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Non-Tech : The New Iomega '2000' Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: Cogito who wrote (1071)	6/24/1999 10:06:00 PM
From: Rocky Reid	Read Replies (2) \| Respond to of 5023

>>How can you possibly believe that Iomega gets 50 to 100 percent margins on Zip and Jaz? If that were true, they'd be making money hand over fist.<< Not true. The selling price of a drive minus the cost of making and selling that drive is its margin. If tons of high margin Jaz drives sit on a shelf collecting dust, the sales of a few high margin Jaz drives cannot offset the losses from the lack of unit sales of the rest of them. This is Iomega's problem. Now with CD-RW, Iomega has a better chance of seeing a 15% profit, but there is little to no hope of ever realizing more than this due to its pure-commodity nature. And IOM stock's present valuation has a much greater than 15% margin product line priced into it. As margins continue to fall, so too will IOM stock. You will see Iomega's CD-RW eat into Zip and Jaz sales greatly hurting Iomega's product margins. But Iomega must do this, otherwise, Zip and Jaz would decline regardless, leaving Iomega with nothing. At least CD-RW give them a better chance of still having a semblance of a product line once Zip and Jaz are gone. But a product line based on pure-commodity items like CD-RW will see an IOM stock price below $1 per share.