How will Iomega magically start making money again? They can't create more demand, the market is saturating, and the shift is moving more toward non power users (OEMs) What fundamental shift will occur? If someone could answer this to my satisfaction, I will probably buy the stock again.
Ken,
This is a very important question. Did you listen to the conference call? They talked about a lot of ways they are planning on saving money. Linda posted a link to a statement that they will shave $50 million of operating expenses for the 2nd half of the year. They have increased their manufacturing quality so that Zip and Jazz return rates have fallen. I think they stated that returns are down 30% due to increased manufacturing quality. At one point they stated they have shaved $8 off the cost of the ATAPI Zip drive by redesigning it with fewer chips. They are working with OEMs to qualify this new lower priced drive. They are also looking at further cost reductions. They are also cutting back on TV ads, instead using their marketing money for more focused channel promotions, as well as increased advertising in Europe and Asia. They are improving their supply chain management, and hope to get inventory turns up to 8, from the current ratio of 3 or 4. They are working on cutting down their inventory more, as well as lowering their accounts receivable. Their DSOs have fallen to the 30's from the 50's. They have made a lot of progress in these areas in a short time, and they are committed to making a lot more progress in the 2nd half of the year. Also, they said preliminary studies indicate that the tie ratio of OEM Zips is the same as for retail. The news on Zip is very good, but was offset by very poor performance of Jazz and Ditto. I think they have a good handle on controlling costs, which IMO is the key to returning IOM to profitability.
Craig |
