Yes, Allen, I can be too negative! The right answer probably lies
right in between, which is why you need the bears here!
There are 2 items that I want to clarify (mostly to others, not
directed at you, Allen) that being R&D, and the 'treadmill'
effect:
TREADMILL EFFECT:
First of all, the treadmill effect refers mainly to revenues, not
earnings exactly. Obviously, they will lower the cost to manufacture
the product significantly at this point in the learning curve. The
treadmill effect is apparent if you look at the Americas. Revenues
in aftermarket only increased 20% even though unit sales were up at
about 70%.
R & D SPENDING:
This is where you have to use your heads, guys! KE said this:
Iomega will increase advertising spending to over $100M WITHOUT
IMPACTING EPS. This means one of two things:
(1) The extra money is going to come from outer space
(2) He will reduce spending somewhere else to balance this out.
A company has three major elements: marketing, R & D, manufacturing.
If marketing spending increases by $100M, where would the money come from? Would they manufacture it? or spend less in other areas?
I think the answer is obvious without having to spell this out.
TIE RATIOS:
Very bad news here. Obviously, people have enough of these. They
are not throw-away items...
kp |
