THE RECENT DROP IN IOMEGA is very much tied to the weakness in computer stocks, especially the commodity types such as hard drives. The Nomai disks issues is a significant one because it raises the question of IOMEGA's ability to monopolize its own disks. To counter this threat, it is very important for IOMEGA to accelerate the penetration of its ZIP drives. If they have to give away their zip drives, so be it. It's not any different from Microsoft giving away their browsers.
IF IOMEGA can achieve a 20% penetration of current generation PC's (new and 3 year olds), then they are the standard. Sony then have to worry about the huge installed base that it is not compatible with. Some people worry about the "only 5%" penetration of the Zip drives. The older 486, 386 shouldn't be counted anymore. The new ones are the important thing, that's why, the OEM channel is where IOMEGA has
been very aggressive. Never mind how many disks sales will be generated. THE PERCEPTION OF BEING THE NEXT STANDARD IS THE MORE IMPORTANT THING. IMO, IOMEGA is just a few quarters away from this.
Once IOM becomes the accepted new standard, then they could take care of the NOMAI compatible disks. I believe it is very easy for them to make the next batch of Zip drives different enough that non-IOMEGA disks will fail. Also, by that time, they could systematically lower the prices that it doesn't pay to go for the clones, very much like what Intel has done in the last few years.
The important thing to remember is if IOMEGA is a commodity computer business. At this point, they have a very good chance to be one of the few companies that can monopolize a computer component, if they play their cards right. |
