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Non-Tech : Iomega Thread without Iomega -- Ignore unavailable to you. Want to Upgrade?

To: Ken Pomaranski who wrote (7403)	2/17/1999 12:49:00 PM
From: D.J.Smyth	Read Replies (1) \| Respond to of 10072

Ken your comments have been debated for two years and during that time IOM has sold 24 million zips. Okay, keep debating. The analysis also does not discuss Pentium III and Y2K. Pentium III will create increased demand for higher end PCs in its own right. Y2K...what more can be said about this that already hasn't been said. The closer we come to 2000, the greater the need people will have in backing up data (as expressed in purchases). People tend to leave things to the last minute, so an expected pick-up in demand will continue throughout this year. the sale of a zip to a box adds "value" to the box, and thus OEMs have tended to increase the price of these higher end models beyond the relative cost of the zip itself (i.e., the zip costs $60 to the OEM, yet the incremental rise in the price to the box approximates $150 to $200 for most box makers other than Dell - without the zip they don't get the incremental rise - Dell sells the zip as an add-on for $99). OEMs would prefer to sell the higher end, high margined zipped models than the lower end low margin non-zipped models. the bottom line is increasing the revenue and the margins, and zip assists in the process at the higher end.

To: Ken Pomaranski who wrote (7403)	2/17/1999 1:05:00 PM
From: Cogito	Read Replies (1) \| Respond to of 10072

Ken - OK, here are my comments on your comments about the First Montauk comments: >>Makes a VERY big assumption about the elasticity of demand on the disks. There is no supporting data for this.<< There is supporting data, both in the form of market research done by Iomega and in the very big boost in disk sales that Iomega saw after taking disk pricing actions last year. >>Doesn't address the MAJOR drawback of CLIK!--> Cost for the OEM to include... What do you think the market is for $1000 cameras? Would a kid pay $200 more for a $20 gameboy? Who would pay $200 more for a $100 phone? The Clik! statements in the analysis are ludicrous, at best!<< Again, you are basing your conclusions on logic alone, without having market research data to back you up. In any case, Clik! as an external product seems to work pretty well. Take a few pictures, download your data from CompactFlash to the Clik! disk, keep taking pictures. Just yesterday I was at Fry's Electronics in El Segundo, California. I spoke to a salesperson there about Clik! Pretty interesting conversation. He said that they are selling a LOT of Clik! drives. (Emphasis his.) I told him I had heard that flash memory was better than Clik! He said, "Look, we have a 30MB flash card for a hundred and fifty bucks. So you can get two for three hundred. Or, you can buy the Clik! drive and one four-pack of disks for the same amount. You'll have 200 megabytes of storage instead of 60. Then, if you want to add more later, you can get another four pack for 50 bucks. It's way cheaper." "What about reliability?," I asked him. He said the Clik! drive was very sturdy and that they hadn't had a single return yet. I told the guy that I didn't have a digital camera yet, but was thinking about buying one. I asked him what he would recommend. He said, "Oh, you don't have a camera yet?" He then showed me the Agfa 1680, and extolled its high resolution and excellent image quality. "But," he said, "the best part is that it comes with a coupon for a Clik! drive. This would definitely be the camera to get." He also said that when the Clik! first came in, none of the salespeople knew how it worked or what it was supposed to do. Then people started coming in asking for it. I asked him how he knew so much about the Clik! drive now. He said that the Agfa rep had been in last week and gave all the salespeople a demo of the 1680/Clik! combo. Just an example of how the Clik! is being perceived in this one place where the rubber meets the road, retail sales-wise. I could address your other points, but I need to get some other things done. - Allen

To: Ken Pomaranski who wrote (7403)	2/17/1999 2:01:00 PM
From: Philip J. Davis	Respond to of 10072

Ken, I thought Montauk's analysis was refreshing and insightful. It doesn't predict success...it only makes a stab at valuation based on the the value of that success at this point, along with Iomega's chances of success. He seems to give them a 1 in 5 chance. >>1. The ZIP can never really replace the floppy because SW isn't distributed on it.<< Software doesn't have to be distributed on Zip in order for it to replace the floppy. I guess we'll just have to agree to disagree on this fundamental point. >>2. In order to replace the floppy, ZIP MUST match floppy's price to OEMs.<< Not necessarily, Ken. Added value of higher capacity and higher performance of Zip allow it to be sold at a higher price than a 1.44MB floppy disk drive. I will concede, however that the cost of the Zip drive will need to come down...and who knows...maybe eventually the cost of OEM Zip will equal cost of OEM floppy drive now, but by then I think the floppy will have been long gone. >>This will never happen without severly impacting Iomega's bottom line. PC makers are cutting costs like crazy.<< Cutting prices always affects the bottom line, unless of course you reduce manufacturing costs more than you cut prices. Granted, whether Iomega can do this or not is debatable, but there is a chance that they might. >>3. Makes a VERY big assumption about the elasticity of demand on the disks. There is no supporting data for this.<< Preliminary indications are that there may indeed be a significant elasticity of demand on Zip disks. When Iomega dropped the price of a Gig-a-pack to $99 and were even available for $79, unit volumes seemed to increase dramatically, at least this is what Iomega said during its CC's. >>4. Doesn't address the MAJOR drawback of CLIK!--> Cost for the OEM to include... What do you think the market is for $1000 cameras? Would a kid pay $200 more for a $20 gameboy? Who would pay $200 more for a $100 phone? The Clik! statements in the analysis are ludicrous, at best!<< I seem to recall that millions of people purchased Zip drives at $200 a pop at one point. I also see many semi-pro digicams in the $1000 price range (Olympus D620L is one; Kodak DC-260 was another). You seem to assume that OEM Clik! drives will be priced at $200 forever. I seem to remember a $100 figure....nevertheless, do you expect this price to be static? And won't early adopters be willing to pay a premium? Come on, Ken. Your claim that Montauk's analysis is ludicrous is in itself ludicrous. Let's be objective. As was stated in the analysis, it is still too early to tell anything about Clik's success or failure. >>5. Mentions how Iomega must increase R&D and Advertising to increase demand and keep cutting edge products, but doesn't discuss the impact this would have to the bottom line.<< I would assume that this goes without saying. Additional expenses always go straight to the bottom line. It does mention that Iomega may have to have additional equity financing or an equity investment by a strategic partner in order to have enough cash to meet the demands required of additional R&D and ad spending. Increasing gross/net margins would help a lot as well. >>6. Doesn't at all discuss the trends in the PC market to lower cost, less featured, internet 'appliances'.<< i agree that this point was not discussed, but I'm not convinced that this is really an issue, since, regardless of the "internet appliance" there will always be the need for removable storage. And in any case, the computers I see for sale in the Circuit City flyers all seem to be fully featured (Zip drive included). >>7. Doesn't discuss impacts to bottom line of the ever increasing OEM percentage vs. retail.<< It did make this statement: "Dollar sales will continue to grow at a lesser pace than total units as IOM finishes their transition into OEM units on the drive side." My interpretation? Revenue growth will be negatively impacted by transition to OEM model - we know this. >>After reading it, I get the idea (IMO) that the writer doesn't fully understand this market. The only way to understand the market is to make a living off understanding the market!<< No one ever fully understands the market, Ken. regards, Lipo

To: Ken Pomaranski who wrote (7403)	2/17/1999 2:07:00 PM
From: Ron Dior	Respond to of 10072

<<<<<The First Montauk analysis on Yahoo isn't bad, but it misses (or ignores) some very big issues. It doesn't discuss: 1. The ZIP can never really replace the floppy because SW isn't distributed on it. 2. In order to replace the floppy, ZIP MUST match floppy's price to OEMs. This will never happen without severly impacting Iomega's bottom line. PC makers are cutting costs like crazy.>>>>> I have to point out why this is two dimensional thinking: 1. When is the last time you found software being distributed on floppy disks? I would not buy a software package with 1.44's because I do not feel like spending an hour loading my new program! (Thinking about SW on 1.44 =Old school mentality) 2. How many 1.44's does it take to = 1-IOM 250MB zip disk? In reality, an IOM ZIP disk holds the same information at a much cheaper cost than 1.44 floppies. Most of the new software on the market carries at least 200MB of data. I have several programs that need between 300-800MB of hard disk space. Good thing I didn't buy the 1.44 floppy version of the program, I would of needed to bring my pick-up just to carry the box home! We really need to think before we post. Ignorance is not a good quality to have in the investment world. Ron Dior

To: Ken Pomaranski who wrote (7403)	2/17/1999 4:52:00 PM
From: Rocky Reid	Respond to of 10072

RE: Montauk article >>After reading it, I get the idea (IMO) that the writer doesn't fully understand this market. The only way to understand the market is to make a living off understanding the market! << What I get out of it is simply a re-statement of the Iomaniac mantra-facts and reality be damned. This in order to set up what I believe could be another opportunistic Short situation. i.e.-tell the suckers what they want to hear, then Short the hell out of it when they buy in. Sounds like an excellent plan to me. After all, it's been done to IOM before. Very recently, in fact.

To: Ken Pomaranski who wrote (7403)	2/17/1999 5:03:00 PM
From: Jim Welsh	Read Replies (1) \| Respond to of 10072

. <<Doesn't address the MAJOR drawback of CLIK!--> Cost for the OEM to include... !>> Ken, While you would seem to make some sense here, there seems to be one consideration that you and the other bears (and even some bulls) overlook--and that would be Iomega's market research. One of the things that made the Zip such a success was that that they produced a product for which their market research told them there was a demand. With that in mind, I have a hard time believing that Iomega is producing Clik! in a market vacuum. I have to believe that they went forward with this product as a result of their market research and as a result of encouragement from potential OEM's. They wouldn't produce this product if they didn't believe there was a demand for it. If this product fails, I don't think it will be because of lack of demand (at least for the concept), but rather that something better may come along before Clik! is fully accepted. On another completely unrelated note, can someone tell me what a "Zip-file" is. I assume this has nothing to do with a Zip drive or disk (because the Zip file lacks the trademark). Is there any relationship between the two "zips" at all? If not, why isn't there some name infringement? Jim W.

To: Ken Pomaranski who wrote (7403)	2/17/1999 7:12:00 PM
From: Dale Stempson	Read Replies (1) \| Respond to of 10072

RE: First Montauk Ken, I enjoyed reading the First Montauk opinion as well as your concerns. Regarding Zip: One of their comments that caught my attention was that existing customers now buy more disks than new drive purchasers buy. IMO, a key milestone has been accomplished. This is made more significant given that unit shipments have been increasing. The continuation of this trend will help margins. Couple this with the expectation of further cost reductions and perhaps we have the basis for a program that more than compensates for future price reductions and expenses. It's also interesting to me that OEMs are currently paying an estimated $50 for a drive and costs are expected to decrease. Zip is getting much closer to floppy drive costs and it seems to be reflected in part by the OEM inclusion rate improving to 7.5%. It doesn't seem too unreasonable to think that it won't be long before Jodie can ask someone like Apple, "What price would it take for you to make Zip standard on all your boxes?", and then be able to answer, "We can do that!" Lastly, it is expected that Zip drive shipments will pass 35 million within the next 10 months. Geez, at what level does compatibility (or non-compatibility) become a major factor? I believe we're getting very close. Regards - Dale

To: Ken Pomaranski who wrote (7403)	2/17/1999 10:11:00 PM
From: BubbaFred	Read Replies (1) \| Respond to of 10072

The stock price chart tells the story. It also tells the future. If one understands it, one will know what is to come. Double top and huge volume on the recent rise and topping formation. At the present, it is neutral with negative bias. One big positive is the insiders' buying. Watch the insiders' activities. EOM.

To: Ken Pomaranski who wrote (7403)	2/18/1999 8:02:00 AM
From: Michael Coley	Read Replies (1) \| Respond to of 10072

RE: Ken's Bear Arguments Ken, I'll need to look through some of your arguments a little closer, but a couple of them are way off base, IMHO: >> 1. The ZIP can never really replace the floppy because SW isn't distributed on it. << This is just flat out wrong. Software is hardly ever distributed on floppy anymore. Out of more than a dozen software packages I've purchased in the past year, every single one has been on a CD. It's been probably two years since I've received anything on a floppy. The floppy at one time was "the standard" for a number of different functions. Various devices have taken over each those functions. CD's for software distribution. The Internet for small file transfers. Tape for backup. Networks for file exchange inside a company. Zip can become a standard without becoming the standard for EVERY function. >> 4. Doesn't address the MAJOR drawback of CLIK!--> Cost for the OEM to include... What do you think the market is for $1000 cameras? Would a kid pay $200 more for a $20 gameboy? Who would pay $200 more for a $100 phone? << Now you're just stretching the facts. Iomega has repeatedly said that OEM versions would be priced in such a way that they would add less than $100 to the consumer price of the product. Not $200. >> 7. Doesn't discuss impacts to bottom line of the ever increasing OEM percentage vs. retail. << The impact from OEM's is more on the top-line than the bottom-line. They discussed OEM's a number of times in the report. Besides, the impact is history. Now that they're at about 60% OEM, you'll see that percent changing at a much slower rate. My projections put it at around 70% throughout all of 1999. Sure, it'll eventually reach the 90's if they become the standard, but by then it won't matter. Also, as they've reduced their costs their gross margins have returned to acceptable levels, even with the record percent of OEM drives sold. I'll try to address some other points from the report in the days to come. I was very impressed with Montauk's report, and found it to be one of the best things I've seen on IOM recently. - Michael Coley - wwol.com