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Non-Tech : Any info about Iomega (IOM)?
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To: Gottfried who wrote (45198)1/23/1998 11:16:00 PM
From: Nadine Carroll  Read Replies (1) of 58324
 
The advertising campaign is the right move for Iomega.

Iomega must continue to gain market share, not just relative to other storage makers, but relative to the entire PC installed base. Market share is everything in most technology markets, and Wall Street does not and has never understood this--the Street always reacts with fear to bold moves to gain market share.

Case in point--remember when AOL launched its big campaign to gain users a couple of years ago & all of us received dozens of intro disks in the mail? I remember sour analysts talking about how AOL was "buying customers" and how it wouldn't pay. They have reaped some rewards from having over 8 million users, I believe.

Another case--the drop in Compaq since the fall. Analysts did not believe that Compaq was making money on the sub $1000 PCs (though the company said several times that they were) and reacted with fear to the lower average pc price. But Compaq's world-wide market share has increased from 10% to 14% percent in the last two years, and they have the lowest mfg costs of any boxmaker (due in large part to having the largest volumes). They can afford to drive the ASP's down. Compaq just made its Q4 numbers, and the stock is currently rebounding.

Altogether, the ad campaign does not bother me -- it's the right thing to do. The company will continue to sacrifice margins as it sells more of its drives to OEMs, but that's also the right thing to do. If Iomega can have an installed base of 25 to 30 million drives by the end of this year, it will be very well entrenched against newcomers like Sonly HiFD. I would be happier if I saw better execution on the new product lines, but KE seems to be managing the company allright.

But he has done a terrible job of managing the analysts. This market does not forgive downside surprises. Thus the 30% drop in the stock in response to earnings that grew nearly 100%, year-to-year...
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