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

To: Gottfried who wrote (54977)	5/19/1998 4:23:00 PM
From: Philip J. Davis	Read Replies (4) \| Respond to of 58324

To the extent that I see Iomega dominating this industry, I feel very comfortable with my position in it. You saw Cramer's comment that the reason for the change in Iomega's fortunes is that its products are being commoditized. This may be true (in a simplistic way), but it is also true of Intel. While you might think comparing Iomega to Intel may be ridiculous and/or premature, just consider that Intel's dominance of the microprocessor market is predicated on its ability to bring newer, faster, better products to market before anyone else. In this way, Intel is able to maintain higher-than-normal margins in an industry in which each successive microprocessor is eventually commoditized. I feel that Iomega could possibly do the same thing. Iomega was first to market with the Zip drive (low-end, high capacity removable storage), first to market with the Jaz and Jaz2 (high end). To date, all of it's competitors consistently lag behind Iomega in bringing new products to market. As long as Iomega can maintain this lead (and most importantly gross margins) I feel very comfortable holding it. Maybe I'm totally and absolutely wrong. Who knows. My only concern is that there will be a paradigm shift in storage due to the internet. If the bandwidth limitations of present internet connections are overcome, such as with very high speed cable modems, then removable storage demand, while not going away completely, will surely drop. This, however, won't happen very soon. Widespread use of high speed internet connections on the par with with dialup connections will take years to implement because it is extremely expensive to install all of the necessary infrastructure across the world, let alone the USA. This, to me, is the best reason to own Lucent and Cisco. Curious that the Clik! news had no effect on the price. In fact it's close to 52 week low. So much bad news in this stock, but heck, not as bad as SyQuest(and that's pretty bad). I have a hard time believing that Sony would have a chance of beating Iomega in the standards game. Iomega has a huge lead. The battle, if it happens, and I think it will, may turn into a slash and burn "capture market share" competition. This would spell doom for Iomega, unless they could lower the manufacturing costs of the Zip drive quickly. I think they just might, but as you would agree, Sony has significant experience in low cost electronics manufacturing. This may be true, but Iomega has a huge lead in manufacturing the drives for quite some time now. Sony is just getting started. This all places the move to Penang in perspective. KE must have been looking down the road and realized that unless Iomega could dramatically lower the cost of production of the Zip drive, it would lose the standards war. Especially against a low cost japanese competitor. In any case, the Clik news was welcome, though I'm not convinced that the drive will contribute more than "niche" interest revenues. Digital camera sales, however are exploding. There might just be something to Clik!. I think that the most likely resolution of the Nomai litigation is of a limited licensing deal with Nomai where they could produce Zip disks for distribution in Europe/Asia. They'd have to be branded Iomega. The next CEO will most certainly be an operations expert. If I could vote, I'd chose andy grove (I can dream, can't I?). Iomega a buyout candidate? I've never really considered it a likely occurrence. Dunn may agree to this, but I think he would demand a price more expensive than any potential acquirer would be willing to pay. I think Sony clearly sees the compatibility issue as it's only hope to capture market share from Iomega...that coupled with a doubling of capacity for low-end removable storage. I just don't see the compatibility issue as so important. One could argue that the reason LS-120 didn't catch on is because of this issue. Of course, it might be in large part because LS-120 was slow, but so was the Zip PP and this is Iomega's most popular Zip drive. In comparing Iomega's advantage of being first to market with Imation's advantage of backward compatibility with 1.44MB media, side by side, I would say Iomega's advantage of first-to-market is much more important. One could argue that the combination of backward compatibility AND doubled capacity might kill Zip. I just don't think so. LS-120 had 20% more capacity than Zip. EZFlyer, at $150 is a much better deal capacity wise (at 270Mb per cartridge), than Zip at the same price point. Nevertheless, EZFlyer doesn't sell well at all. Sony may have the marketing skills and distribution channel necessary to make a viable threat to Zip only if it can get the selling price of HiFD at or equal to the Zip drive, which I think is possible, but unlikely. Because of this, I don't think Sony will ultimately win the standards war. It's just too late to market to make a significant dent in Iomega's market share, without encountering prohibitive marketing expenditures (which Sony is certainly capable of doing). It might require that Iomega slash margins in order to fend off Sony, but I think that Sony will eventually concede defeat. Hopefully sooner rather than later. Philip