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: Herb Fuller who wrote (52845)	4/17/1998 1:19:00 AM
From: Rocky Reid	Read Replies (1) \| Respond to of 58324

Iomega has to be losing money on every OEM drive sold. Even if the Ad campaign never happened, IOM would still have not scored a profit. IOM can push Zips out the door. But at what cost? If they blow 50 million Zip drives out the door, this can still mean that they lose their shirt at Earnings. The demand for Zip is simply not there- thus Iomega has resorted to price cuts and rebate programs that inevitably bring margins way way down. Iomega is currently in a transition to a "demand-pull" structure. This means lower prices. And thus, lower margins. The same arguments that Iomaniacs use against SyQuest SparQ's profit/unit now apply to Iomega Zip.

To: Herb Fuller who wrote (52845)	4/17/1998 9:11:00 AM
From: Jock Hutchinson	Read Replies (1) \| Respond to of 58324

Herb: I am wrong. You are right. Currently IOM is selling at about the correct price to sales ratio for a drive company. Thus, if they are able to grow business and expand margins, the stock price could do well. Of course, this brings in all of the other negatives that have been discussed such as increased competition etc. vs. a tremendous installed base. But its current price means the company's stock price is neither cheap nor expensive.

To: Herb Fuller who wrote (52845)	4/20/1998 11:38:00 AM
From: Jock Hutchinson	Read Replies (1) \| Respond to of 58324

Actually Herb. We are both wrong. The historical ratio for a disk drive maker in terms of price to sales varies from 1:1 to 1:3 not 1.5:1 as I suggested in a previous post and which you followed up on. For example, in the past four years, Seagate and Western Digital with superior storage technology have sold at price to sales ratios in the range of 1:3 to 1.5:1 for Seagate, and 1:4 to 1:1 for Western Digital. I would note that during this time, both drive makers experienced an average of twenty percent year over year growth in revenue, which is superior to the year over year growth that IOM just posted. Moreover, neither of these two companies ever had a year where they suffered the sort of cash flow decline that IOM experienced in just one quarter. Recently with tough times, the ratios are much closer to the lower end of the scale. Thus, by these standards IOM is an awful investment. Again, Herb I apologize for flipping the sales and price ratio in my previous post.