Mike,
H&Q is one of two underwriters (the other one was J. P. Morgan) that helped Iomega do a secondary offering of 6,750,000 shares back in 1996. The underwriters arranged for an "institutional" buy of all the shares at a flat $35 per share. This didn't make a lot of ordinary retail investors happy, because the stock (IOMG back then) closed at about $42 on the day that the transaction was completed, the result being we had to pay $42 while they only paid $35 at the end of that particular day.
The reason stated for this was they didn't want to sell that many shares into the market (only about 120,000 shares outstanding at the time) and take a chance on driving the price down. They wanted to not screw around and just get it over with so Iomega could get their money. Personally, I agreed with their reasoning.
As I recall, when the smoke cleared Iomega netted around $180 million from the deal which they promptly put to use in ramping up their business to meet growing demand and paying off debts, one of them being the plant they purchased from Quantum in Penang Malaysia. Bottom line....I seriously doubt that H&Q is short Iomega in view of their underwriter relationship with Iomega. Here are Iomega 's 1998 performance numbers through the third quarter:
....................1998
QUARTER....REVS..........NET
ENDING.....($MIL)..........EPS
MAR...........407,500.......-.07
JUN...........393,831.......-.15
SEP...........391,766.......-.06 *
* Includes a special non-cash $0.03 per share charge associated with the acquisition of Nomai in France.
As you can see, Iomega has cumulatively lost $0.28 per share through Q3, 1998. So, as I see it, H&Q is estimating + $0.11 net diluted earnings per share for Q4 of 1998 in order to arrive at only a -$0.17 per share loss for all of 1998. Surely I'm missing something here!!!
In view of the "consensus" estimates for Q4 prior to this (around + $0.05), the -$0.17 (for the year) looks awfully "sporty" to me.
Dave
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