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Wednesday, October 16, 1996 Iomega was up $5/16 Tuesday, closing at 24 5/16 (+1.30%). TODAY'S RECAP: Continuing the pre-earnings lull, it seems DVD and digital cameras were the topics du jour on Tuesday. While the days prior to an Iomega earnings statement have traditionally been filled with grand anticipation, this time around the quarterly report has been given surprisingly small attention in the Iomega Folder. The post below from ~NOVWOO~ is the sole example of the sort of analysis we had by the bucketful going into last quarter's report. Perhaps it is because most are expecting a relatively weak quarter that enthusiasm is so slack. Also, many Fools are consciously attempting to avoid a repeat of the debacle of the second quarter, when overly-high expectations going into the announcement were seen as contributing to the sharp decline in IOMG shares following the report of good, but not blow-out, earnings. For these reasons, the usual drumbeat for big numbers is considerably more subdued. In any case, tomorrow Kim Edwards will draw back the curtains a bit to give us all a very welcome peek inside the company. REMINDER: To hear a tape replay of Iomega's Q3 Conference Call Thursday night, call 1-800-633-8284. The Password is 2021724. The tape will be available by approximately 6:30PM Eastern Time - Thursday, 10/17 -- and will remain available until midnight on Monday, 10/21. 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++Semaj C comments on the usefulness of DVD. And now, the Best of the Board...Started 3 a.m. 10/15/96.
1+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:IOMG and DVD Date: 96-10-15 03:01:41 EDT From: Semaj C
Here is the real question. Why do I need a DVD ? I know why I need a zip drive and I know why my wife needs a zip drive.. Storage. VHS tapes? cds? I like them just fine. Did I buy a laser disk player? no. Out of all the people that I know in the world only one owns a laser disk player. sure, it is better than VHS, but so what. cds are better than records and tapes but I still own a turntable and a tape player. They satisfy my needs (simple). what happened to that sony machine that played music on floppys? is that DVD. did it sell? The way I see it a product has to fill a need. SO canna my wife record Oprah on this new dvd player? anna what am i gonna do with alla my vhs tapes?
regards james 2+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re: IOMG digital camera Date: 96-10-15 10:40:45 EDT From: NSACORAF
Interesting thoughts Jeff. I have the use of a Kodak DC50 $1,000 digital camera. It takes about 36 shots on a 5MB flash card which costs, I believe, about $230 + each. The camera works great, and the process of transferring the photos to the computer program is a bit slow, but it works fine. I have the Filmworks program called Photo Enhancer which is a low end program for crop, editing, enhancing with light shadow,etc. I haven't used Photo Shop which is the "Rolls Royce" I believe of the that type of program.
If IO could get the size of a portable Zip drive to about the size of a flash card or maybe a very thick 3.5" disk, you might have something. The present weight and bulk of the portable Zip drive is just to heavy to lug around including the digital camera, IMHO. I agree with you that the market has great potential, because, my guess, in the next 5 or so years digital cameras will become common place and be much cheaper. Such a device you suggest could replace film altogether. You would merely take your mini Zip disk to get it developed or print it on your color printer. There would also be new color expensive printers to print them at home after computer enhancing them at home. Kodak and/or Fuji may develop these to save it's film business. Sincerely, Nick
"Power is not revealed by striking hard or often, but by striking true."---Balzac 3+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re: IOMG digital camera Date: 96-10-15 11:00:09 EDT From: MF ETurkey
<<<If IO could get the size of a portable Zip drive to about the size of a flash card or maybe a very thick 3.5" disk, you might have something. >>>
Unlike the DVD guess work going on, with its narrow margins, creating a standard "film" for digital photography seems to be a far more natural new product to come one day from iomega. Here is why I think this is a distinct possibility for the near future:
First: At PC Expo this past June, my brother and I canvassed all the digital camera makers asking questions about the ability to transfer direct from camera to Zip disk. It can't be done, and the Zip is too big anyway. A new format needs to be created.
Second: Edwards indicated at PC Expo that digital photography was in the future from iomega's standpoint.
Third: There is no standard "film" in digital photography, and some type of "flash card" or mini-Zip would be up their alley (Proprietary, of course)
Fourth: Iomega is now in bed with Kodak in the Zip-across-America thing. Is this a sign of things to come?
Fifth: Digital cameras will become more prominent in the future, with its ease of "developing" (you know Kodak isn't dumb enough to get left behind on this one), and it's ease of distribution. Think of this. . . a professional photographer snaps a picture at a news event, loads the picture immediately into a laptop, and emails it to HQ via cell phone within minutes to beat a deadline. It's coming.
Sixth: At least one photo lab (Seattle FilmWorks) already offers developing pics on floppies and Mystic Film told me they would do the same this coming winter.
Last: Iomega always makes announcements of new products at trade shows. Something will come at Comdex. They *must* be working on this type of project in R&D. Is this possible? Beats me.
But it is inline with iomega's mission of storage, in proprietary format if possible.
Eric 4+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re: IOMG digital camera Date: 96-10-15 13:14:09 EDT From: Sunraydoc
>>>If IO could get the size of a portable Zip drive to about the size of a flash card or maybe a very thick 3.5" disk, you might have something. The present weight and bulk of the portable Zip drive is just to heavy to lug around including the digital camera, IMHO. I agree with you that the market has great potential, because, my guess, in the next 5 or so years digital cameras will become common place and be much cheaper. Such a device you suggest could replace film altogether. You would merely take your mini Zip disk to get it developed or print it on your ...<<<
Uh, how tough would it be for Iomega to develop a miniaturized version of the Zip disk itself, a smaller form factor disk based on the same patents??? Since Iomega probably does consider the potential for Digital cameras with an internal disk to be huge, developing a Mini-Zip based on a smaller disk would be one way to capture this market.
I'm advancing this idea only because it strikes me as a straightforward way to solve the size problem for the Zip in this application, compared to going to a whole different modality such as a flash memory device---Iomega has shown that they are committed to producing inexpensive, mass-producible, proprietary solutions to storage problems, and they are very comfortable with magnetic memory devices such as Zip and Jaz...So why not a device based on the same (already patented) technology for the digital camera?
Sunraydoc--- Bob N. 5+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: KevinFurr in Europe Date: 96-10-15 13:19:50 EDT From: MF Equity
I received the following report from Kevin:
<< Subj: If it's not scottish it's CRAP Date: 96-10-14 08:57:01 EDT From: guest7@electricfrog.co.uk To: mfequity@aol.com
Heya Mike, it's me Kevin again. Better Zip report this time. Stopped by a Mac shop in Edinburgh. They had Zips and said they were selling very well. Priced at 199 pounds, and single disks for 16.99 pounds. Said that they had just began to receive Jaz, and sales haven't picked up yet. Syquest drives used to sell well, before they stopped arriving dut to their "financial difficulties".
Also, Zips were selling at an Office Depot--like place in Oxford England. No details, the only salesman was busy talking for about 15 minutes with some people.
-Kevin >> 6+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Iomega 2d Quarter 10Q Date: 96-10-15 15:52:45 EDT From: Tjabeles
Now the Edgar area finally makes available the the 10Q for the second quarter of 1996. Posters have wondered at the delay since it apparently was filed with the SEC timely. It is extremely helpful and puts in more accurate perspective some of the issues speculated on on this Board. The company clearly explained some of its concerns and the impact of its plans on profit margins. It is no wonder indeed that the H&Q and JPM analysts had decreased their projections. It will be interesting to see if IO meets those projections when the earnings are announced after the close on 10/17 and the description by CEO and CFO in the conference call thereafter.
I am heavily long but thoroughly hedged and not overmargined so look forward to a 4th quarter where sales are likely to increase strongly, but the key will be margins and the delicate balance between expanding the base and controlling what are likely to be heavy promotional expenses-advertising, coop and otherwise, and discounts to OEMs and chains. Since so much planning has been right and the company has been surprisingly straight-forward, beyond its size, the odds are in favor of significant 4th q which time the issue will shift to 97 expectations and where does the line go and what good niches are there to fill. One thing is clear the tie rate is the most important element since that is where the margin is--so the emphasis has to be on companies and industries with high use rate rather than the consumer market which has been the focus. We will see.
From: Investpec 7+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:KevinFurr in Europe Date: 96-10-15 18:27:48 EDT From: Rum Doodle
<<Stopped by a Mac shop in Edinburgh. They had Zips and said they were selling very well>>
I found the same in Paris two weeks ago. Zips are selling very well in four stores I visited, but Jaz is almost unknown. Zip prominently displayed in store windows on several busy streets, sales clerks said Zips sell out quickly but supply was good, and had improved recently.
The most curious sightings were in Venice -- not exactly a hot bed of technology. But Zips were selling quite well in two stores, and again had prime store window space.
Rum 8+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re: IOMG digital camera Date: 96-10-15 23:28:02 EDT From: Huibs pht
>> Think of this. . . a professional photographer snaps a picture at a news event, loads the picture immediately into a laptop, and emails it to HQ via cell phone within minutes to beat a deadline. It's coming. <<
..uh, well, it's already been here..
..Canon's Mavika digital camera was originally announced about 15 years ago, and has been used by professionals to electronically transmit 'news' photos for years..
..I do agree that 'static ram' / 'flash' memory IS the wave for the future for recording media..
..10 gigs on a creditcard sized solid state chip??..
..oh baby..
:) huibs.. 9+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Catchers Mitt Date: 96-10-15 23:31:11 EDT From: PKeeler
USRX will probably announce in 12 hours that they will be shortly (1-3 months) shipping modems that can transfer internet data to computers at double current, v.34, top speeds. What does this mean for IOMG? Well if history proves out, the people who offer stuff for download will double the size of the downloads. This means that hard drives, Zip disks, Jaz disks, and even Ditto tapes will all fill up twice as fast. :)
The "Catchers Mitt for the Internet," and the pitcher just doubled the speed of his/her pitches. Overdone baseball analogy okay during playoffs, IMO.
PKeeler Patrick Keeler 10++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Waiting For Q3 Numbers 1 Date: 96-10-16 02:40:16 EDT From: NOVWOO
Iomega's mild but positive price action today tells us that investors and the market don't have a high expectation of Iomega's soon to be released Q3 earnings in a good way. As a matter of fact I think the market is not looking forward to Iomega Q3 earnings release for any positive surprises. The market may be waiting for the official Q3 earnings announcement to "get it over with". So long as the Q3 numbers are not disastrous like posting a big loss, then with a good Q4 outlook mentioned in the conference call, IOMG will resume its upward movement. The street may be merely waiting for the formality of the announcement to officially put Q3 behind us. Believe it or not, this is a kinder and gentler market to Iomega, at least for this Q3 and this one time.
It is simply because the street is looking at Iomega beyond Q3. Q3 numbers won't matter in a sense that there couldn't be any earnings *disappointment* since there was no expectation to speak of nor to start with for Q3, literally. Do we remember KE started the quarter with the word "challenging"? However, any small Q3 profit at all can be served as a positive earnings surprise and can send the price up. Why? The rebate factor in addition to the word "challenging".
Iomega Q3 Zip rebate may range from 12, 15, 20, 25 to 30 million dollars. And we are talking about earnings in Q3 after the rebate at 0, 3, 7, 9 or 12 million (EPS of 0, 0.02, 0.05, 0.07 or 0.09). Do we see something here? The difference between some of these Q3 earnings estimates are insignificant when compared to the rebate amount. As a matter of fact, the Q3 rebate dollar amount may be larger than the whole Q2 profit of 14 million? (There was no rebate in Q2). Therefore, any profit at all in Q3 may be a positive earnings surprise to the street. And it seems very likely that Iomega will report a small profit for Q3. Any Q3 profit will be something extra and should be welcome and well received.
One thing that impressed me the most in the Q2 conference call was when KE was asked if Iomega would still make money on Zips with the rebate that KE answered so fast with a resounding YES. Skeptics could say KE might only mean that the *incremental* manufacturing cost of a Zip is less than what Iomega can get for the Zip and therefore KE meant a profit in the sense of a gross profit. Regardless, I think Iomega must have lowered manufacturing costs between Q2 and Q3 on Zip drives and other products and at the same time substantially lowered distributed overhead burden to each product due to strong growths on all product lines. If Zips were only making a gross profit with the rebate, then other product lines including Jaz, Ditto, disks and cartridges alone might have grown more than enough to cover all Iomega overheads and expenses and offset any revenue shortfalls due to the Zip rebate that Iomega may report a small but good profit in Q3. Any profit in Q3 is a good profit.
At this stage, it doesn't make sense to worry about earnings and even revenues. It is only important for Zip and other Iomega products to continue to increase their market shares. The rate of increase of Zip's market share in Q3 may not be as high as some want it to be due to seasonality and unusually poor economic condition in Europe. Nevertheless, the rebate has helped to counter these weaknesses and Zip's market share continues to expand at least at about the same rate as Q2. Zip's market position is getting ahead farther and farther from the also-ran. The temporary seasonal stall of revenue growth if true is fine because the Zip rebate has been carried out successfully to continue the more important mission of expanding its market share.
For the very few who insist on the bottom line regardless of rebate or not, they should look forward to Q4 and to comparing the Q4 result with Q3's since now the rebate is extended to Q4. Q4 and Q3 can be compared on even ground as far as rebate is concerned. We do expect a much better Q4 due to the seasonality and the rebound factors. Q3 was a transitional or an adjustment quarter because the rebate was introduced to counter the weaker than usual seasonal conditions. Now, Iomega is fully adjusted to the Zip rebate. With the summer doldrums behind us, let the great earnings show and expectation game begin after the Q3 numbers announcement.
End Report. Posts covered through 3 a.m. 10/16/96. _______________________________
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