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Non-Tech : Any info about Iomega (IOM)?
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To: FuzzFace who wrote (41163)12/22/1997 3:00:00 AM
From: Dale Stempson  Read Replies (1) of 58324
 
Re: Emerald CC & Rosencran's $10 - $12 loss comment

Edwin, My initial reaction to the conference call was that there really wasn't all that much in the way of new information. Aside from some specifics with regards to analyst's estimates, the comments and opinions of the group largely reflect what we've already discussed here on this thread.

You asked for my interpretation of the comment regarding selling OEM Zips in the future at a $10 to $12 dollar loss:

I believe what Howard Rosencrans was trying to say is that Iomega will lose $10 to $12 each, selling Zips to OEMs at less than $50 when compared to selling Zips to non-OEMs.

In other words, Iomega's Zip OEM margins will be significantly lower than their Zip retail channel margins. If they sold to OEMs at $50, then their price to non-OEMs would be $60-$62. (Iomega would still make a profit, but not nearly as much). This would also explain Howard's subsequent comments with regards to how OEMs enjoy the benefits of "ridiculous margins" because their costs are so low by comparison.

This is the only explanation I can come up with that makes sense to me. If I'm correct in my interpretation, then I think Howard brings up a good point. Margins for boxmakers are pretty low, and with Zip demand increasing, those who can today offer built-in Zips stand to benefit. I could see more OEMs and SKUs offering Zips in order to take advantage of this current margin opportunity.

Regards - Dale
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