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Non-Tech : Iomega Thread without Iomega
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To: D.J.Smyth who wrote (8984)4/12/1999 6:55:00 PM
From: Ken Pomaranski  Read Replies (3) of 10072
 
<<And every single one of those OEM Zip drives sold at a loss to Dell.>>

Alright. Let's discuss this rationally. Dell charges $79 for the option to add a ZIP. Dell is making money off this option, or else they wouldn't offer it. (common sense)...

My guess is that Dell wants to make about $25 per drive sold. (33% profit margin..)

This means that:

cost to inventory + cost of warranty + purchase price from Iomega =
$54.

My guess is that this option adds about $5 to warranty costs to dell per system sold. (remember, the more complex a system is the more it fails, and the more it costs to service the system!)

I would also guess that cost to inventory is about $2 per unit. Therefore, I'd be willing to bet the Dell pays about $47 per ZIP drive to Iomega.

Can Iomega manufacture ZIPS for less than $47 per unit? How much profit does Iomega make per drive at this price? Not much. I'd say they lost money on OEM drives through 1998 (obviously, since something had to make them lose money), but may start breaking even soon.

Bulls have to ask themselves this question: If all of Iomega's product lines were profitable in 1998 (the bulls supposition), then how did they lose so much money? Ditto isn't big enough to cause all of it, neither is advertising.

ZIP250: dell charges $149 as an addon. This could greatly help margins, if the customer antes up the extra dough...

The problem is that ZIP may have already cleared out the $200 -> $100 price point. We'll see. Also, there may be confusion as to what the 'standard' really is.

kp
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