BO -
Some responses to your thoughts on the Emerald conference call:
>>At one point, someone mentioned that lowering the price of the drive to consumers will help in the long run because of the increased sale of disks. I disagree. Reason:
Consider two consumers, Mr. X and Mr. Y. Mr. X is willing to spend $150 on a drive, but Mr. Y is only willing to spend $100. I claim that Mr. X is willing to purchase more $10 diskettes than Mr. Y as well. If this is true, then tie ratios will go down with cheaper zip drives, perhaps radically.<<
Your logic fails here. It doesn't matter whether Mr. Y buys as many disks as Mr. X. Since both of them are buying SOME disks, the total number of disks sold increases, along with revenues.
>>Someone assumed Iomega is trading at 20x multiple of future earnings. Earnings, of course, are much more ephemeral than sales. You have to get sales projections correct within a few percentage point to have any handle on earnings. Since I disagree with them on sales (see point 1), I disagree on this item as well.<<
Iomega has not missed consensus estimates for the past several quarters. Of course, this is no guarantee of future performance, but it says something both about Iomega and about the quality of the analysts' projections.
>>Claim that increase in supply to retail will increase gross margins.
What if people want the OEMs now that they are available? That would explain my observations at various stores about slowdown in retail sales. A computer company in the 80's once went bankrupt because they let it known that they were coming out with a better model later. That screwed up their current sales. The same thing may be happening here.<<
??? You mean, if people buy new computers with Zips built in instead of buying retail Zips, this will create a problem? Or do you mean that meeting demand at retail instead of having to leave store shelves understocked is not going to have a positive effect? I really don't see your point at all. Zip sales cannot cannibalize Zip sales. It's the same product. So your comparison to the computer company of the 80s doesn't make sense to me.
>>As long as the floppy drive SLOT is available on the laptops and all computers, it is not too late.
They were also making assumptions about Sony's marketing (will sell at too high a price) that may be unwarranted.<<
The fact remains that Sony's costs WILL be higher, because it just costs more to build a drive with dual-gap heads, etc.
>>Overall, their predictions were based on their assumptions just like any other conference call I've heard.<<
Naturally. Projections of the future can only be based upon assumptions. Just as yours are. This brings us to something that becomes unarguable, namely, that I happen to believe that the analysts on that call are working from assumptions that have greater validity than yours. Let's check in a year from now, and see who was right.
- Allen |
