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Non-Tech : Any info about Iomega (IOM)?
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To: Les White who wrote (43783)1/17/1998 11:15:00 PM
From: Steve Wiz  Read Replies (3) of 58324
 
Exactly,

This is one point that many market participants have yet to recognize.
In the past, if a PC users hard drive was maxed out they would naturally make a purchase for another HD of greater GB capacity. But now we have had a pardigm shift in the HD sector that many Wall Street analysts are to reflexive to see. IOM has sold over 12 million zips. Add in whatever Syquest or Imation have sold and you start to get the picture. Presently at retail, a large percentage of storage purchases made by consumers are of the removable HD kind. The very large HD that consumers receive with their new PC purchase is more than most will ever use. Couple this with the shrinking market share at retail and you see the dramitcally slowing growth of the Fixed HD market.

The only market propping up profitability for HD manufacturers, the high end server market has brought many large participants like IBM, Fujitsu and Samsung, thus erosion of profit margins.

The reason Seagate is laying off workers and closing plants has more to do with technology changes than poor business.

As market participants on this board will remember Iomega purchased a closed plant in Malaysia from Quantum. This should have been an obvious sign that somehting fundamental had changed in the Storage industry. Quantum was divesting extra capacity and plants while another company in the storage industry was buying that capacity and production.

I would not be completely surprised if Iomega yet again buys capacity on the cheap to help fuel its growth. It is surprising that participants have been late in seeing this trend. IOM is shipping over 1 million drives a month and you can add whatever Syquest and Imation are doing. How can this not be perceived as taking away business from the HD manufactures.

It is to late for the larger participants in the HD market to stop IOM from further taking business away from them. A company that produces a new technology, creates a new market etc enters whats called a
Supernormal growth phase. A supernormal growth company as we know is a company who by some technological or product break through can not produce enough supply to meet the demand for its product or services causing a disequilibrium in the market place. This disequilibrium can
either burn itself out (slackening demand eventually) or it can
reinforce itself and perpetuate.

It may be easier to think of this on a microbiology level. Think of a virus cell that enters the body. It enters as one cell and then evolves and replicates entering a Supernormal growth phase. Several things can happen. If its a virus cell of the common cold it will eventually replicate itself to the point where it burns itself out.
This happens to many companies who have one hot product or unsustaining business model. These companies are excellent short candidates. Other virus cells are attacked in their Super normal growth phase with drugs and are eventually weakened to the point were they are rendered harmless. This is what happened to Netscape.

Because Bill Gates has a self mechanism that eventually checked his biasness, he brought Microsoft around and attacked Netscape with everything he had. Gates knowing a little about microbiology, knew he had to weaken Netscape before they exited the super normal growth phase and he was successful.

Lastly we have a virus cell that evolves, replicates and reinforces itself to the point were it overtakes and conquers its host. This is AOL and Iomega. Both companies were allowed to exit their respective Super normal growth phases unscathed. The executives at their competing firms were not illuminated enough to see and recognize change, thus allowing these companies to replicate and reinforce with no outside forces or shocks to slow them down.

Both companies will now enjoy their own inertia, a self reinforcing user base and or installed base and word of mouth. This is something Wall Street analysts still don't recognize.

Steve
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