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Tuesday, October 08, 1996 Iomega was up $1/4 on Monday, closing at $21 7/8 (+1.16%). TODAY'S RECAP: A quiet Monday in the Iomega Folder was shaken by a ghost from the past. Yesterday, Fools learned that a report on Iomega in the November issue of Kiplinger's Magazine features David Hammond -- the notorious ~QW001~ -- who tormented Iomega longs for many months here before disappearing from cyberspace. ~Weaselboy2~ notes the article in a post below. Two small news items touching on Iomega were released on Monday. First, OR Technology announced that it had come to terms with Ingram Micro, "granting [Ingram] distribution rights to the a:drive, a 120MB floppy disk drive able to read and write legacy (720KB and 1.44MB) floppy diskettes while offering 80 times the storage capacity and higher transfer rates." This somewhat cryptically-worded announcement refers to the LS-120 drive, seen currently as the leading rival to Iomega's Zip. Ingram is a major worldwide distributor of computer-related products. Secondly, PC Computing Magazine announced that Iomega's Zip and Jaz drives were among the (very long) list of products nominated for its annual "Most Valuable Product" Awards. As always, America Online subscribers can access both news releases at Keyword: Market News. Finally, an article in Tuesday's Investor's Business Daily features Iomega's struggling nemesis, Syquest. This item is available to AOL users at Keyword: IBD.
INDEX: (Use the Search or Find feature
of your word processor to locate the article number [Find: 1++, 3++, etc.]--or
use AOL's Edit>>Find in Top Window Feature. If Find in Top Window is
dimmed, just click on some text, anything, in the IOMG Today window and try
again.)
1++MF Jeanie confirms Iomega's earnings release date (October 17) with Iomega
Investor Relations. And now, the Best of the Board... Started 3 a.m. 10/7/96.
1+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Earnings Date &10-Q Info Date: 96-10-07 13:09:30 EDT From: MF Jeanie
Talked to Howard Kalt a short while ago.
He has confirmed that earnings will be announced on Oct. 17.
Zacks is reporting erroneous information. Please disregard their date.
To repeat: Oct.17th *is* the date, according to the Company and Kalt, Rosen.
Also asked Kalt why the Edgar version of the latest 10-Q is not available. He didn't know. Said IOMG filed with the SEC, and it's probably a glitch or oversight on their part why it is not yet on Edgar.
Jeanie 2+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Dave Hammond Date: 96-10-07 15:13:32 EDT From: Weaselboy2
Anybody else catch the "Return of Q" in the latest issue of Kiplingers?
Just when you thought it was safe to go outside, our good friend Dave Hammond somehow managed to get quoted in an article about on-line investing in the latest issue.
Dave (who for those of you who are new around here), used this board as what he called a "psychology experiment" earlier this year. At least this is what he claimed in a Fortune Magazine article. Personally, I think he was just an idiot, but thats beside the point.
In yet another fine piece of revisionist history, Dave is portrayed in this article as a "victim" who received nasty e-mail and threats to his health and well being after he posted "negative notes" about Iomega. (Of course he seems to have forgotten to mention how he jerked people around.)
I just have one question: How in the world did he gain enough credibility with the media to (apparently) become the great Iomega expert? He never had a grasp on the fundamentals or understood the company in the first place and Im sure he never will.
Mark Hardie (scratching his head) 3+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Syjet & LS-120 at Ingram Date: 96-10-07 15:41:36 EDT From: CayugaDan
I checked out whether the LS-120 as marketed by O.R. was at Ingram. Indeed it is in the system. There are two SKUs... one goes for $210, the other for $230, I couldn't really tell what the difference was, except maybe an IDE cable. There was no ETA, and approximately 50 of each were ordered by Ingram to come in.
I thought today would be the day Syjet might be arriving at Ingram. You may recall that the last time I checked there were various dates in October listed as arrival dates. Well, not only is nothing in yet, but MOST of the dates have been pushed back to December! Curiously , the LA warehouses still have October delivery dates. Also particular version of the drives still have October ETAs. Either Syjet will be out with a very limited number of drives, or these just haven't been adjusted yet. 4+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Kiplinger's/Hammond interview Date: 96-10-07 17:02:51 EDT From: MF Jeanie
Mark Hardie (Weaselboy2) asks:
<<I just have one question: How in the world did he gain enough credibility with the media to (apparently) become the great Iomega expert? >>
I had the same question, Mark.... so I called Gregory Spears, the lead editor on this piece, at Kiplinger's. Have just had a most enlightening 30-minute conversation with him :)
As I suspected, most reporters follow the path of least resistance when looking to flesh out a story. Spears used the old Fortune article as a reference to research the Iomega/Motley Fool portion of his story. He then went through a contact at the S.F. Chronicle to track Hammond down. (!)
He was surprised to learn the other side of the "Q" story, but was handicapped because he didn't know any of the real contributors here, and Hammond had an identity as someone in the money management field.
(BTW, Spears tracked him down at a Bear Stearns office where he's renting space. He has started his hedge fund, but since it's still going thru SEC red tape stuff, he cannot reveal the name of the fund yet.)
Spears added that Hammond appeared credible to him because he presented himself as someone who understood the Iomega technology and believed strongly that it would not win out as the standard. The reporter admitted to me that he personally does not have a grasp of the product, which was obvious when he used the term "computer memory" to describe what IO does.
The point that seemed most credible to Spears was Hammond's contention that the stock had soared way beyond a sensible valuation for the company. I pointed out to him that this may very well have been true in May -- but not at all back in March when "Q" began his bearish baiting on our boards. In fact, Hammond was wrong about the direction of IO then, but now is using hindsight in his favor to cash in on his "credibility".
Greg Spears was open, interested, and most accommodating to me. In fact he was delighted to hear from someone connected with the Motley Fool, because he has admired the Gardners and feels that TMF is one of the only places that is attempting to promote solid credibility within the "wild and woolly web" of online investment forums.
That said, I am extremely disappointed in Ted Miller, the Editor of Kiplinger's. It was my understanding that Ted was planning to monitor the IOMG folder beginning months ago for a story about this Company and its loyal following of early investors. From all appearances, he assigned the story to Greg.... who, as he admitted to me, has not read the MF IOMG folder at all.
So... what we get in the end, is someone not doing their own homework, but relying on the public opinion of others to give them the 'facts'.
There is no reward for reporters.... or investors... with this method of non-research.
Jean Macaulay MF Jeanie 5+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Kiplinger's/Hammond intervi Date: 96-10-07 17:43:55 EDT From: MF Cheeze
MF Jeanie: <<<The point that seemed most credible to Spears was Hammond's contention that the stock had soared way beyond a sensible valuation for the company. I pointed out to him that this may very well have been true in May -- but not at all back in March when "Q" began his bearish baiting on our boards.>>>
Old-timers please correct me if I'm wrong...but wasn't Q bashing Iomega as far back as last October? IOMG is still up at least 400% since then, even after the collapse since May.
Cheeze 6+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Tie Ratio/sales Date: 96-10-07 19:49:29 EDT From: PKeeler
>>> Date: 96-10-05 13:13:58 EDT From: Ind Sales
I had noticed in Syquest's press release that; <<Founded in 1982, the company has an installed base of more than 3 million drives and 15 million cartridges worldwide.>>
Isn't that a published tie ratio? 5 to 1, I believe. After time, this should mean that Iomega will have sold 15 million zip cartridges. Of course, with more Zips sold, that number increases over time. I don't know what the ratio was expected to be for the Zip, but this is a good starting point, and at least Syquest released it, Iomega won't. >>>
A better starting point is Iomega's release in March that announced they had shipped 1 million Zip drives and 10 million Zip disks. This implies a tie ratio for Zip at 9:1 (1 comes with drive). Syquest disks were always very expensive. Syquests ratio might be useful for predicting Jaz tie ratios.
BTW, unless the tie ratio has shrunk there should be around 30 million Zip disks shipped as of September.
PKeeler Patrick Keeler 7+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Tie Ratio/sales Date: 96-10-07 21:03:59 EDT From: MF Logman
PKeeler writes:
<
Patrick,
Actually, the release said they had shipped *over* 1 million drives, and *nearly* 10 million disks. Fiddle with the numbers a little bit and it's easy to get a 8:1 or lower tie ratio.
Examples:
9.9 million disks and 1.1 million drives = 8:1 ratio (not including the freebie).
9.8 million disks and 1.2 million drives = 7.16:1 ratio (not including the freebie).
I think a 7.5:1 ratio would be a more conservative, and possibly more accurate assumption of the tie ratio at the time of the March press release. Who knows how the tie ratio has trended since, but I think the JP Morgan analyst is using a 5:1 tie ratio in his model.
Logman 8+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Kiplinger's/Hammond inter Date: 96-10-08 00:51:55 EDT From: MF Ricster
<<Old-timers please correct me if I'm wrong...but wasn't Q bashing Iomega as far back as last October?>>
I believe QW may have posted before September 1995, but since those folders are apparently lost forever, I guess his earliest posts may be only the stuff of legend.
One thing I will say about his effect on this board. Every time he posted one of his pieces of nonsense, it would prompt at least half a dozen posts from the truly knowledgeable pointing out his errors. I am sure many of us can credit those responses for much of our knowledge about the company. (In that vein, it is good to see DILLIGF here tonight.)
If someone had the time and the resources to do it, it would be wonderful to see a collection of QW's "greatest hits." We have seen a couple of worthy candidates tonight already. One of my favorites: I am sure you all remember when he reported that even though our channel checks found phenomenal sales of Zip drives, corporate customers of large chains like CompUSA were buying huge amounts of PD's (or maybe it was LS-120's) out the "back door."
He was also big on predictions of announcements regarding competitive products that never materialized. Funny thing. That never dissuaded him from making more unfounded predictions.
For those of you who missed this era in this board, it turned out that he was purposely posting false information as part of a "research project" to assess the effect of on-line postings on stock price movement. He was making his posts to see whether they moved the market the next day in preparation for his hedge fund. I for one cannot wait to see the prospectus for his fund. In fact, it may be a collector's item among participants on this board.
MF Ricster 9+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Tie Ratio/sales Date: 96-10-08 02:23:55 EDT From: Foolshdog
Ind Sales wrote:
>>>>>> I had noticed in Syquest's press release that; "Founded in 1982, the company has an installed base of more than 3 million drives and 15 million cartridges worldwide."
Isn't that a published tie ratio? 5 to 1, I believe. After time, this should mean that Iomega will have sold 15 million zip cartridges. Of course, with more Zips sold, that number increases over time. I don't know what the ratio was expected to be for the Zip, but this is a good starting point, and at least Syquest released it, Iomega won't. <<<<<<<<<<<<<<<<<<
PKeeler replied:
>> A better starting point is Iomega's release in March that announced they had shipped 1 million Zip drives and 10 million Zip disks. This implies a tie ratio for Zip at 9:1 (1 comes with drive). <<<<<
Logman further replied:
>> Actually, the release said they had shipped *over* 1 million drives, and *nearly* 10 million disks. Fiddle with the numbers a little bit and it's easy to get a 8:1 or lower tie ratio.
Examples:
9.9 million disks and 1.1 million drives = 8:1 ratio (not including the freebie).
9.8 million disks and 1.2 million drives = 7.16:1 ratio (not including the freebie).
I think a 7.5:1 ratio would be a more conservative, and possibly more accurate assumption of the tie ratio at the time of the March press release. Who knows how the tie ratio has trended since, but I think the JP Morgan analyst is using a 5:1 tie ratio in his model. <<<<<<
Ind Sales, I agree with both PKeller and Logman. Also check the wording of the Syquest release and you see they aren't really giving you as precise a ratio as you think either. I think those milestone releases are nice but only taking them very broadly. It's hard to get any real financial info from them. As properly pointed out by the board previously, they are marketing ploys, that is all.
If you want to get real financial numbers, as I feel the tie ratio is, then you need to examine the financial statements. In this case, the statement of operations. One can set up financial equations and try to solve them with both revenues and gross margin. This becomes easier the more quarters one has to examine and the more pieces of information that are given. KE doesn't give us many pieces but making some assumptions and following trends it is possible to at least come up with some probable numbers.
Like I've stated before, I think the tie ratio was probably over 8 for both Q4 and Q1. In Q2 it started to go down and my guess now is that it is even lower in Q3. When I have a chance to look at the new numbers coming out next week, I'll better know if this indeed was the case. I suppose Q4 might be a better time for the tie ratio as those disks would seem to make good stocking stuffers. Then by next year as Patrick pointed out the licensing deal with MCI should provide a big help to the tie ratio. I suppose we shall see.
Jim Arden(Foolshdog)
PS- Also SandraDern asked about the margins on the disks. IOMG doesn't tell us so no one here knows for sure. They're another piece of the puzzle.
End Report. Posts covered through 3 a.m. 10/8/96. _______________________________
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