless of their accuracy, I will always include them as part of my research.
I hope you are correct about IOMG reducing their inventory to improve their balance sheet. But why would they use the "European Slowdown" as an excuse? If IOMG and their shareholders both want them to reduce inventory, why would they want to hide the fact that they are doing so by lying about it and blaming Europe? Sounds like a dangerous tactic to me.
I also hope you are correct with your predictions for sales and net margin. This is an area that always has the potential to surprise in both directions. I hold hope for JAZ sales and end of September OEM shipments as potentials for improvement. It's that darn rebate that still has me concerned. Even if revenues are better than expectations and match last quarter, net profit margins would have to double just to cover conservative estimates of the millions and millions that will have to be accounted for. If 700,000 ZIP drives is a conservative estimate (as your forecast would indicate), and we get real conservative and say that only half of the ZIPS sold are subject to rebate, that's a MINIMUM of $17.5 million that gets subtacted from net profits. That's more than all of IOMG's net profits for last quarter. And, as Young pointed out in his recent post, there are still the unknown ramp-up costs for the new JAZ plant.
You are certainly correct when you predict that if IOMG were to have a blowout quarter, new investors would have to pay a stiff premium to climb aboard the train. This works in both directions however. I expect that current IOMG longs (like me) will continue to hold a position regardless of how good or bad 3rd quarter estimates appear. I will also lighten or increase my position based on short term prospects (just my style). I actually hope I am wrong, however I believe the short term probabilities still suggest a very weak quarter and I couldn't recommend that a new investor buy now when the evidence suggests that it is better to wait a few more weeks.
Bottom line - I'm rooting for you Winner!
Regards - Dale |
