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Non-Tech : Iomega Thread without Iomega
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To: David Colvin who wrote (9195)4/17/1999 2:38:00 PM
From: Ken Pomaranski  Read Replies (3) of 10072
 
A few more observations:

First, I'm leaving my model intact for Q2, but I may have to change it for Q3/Q4 if ZIP250 takes off as much as management says it will. I'll wait and see what Q2 brings.

Next, it is becoming apparent that ZIP will never replace the floppy. Floppy drives cost about $18 wholesale to a PC vendor. I don't see any way that the ZIP could be cost reduced that deeply. Iomega has admitted that OEM ZIP 100s have 'negative margins' (another term for 'losing money hand over fist') and this is when Dell sells them as an add-on for $79. The chance that a PC vendor will dump their $18 drive for something that costs more is ludicrous.

I think the model will always be that ZIP will be an add-on peripheral to a PC. Like the Dell model. They will not be in low end boxes, or in the 'internet appliances'. They will be 'standard' in high end boxes (maybe! DVD may be better in these instead...)

So I ask myself: How much is this franchise worth without 'replacing the floppy'? It all goes back to the bottom line: can they create a cash cow out of the ZIP line? What stops Dell from offering any number of peripherals for removable storage?

Last note: Iomega made money this time because of the lowest R&D spending in 3 years. Advertising was almost nil. When they start the CLIK! 'hail mary', watch for expenses to rise again. (Hence the reserved outlook for Q2).

kp
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