S. bateh and all, Below is a partial transcript from the CC done by Vin Ordinaire over on TMF board. Just in case some have not had a chance to hear it over vcall yet. Not a lot of excitement, but it appears that Mr. Jodie Glore is making headway with the company. More job cutbacks, break-even quarter coming up, restructure charges, all add to bumps in the road ahead. However, they are beginning some new initiatives on Y2K backups using Iomega products along with new automated file backup software and they will be working at educating the public and sales force on Clik! capabilities. Agfa camera with built-in Clik! will be out in a few months and we will see if other companies also add to the Clik! OEMs. It will require more patience to hang on to IOM shares over the summer, but will try to hold on a bit longer. Mel
Repost follows:
Subject: Transcript, Glore call, 15 Apr 99 Date: 4/15/99 8:14 PM
Author: VinOrdinaire Number: of 20599
The following transcript is Jodie Glore's statement in the conference call up to the introduction of Dan Strong, CFO. I haven't transcribed that part; not sure whether I'll be able to get to it tonight.
Jodie Glore, April 15th Conference Call statement:
Good afternoon and welcome to Iomega's first quarter 1999 analysts conference call. This is Jodie Glore with the cold, and today I am joined by Dan Strong our controller and acting CFO, Lori Keating our chief legal counsel, and Rob Simons our treasurer will be joining us for question and answers.
On our call today we want to share information that will help you better understand our business, so . . .
[disclaimer: forward looking statements etc., form 10-K, etc., blah blah blah]
With that said, I would like to talk briefly about the quarter and then let Dan discuss the details. We made money in the quarter. Not a lot, but we made money in historically for us what has been a seasonally soft quarter, and this year was no exception. We reported results in the middle of the range we estimated last quarter. We continued our focus on asset management and reduced inventory by $7 million dollars over the course of the quarter. This was the fourth quarter in a row we have reduced absolute inventory levels. We were also cash-flow positive for the second consecutive quarter.
Demand for our Zip products again showed momentum. In the first quarter, Zip drive unit shipments were up 44% and Zip disk unit shipments were up 39% over the first quarter of 1998. We shipped 2.6 million Zip drives in the quarter, increasing the installed base to over 23 million drives. As you know, the installed base of Zip drives is one of the key metrics to use in valuing our business as it continues to grow.
We are continuing our success in the OEM market. All of the major OEMs offering SKUs offer SKUs with Zip Built-In. And Dell announced on Monday that 40% of their Dimension customers are choosing models with Zip included. Dell is also the first OEM to offer the new Zip 250 as a built-in option. Having a premium product like Zip 250 in the marketplace will enable us to improve our margins and at the same time aggressively position our Zip 100 drive.
Our Jaz business was softer than expected in the quarter. We believe that a seasonally soft first quarter, which followed a great fourth quarter, is a primary reason for this sequential weakness. We intend to improve Jaz profitability and take advantage of its strength in vertical markets.
As expected, our exciting new Clik platform was component-constrained throughout the quarter. We did not spend marketing dollars to promote a product that was not widely available in the quarter.
Today we announced that we are kicking off a new marketing program to promote our Clik platform. We plan to conduct 800 product demos in 38 major markets beginning this weekend. We believe that there is great potential for Clik, and we are working with many people to introduce some exciting Clik-based solutions this summer. On the Clik OEM front, Agfa is on track to launch a camera with Clik built-in mid year. Compaq, Sharp and others have also made commitments for Clik inclusion, and we will continue to announce other OEM initiatives as appropriate.
We recently launched two new marketing and sales initiatives for 1999: One focus on corporate sales and the other on Y2K and software solutions. Zip is now available across many commercial PC models or in authorized reseller option kits from Dell, Compaq, Gateway, IBM, HP and Apple. We intend to capitalize on availability of Zips on these commercial machines to increase our presence in the corporate segment by making joint sales calls with our EOM partners and demonstrating our full portfolio of removable storage solutions, including software.
We have one of the most compelling Y2K solutions in the market today. For the cost of a $99 zip drive and a few disks, anybody can back up their critical files and welcome the new millenium without fear of losing their data. You will see an aggressive marketing program promoting this and other solutions to Y2K issues in the coming months from us.
As we continue to focus on providing solutions, we're developing software to make our storage products more compelling to both our corporate and retail customers. A preview version of our new Quicksync software is now available as a free download at Iomega.com. The software, which we developed, enables users to do real-time backup of their documents. Each time they save to their hard drive, a duplicate file is automatically saved to a Zip, Clik, or Jaz disk, and the software even takes care of version control. We've had corporate customers tell us recently that software solutions like Quicksync and Norton Zip Rescue are reason enough to buy our drives.
That being said, there are still many opportunities we have yet to address. I have critically examined every aspect of this company and let me briefly share with you what I've found.
We have one of the most successful computing products of all time in the Zip drive. We have a solid niche product in Jaz, and we have a product with enormous potential in Clik. Zip and Jaz are the indisputable market leaders in their segments, and we expect to achieve similar results with Clik. We have a strong brand, committed partners, and a talented workforce. We are operating from a position of strength.
I have also found, however, that we have made mistakes and missed opportunities. We have spent too much money. Our product development process has been too expensive, taken too long, and has not been responsive enough to customer needs. We have been overly reliant on price reductions as a means of increasing unit demand. We have not managed this business as well as we could have.
I have visited almost all of our facilities and talked to most of our people. I have met with many of our customers and channel partners, and we all agree on one thing. We can do more, faster. As we have implemented the changes to a functional organization, we have found excesses and redundancies. Over the course of the next quarter we will be accelerating our streamlining efforts to focus on earnings growth, which means we will be reducing facilities and head count. We expect to take a special charge in the second quarter associated with the changes we will be implementing. We are close to completing our analysis, and we will announce the specifics of this charge and resulting savings later this quarter. We expect that these efforts will provide the profitability and cash resources we need to engage in activities which will further enhance shareholder value.
We remain committed to increasing the installed base of drives. We have evaluated our ongoing engineering projects, and we are assigning our best and brightest people to pursue the new products and cost reductions that will enable us to profitably increase the number of our drives in the marketplace.
Most of you are aware the significant improvement we have made in the operations area, or what I call the backend part of our business. Today we announced that we have won Dell's Most improved supplier award for our delivery of high-quality Zip drives and best-in-class customer service. We have shown our abilities to focus on problems and fix them. Now we are focused on improving our product development process and the front-end sales and marketing areas of our business. I have every confidence we can do that.
We are currently beta-testing a web-based direct sales model to take advantage of the growth of e-commerce. We expect to launch this site later this quarter and anticipate that over time it will become an important channel for the sale of our products.
Before I turn the call over to Dan, let me summarize the areas that need our attention.
- We're going to continue our singular focus on predictable sustainable profitable growth.
- We are aggressively reacquainting ourselves with the people who do use or could use our products. By better understanding our customersm, we will be better able to develop additional solutions that simplify their use of our products and simultaneously increase their consumption of Zip, Jaz, and Clik disks, leveraging one of our key corporate assets, our installed base of over 26 million storage solutions.
As we make these changes over the next several months, we will be positioning ourselves for future profitable growth. Metrics for judging our performance as we make these changes include:
- Our success in increasing the installed base of our drives.
- Our ability to leverage this installed base of drives into solid year-over-year disk revenue growth.
- Our ability to launch new software solutions in a much more timely and cost effective manner than we have in the past.
- Our ability to launch a successful web-based direct sales model.
- Last but not least, the number of enterprise and corporate customer wins that we are going to generate.
Each one of these is an important component of our long-term success. I speak for the entire company when I say we are all committed to delivering the best available storage solutions to our customers, and providing outstanding returns for our shareholders.
With that, I'd like to turn the call over to Dan Strong, who will discuss our first quarter results in more detail.
Dan Strong:
[My preliminary sense of Dan Strong's portion suggests a variety of indicators of strong business operations, combined with weakness in 1Q Jaz and Ditto sales, and he stated that the Idanta payback is deferred to the second quarter (but comfortable with liquidity). Quarter closed on March 28th so the March 31 Idanta payment is a second quarter payment, not a first quarter payment. Operating model is now for SG&A of 20%, higher than the mid-high teens. Second quarter guidance is break-evenish. However, the mid-single digit after tax return on sales is still there for the second half.]
I'll post more when I have time to think about it,
Vin
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