Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : Any info about Iomega (IOM)? -- Ignore unavailable to you. Want to Upgrade?

To: Rocky Reid who wrote (49794)	3/12/1998 1:39:00 AM
From: FuzzFace	Respond to of 58324

< However, there should be strong support at $7 1/8. It may be tested soon.> If it goes down that far, will you go long?

To: Rocky Reid who wrote (49794)	3/12/1998 9:07:00 AM
From: jwk	Read Replies (1) \| Respond to of 58324

>> I think that analysts are more concerned with how much of that $100 Million Ad expense will be factored into Q1 earnings. << For those who may have missed it, here is a work-up on that issue by Patrick Keeler ( who used to post here regularly). I've asked s. bateh to see if PK could use his sales info to shed some light on which of these scenarios might be developing for Q1. Also, trying to remember from the cc if it is possible that KE might weight some of the ad expenses toward later Q's. Perhaps 10mm Q1 to get up and running, 14mm Q2 to accelerate a bit, 17-8mm for Q3 to build for Q4, and then really crank the volume for Q4? Where does it say that just because 100mm /4 = 15mm per Q means they have to spend it at that rate? Anyway, here's PK's#'s........... Oh, to answer the original question that Lumpy side stepped, no evidence that I am aware of that J2 or Buz #'s are in estimates at this time. -------------- Subject: $100 MM a big deal? Date: Tue, Mar 10, 1998 5:10 AM From: TMF Keeler Here are some projections to help clarify my last post. Assume ~10% revenue growth over 1997 and that $100 MM is added to normal SG&A spending. I will show the income statement at 4Q97 Gross Margin levels: Revenue............$2,000 Gross................$668 SG&A................($436) R&D..................($90) Operating Income.....$142 Interest...............$3 NIBT.................$145 Taxes................($51) Net Income............$94 EPS = $0.33 Certainly 10% revenue growth, with no cost reductions anywhere in the business would not be a good thing. In the three years I've followed this stock, I have never seen any indication Edwards and Purkis are stupid enough to do this. Here is again, the same revenue growth but with a 5 percentage point (15%) improvement in Gross Margin (Iomega improved GM 14% last year): Revenue............$2,000 Gross................$768 SG&A................($436) R&D..................($90) Operating Income.....$242 Interest...............$3 NIBT.................$245 Taxes................($86) Net Income...........$159 EPS = $0.56 So with just 10% revenue growth and a 15% cost of goods reduction, IOM clobbers present FY98 estimates. Did people think it was that easy? I didn't until I ran the numbers. Now lets say IOM reduces SG&A expenses 10% before the $100 MM additional ad spending. Now look at the income statement: Revenue............$2,000 Gross................$768 SG&A................($402) R&D..................($90) Operating Income.....$276 Interest...............$3 NIBT.................$279 Taxes................($98) Net Income...........$181 EPS = $0.64 Wow, $0.64 just by increasing revenues 10% and Gross Margin 15%; while spending an additional $100 MM on ads, and reducing non-advertising SG&A expense 10%. Now, lets look at 10% revenue growth, 5% Gross Margin growth, $100 MM in additional spending on ads, and reducing non-advertising SG&A expense 10%: Revenue............$2,000 Gross................$702 SG&A................($402) R&D..................($90) Operating Income.....$209 Interest...............$3 NIBT.................$212 Taxes................($74) Net Income...........$138 EPS = $0.49 Well, I hope I've at least shown that $100 MM is not a big deal and that the Income Statement has lots of places for KE and LP to make up the difference. I personally expect sales growth much higher than 10%. Here is 20% revenue growth, 5% Gross Margin growth, $100 MM in additional spending on ads, and reducing non-advertising SG&A expense 10%. Revenue............$2,100 Gross................$737 SG&A................($417) R&D..................($95) Operating Income.....$225 Interest...............$3 NIBT.................$228 Taxes................($80) Net Income...........$148 EPS = $0.52 Fool on :) TMF Keeler Patrick Keeler A Fool and his money are soon partying