Dave-
Great to see your post discussing concerns for IO's overall business plan/profitability outlook. I think for investors with a longer term outlook, research in this area is a must.
For purposes of discussion, I'll try to respond to a few of your statements where we have a different take on the situation.
All of this is in ICBW mode (I could be wrong).
<<OMG's profitability is hardly something to write home about. They had sales
of over $250,000,000 and a profit of 10c/sh, that's a very low gross margin.
If margins fall further and they get others to make their equipment,
therefore sharing profits, the 10c/share may be a high water mark.>>
I believe that 2Q earnings showed an increasing margin on sales. As ramp up costs are absorbed and as economies of scale come into play, the outlook for these margins to be maintained or increased is positive.
<<I think the $50 rebate on a Zip is more an indication of slowing sales than an
attempt to gain more market share, they have virtualy no competetion in this
area so why reduce the price on a hot selling product. IOMG will have to
continue to reduce their reduce costs to maintain their unit sales.>>
People can certainly differ on this one. But, this seems to have been a calculated action to drive Syquest from the market. With Syquest essentially gone and the LS 120 yet to make it out- IO has no competion because they have thus far proven to be too tough to compete with due to the right mix of product and pricing.
<<Also, any product that reaches a standard status has to be very inexpensive
and has to be made by multiple manufactures. Take a look at the regular disk
drives or hard drives today, they are standards but there is barely any margin
in it, and their PE's are in the single digits.>>
I think that this is where the real genius of IO's overall plan shows up best. Their products are proprietary while the hard disk drive is an open standard. Its a world of difference.
My knowledge in this area is limited, and I am trying to learn more. At this point I think that understanding the long range aspects of IO's business plan can help make sense out of the day to day market activities we are experiencing. I also think that those who are shorting this company either know something negative that I don't have a clue about - or that they are clueless about both the products and business plan. I've put my money on the latter.
Hope some others will jump in an share their knowledge on this topic. |
