|
|
|
|
Thursday, October 10, 1996 Iomega was down $1/2 Wednesday, closing at $23 1/8 (-2.12%). TODAY'S RECAP: On Wednesday, compulsive readers of The Motley Fool's world-famous Iomega Folder faced another trying day without any fresh news to fret over. Fortunately, a list of questions from ~CyberVster~ prompted a lot of thoughtful replies from several of Fooldom's sharpest minds. The best contributions to that thread comprise the main portion of today's report. A reminder: Iomega is scheduled to release its earnings report for this year's third quarter after the close of trading on Thursday, October 17. 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++CyberVster poses a series of questions about the future of Iomega. And now, the Best of the Board...Started 3 a.m. 10/9/96.
1+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Some what if's -1 Date: 96-10-09 14:27:38 EDT From: CyberVster
Looking for feedback:
If you can bear with some what ifs I have a few to ponder. What if Iomega reports inventory turns at 6 (about the same as last Q)? What if Iomega reports finished goods at over $50 million ($20 million more then last Q)? What if Iomega reports EPS of about 30% less then last Q (.08 or so but, after charges/ rebate reserves)? What if Iomega reports still slow Europe sales (but good US and Asia numbers)? What if Iomega reports that Malaysia plant is already near full capacity? What if Iomega reports OEM sales are picking up but still insignificant to total revs? What if Iomega [more then] hints at a remarkable quarter coming up (i.e. Q4)? What if all the above is true? Pretty much what the analysts are predicting.
Currently at $24 or so IOMG is trading at just over 1.2 x 1997 estimated sales. I think the low of 13 and change (I realize there was an inter-day dip into the 12s) was about 1.2 times 1996 estimated sales. I realize I am rounding numbers here, but the trend seems clear.
At its very lowest low, in its darkest hour (internet hype stock etc...) IOMG held at more then 1.2 times 96 sales. Now factor in the new news, Intel, and the BIOS announcements. Add in the fact that OEMs are increasing SKUs (though slower then I want to see them), stir this together with the knowledge that wall street is showing signs of believing the story (for the first time). If you can still believe that IOMG will trade in the teens again then it will have to trade at less then 1 x 97 sales. On the other side of the coin. Q3 is over. Q4 and next year matter now. Since Iomega is estimated to grow about 100% 97 over 96 is it feasible to expect IOMG to trade at maybe 2 x 97 sales? And heres a thought. Can we expect all the new developments to maybe raise the estimates for 97 a little?
With the BIOS and Intel announcements (way under played IMO). I expect Zip to take a faster track to 100% OEM inclusion, Ill say 1999 is the year (I really believe 1998) anyway, bear with me. How many PC will ship in that year? Iomega will rely on licensing for most of those sales I am sure. Pull the tie ratio down to 3-1 to be conservative and do the math. My point is:
We will see way over 100% EPS growth over the next 8-12 quarters, no thats wrong. We will see way over 500% EPS growth. Wait a moment. Dont flame me to fast. But if Iomega is successful the EPS growth will easily exceed 1000%. Run some numbers, please prove me wrong. Over 2-3 years what kind of curve should we assume for that growth?
I am not saying this is a definite lock here, I am just, what ifing remember (but it does appear to be a pretty sure thing ;-). Most of the old bulls here have dreamed of the possibilities of a defacto standard. I am just reminding everyone that the dream is not slipping away to the competition, In fact it seems to be racing up on us so fast, and we are so paranoid because of the recent past, that we are unable to see all the potential anymore (or at least unwilling to express it). This board is cluttered by traders and shorts I agree, but the longs have the facts, continue to dig for the facts, and post the facts here. You analytical types need to continue to churn it all into projections and estimates. We have so much new info and no new projections. Where will the world find out about Iomega if we dont do the work here? On BizInsider? Imagine that!
I rely on you all for news and objective opinions to reinforce and complement my own thinking and research. I worry about new investors reading this board. Lets move toward balancing the amount of informative posts vs. The amount of total posts. I do not mean to be hyping the stock here. I strongly recommend potential investors to do the leg work themselves. I did and I am just relaying some thoughts about it.
PS: Believing our whisper numbers hurt this stock is inane. What hurt this stock was the drop in EPS growth rate. That rate will accelerate again going forward and the stock will resume it climb to fair and full value. I think we do ourselves a disservice by fostering that attitude. We have had the best info available in the past and there is no reason to stifle ourselves when it comes to projecting future performance. Plus, Where will the analysts get there estimates? You dont really expect that they have half the man power or a quarter of the brain power as we do here, do you? Now if we could find a way to cut down on the background noise in here...
Mark 2+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Some what if's -1 Date: 96-10-09 14:48:55 EDT From: MF ETurkey
<<< I expect Zip to take a faster track to 100% OEM inclusion, I'll say 1999 is the year (I really believe 1998) anyway, bear with me. >>>
This is way more than I expect. I would be *delighted* to get 33% by year 2000.
The reason? That fixed hard drives shipping with machines have been growing rapidly, and there will be many folks who will not shell out the 100 bucks to get more drive space when they are already buying a 2 gig hard drive that appears impossible to fill up. I know I never thought I would fill the 120 megs on my old 386, or the 500megs on my current Mac.
But that is the mindset of plenty of new buyers, in a very price sensitive market. Many will say, "I'll buy it if/when I need it".
I simply don't think that a 100% penetration is going to happen by year 2000, even if everything went smoothly for the company.
Eric 3+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Some What If's -2 Date: 96-10-09 18:42:09 EDT From: DWJames1
CyberVster. Don't know whether you saw CNBC today, but they played another type of *what if* that I would suggest you try. And that is, what if the stock price rose to ____, what would be the total market cap and how would it compare to other major companies? And, by implication, is this a reasonable dream?
Example: what if the stock got back to 55 and with options, etc. there were 150 million shares outstanding? The market cap would then be a little over $8 billion. To support this, annual gross revenues might have to be $3 billion. Is this possible? How soon? in what markets? Could it be done as a logical extension of the present company product/market strategy? (my guess is probably *yes* in some reasonable time frame - which is why I hold). Then try 100, 200, 500 or any price your heart dreams of.
At some point you are faced with the fact that to justify that market cap IOMG would have to be a very different company from what it is today - and/or the time frame is out somewhere in 2010. (I can vaguely see 100 and a market cap of 15 billion - but after that, things get a bit fuzzy)
The CNBC example was the fact that Cisco now has a market cap bigger than GM or Ford and that the recent run up of Intel created an *increase* in market cap this year of more than the the total value of GM or Ford (about 39 and 37 billion to a total of over $90 billion).
FWIW - DWJ 4+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:**Computers in U.S. Schoo Date: 96-10-09 19:33:15 EDT From: Haiyaku33
<<....there are still plenty of schools with Apple IIs or 286/386 machines (not that you couldn't use on a 386, but a school with this level of technology is unlikely to buy a Zip drive).>>
Being a tech specialist, educator in the public school system, I feel you have missed the boat on this statement. It is for this very reason that schools are buying up Zips like crazy (I know this from a first-hand basis, both locally and nationally). The word of Zips has been growing and now the new budgets are in for this year...so watch for an explosion from the public schools.
The existing problems:
1. Schools can't afford to buy new computers every coupla years. They need a bandage to help them get by...not just for today but something that is dynamic (flexible).
2. Older computers do not have enough RAM installed to run newer software. Buying additional RAM is wasteful...those same chips most likely cannot be transferred to new machines because of incompatibilities. (hence, throwing away $ on an old machine)
3. Older computers have small hard drives. (adding a new hard drive, internal or external, has same "hence" as number 2 above)
4. Schools are aggressively moving to internet capabilities. Systems need to be able to read and download and store bigger files. (check out national NetDays '96...whereby corporations are installing net lines in the majority of schools). FYI, in Southern Florida alone, this month, So. Bell Tel Co is giving $25 million to a huge number of schools to make them net capable. This is a NATIONAL effort, however.
Here's what the Zip does to solve these problems:
It can be used as Virtual Memory and additional RAM chips are not n(expands the usage of computer labs...need computer applications? put that software on one zip disk. need language arts stuff? put that software on one zip disk. need math applications? put that stuff on one zip disk... etc... the computer lab now has no down time. The zip can also be transferred to new machines whenever the schools can afford em. ....and don't forget the capability to work off the internet!!!
In dollar terms, think of this: buy NEW computers for ONE lab (24 * $2,000 per unit= $48,000 expenditure). OR buy 24 ZIPS ($200 * 24 = $4,800 expenditure). The following year, buy 8 new computers with internal Zip...and so on. Schools will have made the transition within 3 years but have already become much more capable in the short run! .........smart and cost effective!
Lastly, the speed, the storage capabilities of present day computers has grown exponentially while the capacity of the 1.44 floppy disk has remained stagnant. Read/write CD's....give me a break..... not gonna happen any time soon in the schools or the general public and they are gonna be Iomega's bread and butter. Times have changed; paradigm on the brink. Just visit your local high school or college and find out that they have indeed gone to the graphics and information age...and that translates into Zip drives and disks. (or the Syquit for those not in the know, or the LS-120 who are dreamers)
It's only a matter of time.
Haiyaku33 (aka Inmotion33 for you long-timers) 5+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Response to MF ETurkey -2 Date: 96-10-09 20:46:43 EDT From: MF ETurkey
<<<So while the 33% by 2000 may be enough for some Iomega investors I dont see that as being possible. The BIOS news (and the Intel support dont hurt) pretty much makes this an all or nothing proposition.>>>
Mark, My opinion isn't based on the technical aspects of the BIOS, or any other fancy computerese (which I confess to be somewhat ignorant about despite my reading this stuff). My opinion is based on the following:
1. There are billions of floppies out there already; 2. The 3.5 floppy is dirt cheap; 3. Hard drives with new computers are huge; 4. Zip need is not apparent to many (most?) new computer buyers; 5. You can always buy a Zip later if you need it; 6. Without consumer demand it won't happen.
What! No consumer demand you say!
Well, in fact this is the first real Christmas season with Zip available in a few of the boxes. We simply don't know what is going to happen. Hopes and dreams are one thing, but raw data is something different. We'll know better in January.
Keeping my feet on the ground, and hoping for a solid 33% penetration (33 million computers and 120-150 million disks) by the year 2000,
Eric 6+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Response to MF ETurkey -2 Date: 96-10-09 22:11:21 EDT From: PKeeler
Plant tongue in cheek for this sometimes lighthearted response:
<<1. There are billions of floppies out there already;>>>
Potential Zip market
<<2. The 3.5 floppy is dirt cheap;>>
Most things people can't use are.
<<<3. Hard drives with new computers are huge;>>>
But the file system used by Windows negates almost all size improvement. 2GB drives have only about 1.2 GB of useful space.
<<4. Zip need is not apparent to many (most?) new computer buyers;>>
Thank God there are potential customers left.
<<<5. You can always buy a Zip later if you need it;>>>
At a higher margin.
<<<6. Without consumer demand it won't happen.>>>
Nobody told the makers of the following:
PD/CD LS-120 UHC-130 MicroChannel OS/2 Apple 2.88 MB floppy 21 MB Floptical
PKeeler Patrick Keeler 7+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Some what if's -1 Date: 96-10-09 22:59:00 EDT From: RB61
CyberVster,
<<If you can bear with some what ifs I have a few to ponder. What if Iomega reports inventory turns at 6 (about the same as last Q)?>>
I, for one, would be relieved (not pleased, but relieved). Reason being that IOMG is trying to ramp up a new facility in Penang, Malaysia as well as continuing to refine and cost improve the Zip and Jaz. 4th qtr 1995 saw IOMG with 4 turns. This improved to 6 during the 1st qtr 1996 and stayed the same for the 2nd qtr. I think this will improve over the next couple of qtrs, but with the slowdown in Europe and the refinements mentioned above, I think this is a bit much to ask IOMG to improve this in the 3rd qtr. BLATANT PLUG!!! Inventory turns was discussed at length in the Reading Financial Statement Folder of Investment Strategies after IOMG's 2nd qtr. :>)
<<What if Iomega reports finished goods at over $50 million ($20 million more then last Q)?>>
Fully expected. KE indicated that it was IOMG's plan to build up a solid inventory level during IOMG's 2nd qtr conference call. Remember, shipments to vendors must be made during the critical months of Sept through Nov for the holiday selling season. December, is not a big selling month at wholesale. The goods have to be in the stores prior to the start of December (going from 1st hand experience from my company). Therefore, IOMG NEEDS a large inventory built up during the slow summer months to be fully prepared and able to supply its distribution and retail base of customers for the holiday season. I would expect an inventory level even about the $50m mentioned above. Remember, most of that inventory will have been shipped by the end of October. If ending inventory is $90m, that only will represent less than 3 weeks worth of sales for the qtr. The analysts are expecting $400m+ for the 4th qtr, so $90m in finished goods doesn't even take care of 25% of that amount. In this situation, a high inventory number is really not what it appears. This will be a planned buildup.
<<What if Iomega reports EPS of about 30% less then last Q (.08 or so but, after charges/ rebate reserves)?>>
Again, I would feel relief. If we can beat the analysts on this *Challenging* qtr., I'll be happy. What I will be looking at is the earnings (and some guidance during the conference call as to what % of accrual for the rebates.
<<What if Iomega reports still slow Europe sales (but good US and Asia numbers)?>>
We need to give KE a little time to fix the problems in Europe. From what I have heard, the distribution in Europe needs fixing. The product sells well, but no one has it. I think KE will have that fixed by the end of the 4th.
<<What if Iomega reports that Malaysia plant is already near full capacity?>>
I'd be pretty happy :>).
<<What if Iomega reports OEM sales are picking up but still insignificant to total revs?>>
I would ask, "What is insignificant?" Are you saying that OEM sales compared to what IOMG did last year $84m+ for the qtr, or this year, analysts estimated $250m+. Big difference. I think that we can see more and more SKU's showing up. But most of these have just been in the past few weeks. KE indicated that the end of the 3rd qtr was when most of the SKU's would ship, so the results will start to show up in the 4th qtr.
<<What if Iomega [more then] hints at a remarkable quarter coming up (i.e. Q4)?>>
I just hope that KE does NOT use the word *Challenging* any more :>)
Just my thoughts.
Fool On,
Robert 8+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:HELP ME ...please!! Date: 96-10-10 00:42:01 EDT From: MasonBarge
Guys, I just wanted to add my two cents worth. I make a fortune on the market and I made a bundle on IOMG. I think it's starting to look like a loser. It's largely, in reality, as much a software company as a hardware company, and the software is second-rate. Not that it isn't a bunch better than SyQuest, which is a living man with a hole in his aorta, but the horrendous problems with configuration and bad customer service are bad, bad signs. Management pushes products out too fast.
I've had Iomega products myself and they worked great one out of three times. I'm thinking about throwing the zip in the trash and getting a Seagate tape. Really, the only thing that might save Iomega, in the long run, is manufacturer installations. It's a great concept and pretty good execution, but the product is not good enough to sustain long-term mismanagement. Remember Dennis Hayes? Can anyone say "Intuit"? How about Stevie Jobs? Iomega has a techno lead, but big techno leads have tasted Chapter proceedings before and will continue to do so in the future.
I'm not some anti-Iomega idiot or a shorter. Right now, I'm into fab support. But if you look at the survivors on the tech scene, you the survivors are well-managed at the engineering and customer support levels. I suggest you try having trouble with an Adobe product and an Iomega product, and see which one gets fixed first.
This stock may go to $40 on earnings, but it's a probable long-term loser unless management can get its act together. Best of luck to all of you, and if you hold, I hope it goes well. I mean, it's generally a great product and it would help us all if it worked out. 9+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: A-C C-A Date: 96-10-10 01:00:16 EDT From: CayugaDan
<<<<From: Hal Rubel Dumb Question: If it is a SCSI device, why not plug it in to the SCSI port and just use it. SCSI is supposed to be device independent. I think that's the whole point. Isn't SCSI part of "BIOS"? The standard has been around for 10 years.>>>>
Not dumb at all. Reviewing this basic question may emphasize why the BIOS announcement is so important.
Before the BIOS announcements the A: and B: drive letters were reserved for drives that worked off the floppy controller. Drive that work off IDE, MFM, SCSI, and other types of controllers use the drive letters of C: and above.
Since AMI-Phoenix compatibles BIOSes (hey, aren't you tired of the word Wintel?) machines boot off the A: drive or the C: drive, until this BIOS modification is implemented if you make the Zip drive your boot device it has to be C:
Serving as a second boot device is, IMHO, the most important advantage that a 3.5" floppy has right now over the Zip (the others, price and depth of market penetration are less important, though that's debatable). Your C: drive should be a Jaz or another type of hard drive. Right now your A: drive should be a 3.5" floppy. That's some advantage. Next year that advantage will vanish.
Next year I will be recommending a Zip drive as the A drive, and you should probably be getting a 3.5" for you B drive.
-Dan
I'll bet someone, whether its iomega or Epson or whoever markets a Zip & 3.5" floppy unit. I still occasionally sell the Epson ' 5.25" & 3.5" in one unit' drive
End Report. Posts covered through 3 a.m. 10/10/96. _______________________________
WE
DELIVER - Get IOM
In Fooldom Today delivered
|
||||||||||
|
|||||||||||
