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

To: Ken Pomaranski who wrote (53770)	4/28/1998 2:46:00 PM
From: Michael Coley	Read Replies (1) \| Respond to of 58324

RE: A Response to the Bearish Arguments. Ken, I respect your opinion very much, and thing that you're the most level-headed bear on the thread. However, I think you're not seeing the whole picture here. >> All you have to do is look at the balance sheet, look at revenue/profit breakdowns, listen to CCs, and you'll get the following: << I've done all of that and come to different conclusions: >> (1) Iomega is a ONE PRODUCT company. They will live or die based upon this one product. Pull out these revenues, and the company is bankrupt, pure and simple. << This is simply not true. In 1997, 33% of Iomega's revenues came from Jaz, Ditto, and other products. That's almost $600 million in sales, which is far more than any of their competitors. (This was even higher than I had projected--I was guessing 20-30%.) >> (2) They are not profitable selling this product anymore. Now why is that??? Because the mix has gone from retail aftermarket to OEM. Also, the techheads (early adopters) are saturated with disks. << The switch from retail to OEM was calculated and planned. In order to ensure future growth and market domination, they are doing everything they can to get in the boxes now. They are succeeding. The earnings shortfall last quarter was due almost entirely to the revenue shortfall. They had ramped operating expenses up expecting revenues to be up. You need to analyze the revenue shortfall to know what went wrong. And once you do, you'll see that the problem rests squarely on foreign retail sales. Europe and Asia were both down over 50% sequentially. Asia is no surprise. Europe was due to discontinued channel rebates, which they have recently reinstituted. Sales in the US were essentially flat, which is astounding going from Q4 to Q1. As far as disk saturation, the numbers once again prove you wrong. Q1 saw a sequential increase in disk tie rates. >> (3) How many disks do the people who find one of these devices in their computers buy? maybe 1-2 if Iomega is LUCKY. Most people will ignore the slot. With 4Gbyte hard disks standard, who needs a measly 100Mbytes to store stuff off on? Can't see 'Joe six-pack' going out and spending $100 on a 'GIGAPACK'. Shoot, this will be 1/5 the purchase price of computer before you know it. Joe can buy 30 6-packs with this money! << I think that the tie rate is probably a little higher than the 1-2 that you throw out, but I agree with you--it will be lower than it would be for someone who CHOSE to put a Zip in their computer. I don't think this is a major factor yet. Most people who have Zips right now CHOSE to get an add-on Zip or a Zip built-in. >> (4) ZIP is old technology. period. This will impact sales at some point. << No, the 3 1/2" disk is old technology--Zip is new, stable technology. It's not bleeding-edge, but it's certainly not old. You're losing perspective. The mass market isn't interested in having bleeding-edge technology. How many people do you know with DVD-players? >> (5) Yes, ZIP is the 'standard', but WHO CARES? They can't make money off being the 'standard'. Who cares how many ZIP units have been sold? If Iomega can't make a profit, its irrelevent. << Becoming the standard means a lot. The growth potential is incredible, when you consider that they're currently only in about 5-10% of the boxes. About the necessity of making a profit, true, but don't base the "profitability" decision on a single bad quarter. Iomega has a tremendous infrastructure and product line in place, and has the ability to profitably grow to become a $10 billion company within the next 5 years. >> (6) What could possibly cause a pickup in ZIP sales? It's past the product maturity curve from marketing 101. Drop prices? IOM makes less money. Advertise to stimulate demand? They lose more money. << I'm sure they'll do both (drop prices and advertise). Iomega has stated clearly that their game plan is to profitably reduce the price of Zip below the $100 price point. >> There is nothing that I can forsee that would enable IOM to make a profit off ZIPs anymore. Yes, this is my opinion, but it has basis in fact if you just look at the numbers, and ignore the 'story'. The bulls focus too much on the 'story'. I GRANT YOU THE STORY, but stories are cheap... << You must be looking at different numbers than I am. >> (7) CLIK! is unproven, and any bulls counting on this product are gambling, plain and simple. Using this argument is not investing at all.. << Any new product is unproven. Clik! does have tremendous potential, though. Just like Zip, it has the ability to create a completely new market. I don't think there's a problem with people counting on this product, though. None of us know exactly how big of a hit it will be, and haven't incorporated it into our models (at least I haven't). >> Lets say you were looking to invest some money. You wanted to make some money off your investment. You start researching company 'A'. Company 'A' had awesome growth in the past, but you determine that it was all due to one product. You also notice that the company doesn't make money off this product anymore. There is competition mounting. Company 'A' has this new product in the wings, 1+ years out. This is their only hope. Do you commit funds now, or do you wait to see the 'splash' this new product will make? Also, you know that if this new product fails, the company is gone. << Awesome growth in the past: True. All due to one product: False. Doesn't make money off this product anymore: False. Competition mounting: I'd be worried if it wasn't. New product in the wings: I'd be worried if there weren't new products. This is their only hope: False. If this new product fails, the company is gone: False. - Michael Coley - wwol.com

To: Ken Pomaranski who wrote (53770)	4/28/1998 3:09:00 PM
From: Philip J. Davis	Respond to of 58324

Ken, >>1) Iomega is a ONE PRODUCT company. They will live or die based upon this one product.<< Granted, Iomega is a one product company for now. Jaz, however, has much potential. Yes, Clik! is unproven, but if Iomega delivers the product as advertised, it might very well add significantly to the bottom line. >>Pull out these revenues, and the company is bankrupt, pure and simple.<< This is quite obvious, but do you really think Iomega won't sell any more Zip drives? We've seen competition come and go (SyQuest, Imation). Sony may deliver with the HiFD, but SyQuest's EZFlyer doesn't sell and Imation can't entice buyers with backward compatibility. One could make an argument that the combination of 200MB capacity and backwards compatibility will steal market share from Iomega. I just don't think so. Backward compatibility with the 3 1/2" floppy drive is over-rated...look at Imation. Removing this, and all you have with HiFD is a 200MB drive. You claim that 100MB is not large enough for users with 4GB+ hard drives. And 200MB will be enough? Do you really think that Sony can produce the drive and make it profitable, considering that the drive mechanism will require two heads? To make it attractive to potential buyers, the drive will have to be the same price, or slightly more expensive than Zip. What MSRP do you think Sony will target? $150? Can they be profitable? Who knows, right? >>(2) They are not profitable selling this product anymore. Now why is that??? Because the mix has gone from retail aftermarket to OEM. Also, the techheads (early adopters) are saturated with disks.<< Yes, product mix has shifted to OEM's. Retail aftermarket was dissapointing. That's not to say that they won't pick up. Prices could drop more, and if manufacturing yields improve, profit margins can be maintained. My opinion, of course. Remember that most new purchasers of PC's are still on a learning curve with their new PC. They may not realize until it is too late that they need to back up critical files. >>(3) How many disks do the people who find one of these devices in their computers buy? maybe 1-2 if Iomega is LUCKY. Most people will ignore the slot. With 4Gbyte hard disks standard, who needs a measly 100Mbytes to store stuff off on? Can't see 'Joe six-pack' going out and spending $100 on a 'GIGAPACK'. Shoot, this will be 1/5 the purchase price of computer before you know it. Joe can buy 30 6-packs with this money!<< Ken, you don't have to back up your whole hard drive on 40 Zip disks. Most applications are on CD's so the only think you have to backup are critical files like Quicken files, scanned images, music and sound files, address book file, word processing and spreadsheet files. These can certainly fit onto a Zip disk, or 2 , or 3. Internet downloads. What about all those programs? Yea, you can just delete them and download again. But who wants to wait, if you've already downloaded it? Store them on Zip disks. <<(4) ZIP is old technology. period. This will impact sales at some point.<< Who cares? EZ135 was arguably more technologically advanced (higher capacity, faster). It didn't sell. Why should it matter now? >>(5) Yes, ZIP is the 'standard', but WHO CARES? They can't make money off being the 'standard'. Who cares how many ZIP units have been sold? If Iomega can't make a profit, its irrelevent.<< Who cares? I certainly do. Concurrent with becoming a standard is a large installed base, which, as computer users become more sophisticated will purchase more Zip disks well into the future. How many 3 1/2" disks do you own, Ken? 100? 200? Would you care to venture how much money you have spent on floppy disks during your lifetime? >>(6) What could possibly cause a pickup in ZIP sales? It's past the product maturity curve from marketing 101. Drop prices? IOM makes less money. Advertise to stimulate demand? They lose more money.<< How about drop prices, increase manufacturing yields, AND advertise. You claim Iomega won't make any money. I disagree. In answer to your hypothetical question....it all depends Ken...on the "story". You can't just look at the balance sheet, though clearly this is the very first place you look. You seem to take it for granted that not only is Iomega not making money now, but will not make any money in the future. What about new products? Ken, all investments are speculative. Iomega much more so. Regards, Philip

To: Ken Pomaranski who wrote (53770)	4/28/1998 3:19:00 PM
From: Gottfried	Respond to of 58324

Ken, nicely reasoned bear argument. I think most of us make up our minds about a company first, then we find arguments to support our opinion. What scares me the most is competing against Joe's preference for sixpacks.<G> For reasons similar to your Iomega concerns I decided against buying Gillette: everyone who shaves already has a razor. More and more people are growing beards or use electric shavers. Anyone can start a razor blade factory. Joe Sixpack would rather buy more beer than shave. <vbG> Good investing! Gottfried :) Patience has its limits. Take it too far, and it's cowardice -George Jackson