Margin Calls
How much will the <$5 Margin Calls affect IOM on Monday? Anybody's guess, but one thing, the trend is crystal clear. IOM is headed down down down.
There is no Comdex Hype to bump up the stock price. There is no 4th Q Hype to bump up the stock price. An MR product announcement you might suggest? It would merely cannibalize higher-margin Jaz. The News Release might be good for a 1/2 to 1 1/2 point bump up in the extreme short term, but long term, it will only allow the Jaz-division to survive, not thrive. A mass-produced ORB will kill off Jaz if Iomega does not respond with a similar product and price point. But with Iomega's massive and expensive American Overhead, profits will be scarce-- but survivable.
Be very aware that the current concern of Iomega Management is to merely Survive...not Thrive. The "Thrive" pipe-dream that so many here subscribe to is not based on reality and market conditions. It is based fantasy and past history...3 years ago already. Iomega Managment knows this to be true. The PC market is entering an extremely low-margin period. Iomega is no exception to this condition. As proof of Iomega Management's realization of this concern, they have sold off the Ditto division, thereby Shrinking the company with very little in return. The concern was not to get $3 Million in cash. Their effort is to shrink the company in order to Survive...not Thrive.
On the other hand, Castlewood Systems is set up perfectly for these low-margin market conditions. Castlewood has very low American Overhead. Production expenses and profits are distributed among several partners (Sanyo, Aiwa, Trans Cap, etc.), assuring direct partner concern over quality as well as financial success of the ORB products. Product prices are low in keeping in line with other computer products. Product Quality of Orb according to Usenet posters is Very Good. Orb Customer Service is free and reachable by email and phone.
Iomega's Book Value is $1.42. This is its "Survive Level." The stock price will undoubtedly reflect this "Survive...not Thrive" level as well...perhaps a year from now.
But maybe even sooner then we realize. |
