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

To: Michael Coley who wrote (51236)	3/25/1998 8:17:00 PM
From: Michael Coley	Read Replies (1) \| Respond to of 58324

RE: My thoughts on the day and the future of IOM. I was quite surprised to see the strength shown in IOM. A couple noteworthy things to point out: 1) Iomega only dropped about 5%. 2) Volume was only about 40% higher than average. I've been saying for about a week (mostly on Yahoo) that the downside in IOM is limited. A short there said he was looking for a point. I said that he would only get a point with bad news, and that I couldn't imagine anything else that could happen. Well, it did... BUT we only took a 3/8 point hit. The stock has been shifting lately, and I think that shift is almost complete. Momentum investors rode it up through November and started bailing and riding it down from there. Now I think the stock is priced right for the value investors to start climbing on board. The momentum investors are leaving and the value investors are jumping on board. The value investors will probably look for 40-100% gains, and once it starts moving the momentum investors will be back, too. Technically, I think things will look very good for IOM in the next few months. Fundamentally, I think Iomega is still good. Sales still appear to be very strong. NOTE: This is complete speculation, and is only my opinion. Nobody knows the future. I've been wrong before. I'll be back to read and post more later. We have a missionary giving a presentation at church tonight! - Michael Coley - wwol.com

To: Michael Coley who wrote (51236)	3/26/1998 2:29:00 PM
From: Bill Lin	Read Replies (1) \| Respond to of 58324

Michael, agree with your assessment on board/KE interaction. I think most think that IOM will cut prices in near future at retail level to put it in equilibrium with OEM pricing levels. "Grey Market" (the oem drives selling to people like me) drives have cannabilized retail sales and this will cause retail support to decline. On financial side, what will happen to margins, and what will be IOM's cost structure under a LOWER MARGIN/LOW COST model? Here's a guess: short term (2 qtrs) unprofitable. in 3 qtrs and beyond, IOM will do well. long term model: 25% gross margins : 10% GM on zip drives, 40% GM on zip disks. SGA is 9% of sales. R&D is 10% of sales. Income before tax is 6%. NI after tax is 3.6%. So on $2 billion sales, they will see $72mm in NI or (/283) = $0.25 per share. HOWEVER!!! if zip prices decline to $50 per unit, then the possibility that people will just buy a new zip with a new unit will increase substantially. This is not the case now, since I transfer my old zip to my new box because the dang thing was $100. But I went ahead and bought a 3.5" unit, becuase its essentially a free component of the system. I think zip IS still the IOM story. and Penetration to 40% of computer sales (or 0.4 times 90 million = 36 million) is an attainable goal. (times $35 wholesale = $1.26 billion zip drives) zip disks, hopefully at $4 retail (looking out to 1999), with tie ratios of 4:1 and wholesale prices of $3, will give $432million in sales. So we have a model which will generate $1.69 billion in sales. a 10% GM on zip drives gives $126mm. a 40% GM on zip disks gives $172mm in gross profits. add up to $299mm. so its 17.6% GM, not 25%... hmmm... so..SGA plus R&D must be 11.6% of sales only or $196mm per year to achieve a 6% income before tax. gee... looks achievable... this is before jaz/jaz2 sales and margins... BL