Franco, glad you took the time to clear things up. Most analysts have
been saying the same things since last year. That's because most analysts
use past performance to judge the merits of a stock.
At current price of about 50/shares and 120 mils share, IOMG 's market cap
is 6.0 bils. 1996 revenue will be at least 1.5 bils. Price/sale ratio is then only
4.0. You won't find many superfast-growing companies with a price/sale ratio
of only 4.0 or below 10. Most are way above 10, many above 30.
I believe the 1.5 bils revenue estimate for 1996 is quite low, since the projections
did not include a number of new deals and new uses (like Acer 's Internet PC).
Acer should have already bought a bunch of Zip this quarter, since they plan to
ship internet PC in June. My guess of 1996 revenue is around 2.0 bils, which
gives a price/sale of only 3.0. You won't find hardly any growth companies
with this price/sale ratio, period. So I think IOMG is still cheap, certainly a lot
cheaper than the vast majority of hot growth stocks out there. (Exactly the
opposite of what CNBC and other media have been erroneously putting out
constantly.)
None of the current revenue estimates assumed that the Zip and Jaz become
standard PC gears around the world, and totally ignored new uses for removable
dirves/disks (a potential source of great surprises as we have seen so far).
When and if Zip and Jaz becomes standard, worldwide revenue will be > 8 billions
(30% of current world market) and possibly much higher. But let's say that 8 bils is
the target in 1998, then price/sale ratio based on current price will be only 0.75.
With zip and Jaz disks bringing in high margin (12-15% is my guess), the
price/ratio should be between 5 and 10, which means that IOMG price will be
6 to 13 times current price in 1998.
So my conclusion is even without new deals from IBM, Compact, Apples, etc,
current valuation is still very favorable compared to projected growth. Though
I have no doubt that IBM, Compag, Apples will join in - simply because there
are no other products with better price/performance and great demands by
consumers - and no PC manufacturers can afford to give up an edge to the
competition in the PC market. Now if Sun and others decice to include Zip in
their internet boxes - to make sure that Acer won't leave them in the dust - it
will be awesome. I think there will be many new uses for Zip and Jaz disks and
the data storage industry will never be the same.
A COMPUTER ON EVERY DESK, AND A ZIP AND A JAZ IN EVERY
COMPUTER. BUT WAIT, THERE ARE A LOT MORE...
I think I'll try to copyright this phrase. It has and will be making many folks very
wealthy. Good luck with your decision.
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