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Non-Tech : Any info about Iomega (IOM)?
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To: Rodger Wenzel who wrote (9657)10/23/1996 1:48:00 AM
From: William R. Polk   of 58324
 
I see from your profile that you have a degree in mathematics so obviously you are able to crunch numbers. However, I believe you are missing at least a couple of crucial facts. First of all, the Zip rebate is available only in the U.S. Not available in Europe and Asia. Unless you are in a position to know what U.S. sales alone are, your caculations are interesting but meaningless. Second, OEM sales for the quarter were 10% of sales, and not subject to the rebate. Third, a certain percentage of rebates were paid in the 3rd quarter and thus already "charged" against revenues. You do not know what that number is and either do I. However, I know for a fact that rebates have been submitted and redeemed in the third quarter. Now noone (outside of KE and company) knows for sure what the breakdown of sales of Zip between Europe, Asia and North America is. However, we can take some educated guesses. If you assume 900K total drives in 3rd Q (this is a figure given to us from J.P. Morgan) the 10% OEM brings us down to 800K account for. What were European sales of Zip? I don't know for sure and either do you. But we do know that European sales were 16% of total sales. For purposes of discussion I will assume only 10% of the 800K drives were for European Zip sales (although I have a hard time believing that Ditto and Jaz sales outpaced Zip sales). This leaves us with 720K drives for Asia and North America. There is no breakdown of sales between these two areas but even assuming that Asia was the same as Europe (i.e. 10%) then that leaves us with U.S. sales of 640,000 drives (non-OEM). IOMG has reserved 23.3 million for the rebate. This is enough for 466,000 drives. Even assuming that absolutely no rebates were paid and counted against revenues in the 3rd Q (which we know is not true) this still leaves us with "rebate reserves" of approx. 72% which is certainly within range of what many think the rebate redemption rate should be. As I recall from the conference call, K. Edwards never said the reserve was "50%" but rather gave a range (i.e. "closer to 50% than 100%"). My figure of 72% certainly falls within that range and is certainly within striking distance of the 75% critics of IOMG say was necessary. I look forward to your response.
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