ALL: Thought you'd like to read the latest on IOMEGA from The Street.com" Nothing new except I didn't realize that EPS estimates are -.06. I thought they were -.03
Bear Hunt: Earnings Preview: Can Iomega Become
Profitable Again?
By Eric Moskowitz
Staff Reporter
4/16/98 1:04 PM ET
Iomega (IOM:NYSE) reports after today's close and expectations couldn't be
lower. For the first time in three years, the company is expected to report a loss,
and its highflying CEO, Kim Edwards, has recently departed.
"The company is hurting from a combination of a shortfall in sales and an
increase in incremental ad spending," says Glenn Hanus, an analyst with
Needham who lowered his rating to a hold in December. Some of the sales
shortfall has more to do with an increase in sales for its main competitor,
Syquest Technology (SYQT:Nasdaq), says Hanus, than anything else. "I've
been hearing from stores that the sales momentum for Syquest's SparQ and
SyJet drives has been favorable." (Hanus hasn't participated in any of Iomega's
public offerings.)
Now that Edwards is out, it not only leaves a vacuum at the top, but it creates a
quandary for Iomega: What should it do about its ad budget? Edwards was a
great marketer, and he had allocated $100 million for ads this fiscal year to
promote the company's new one-gig Jaz drives. The ad campaign, however, was
not going that well and was overshadowed by a resurgence in Syquest's
comparable SparQ drive. When TSC last profiled the company, Iomega made it
clear that its ad spending was hurting the company's bottom line. That was one of
the main reasons it gave for pushing down Street expectations for its March
quarter.
Before the company preannounced a month ago, analysts had hoped for a
9-cent-per-share March quarter, the same number it posted in 1997's first quarter.
Now, consensus estimates call for a 6-cent-per-share loss for the struggling
disk-drive maker. Iomega's stock also hasn't been helped by the ad campaign,
which began with four $1 million-plus spots at the Super Bowl at the end of
January. The shares are down 41% year-to-date. It will be interesting to see what
Iomega management have to say about the ad budget at the conference call this
evening.
JD |
