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To: David S. who wrote (912)	8/6/1998 2:20:00 PM
From: Bill Lin	Read Replies (3) of 10072

IOM had stated in their CC that their new ATAPI 2 product has a COGS of ATAPI-1 less $8. So, while Rocky was correct that OEM drives sales last qtr were slightly negative (I'd guess around 1% negative GM), the $8 drop in COGS (or more like $7.70?) would represent at least in increase of 11% in Gross margin (if they were selling drives to OEMs for $70. The $42 price you got (I wanna know WHERE! I need one) is probably inventory clearout of ATAPI 1 Jaz 1 and 2 are being phased out this year, so i'd expect their price to continue to drop. I think that we as investors (hypothetically), must demand a better return on our R&D budget. The revenue stream produced by the Jaz 2 product is pitiful compared to the amount spent to develop it. At least we want a 10:1 ratio on money spent vs annual revenue stream, *using a 50% gross margin model. Knowing that IOM is moving to a 20% gross margin level, the revenue stream to R&D ratio should be closer to 30:1. Bill

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