Frank, My experience tells me that investing in a company based primarily on
past performance is like driving with the rear view mirror. One can't see what 's
ahead. What's important to me (and apparently to most investors and mutual funds)
is the prospects of 1, 2, 3 years ahead. Not last year 's earnings or even last
quarter. Stock price is always driven by future propects, not past performance.
There are a multitude of excellent companies with excellent past earnings, decent
growth, low P/E and low book values - but their share prices stand still because the
future prospects aren't great. Novell is a good example.
I just have a strong believe that a paradigm shift is occuring in the data storage
industry - as a result of the price/performance achieved by Iomega for its Zip
and Jaz. High-performance, low-price removable drives and disks will likely be
the future - replacing 3.5-floppies, CD-ROMs in many applications, and perhaps
a big chunk of the hard disks market. I know there are people who disagree with
this view. But I have many years of experiences making good uses out of PC and
don't see how 3.5 floppies, CD-ROM, and perhaps even harddisks can stay
dominant much longer with the Zip and Jaz around. The consumers will ultimately
decide, and that is in Iomega 's favor in my opinion.
Someone mentioned that the world wide data storage market is $25 billions. Iomega
right now is the only one in the driver seat in terms of being able to capitalize on a
paradigm shift in this huge market for the next several years. I would not be surprised
at all if it achieve 30 to 50% market share over next 3 years. If one is too worry about
last year 's performance or current high PE, one will certainly miss a potential
5, 10, or even 20X gain in the next 3 years.
Of course, if I do not have the intend nor conviction to hold Iomega longterm to
let the longterm picture develops, I would be worried about shorterm fluctuations
in IOMG 's share price due to high PE, etc. Unless the market crashes, there is
no doubt in my mind that IOMG 's share price will be a lot higher than it is now
by year end.
A few days ago, I read a news release mentioning an analyst 's opinion that there
should be several major OEM deals announced by the end of summer. When
that happens, you can be sure that Iomega 's PE will be much higher than it is now. |
