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Wednesday, October 23, 1996 Iomega was down $1 1/8 Thursday, closing at $22 1/8 (-4.84%). TODAY'S RECAP: Tuesday in the Iomega Folder looked like a fight in a seventh grade detention hall on substitute teacher day. Bickering, name calling, whining, and taunting prevailed. Fortunately, we didn't seem to find enough room to include any of that stuff in our selection of posts this morning. Iomega shares fell again Tuesday, this time on an announcement by a consortium of major high-tech firms (including Sony, Hewlett-Packard, and Mitsubishi) that a new "CD-ReWriteable" (CD-RW) drive will be available to consumers some time early in 1997. This drive will be able to record data to compact disks over and over again -- unlike the currently-available CD-R drives that use disks which, once filled, cannot be erased. The downside to the new CD-RW device is twofold: first, it is still very expensive, and second (though none of its performance specs have yet come our way), it is probably slow compared to magnetic drives. The CD-RW machines are to be priced somewhere below $1000 apiece. CLARIFICATION: In yesterday's I/T, we stated (in reference to the expansion bay in Apple's new line of PowerBook 1400 laptops), "This is the first time that Apple has made any special accommodation for an Iomega drive in any of its products." Well, not necessarily. MF DTurkey reminds us, "We don't know that Apple made any special accommodations for Iomega. What I'd guess is the slot where the removable Zip drive will go is some sort of industry standard, and Iomega/VST designed the laptop Zip to fit in there." In other words, Apple only mentioned that their expansion bay could accommodate a Zip drive. To suggest that Apple made some sort of "special" accommodation is to overstate what can be inferred from Apple's press release. 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 Ben comments on the CD-RW announcement. And now, the Best of the Board...Started 3 a.m. 10/22/96.
1+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Press release Date: 96-10-22 07:38:30 EDT From: MF Ben
<<<Rob van Eijk, director of strategic marketing at Philips' Philips Laser Optics North America, in San Jose, Calif., said the new CD technology is aimed more at the space occupied by 100 million CD-ROMs than the floppy disk space.>>>
The CD-RW release is pretty great news. Sorry, but I also believe in DVD and this is a necessary step in DVD's direction.
I've been saying since April that I don't believe the optical products, especially CD-Rom and DVD, really have much to do with what Iomega does. That's also the same reason I question whether Iomega would get into optical, or, even sillier, the currently ROM-only DVD market.
Before the naysayers start posting, I believe these CD-RW will sell pretty well in Q4 '97 and that the product will do just fine. I also don't see it as trouble for the Zip.
IMO, the computer of 1999 will not ONLY have a DVD as its removable storage device.
Cheers,
Benjamin
2+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:CNBC/Re-Recordable CD-Rom Date: 96-10-22 08:26:16 EDT From: RunngMoose
It has been discussed hundreds of times on this board, and generally concluded by the more-objective and analytical participants, that the CD-ROM read/write technologies are not a threat to either the Zip or the Jaz, especially in the short run, and that the technologies can maybe even peacefully co-exist together.
Iomega obviously had a well thought plan for which market segments they wanted to attack.
Any true threat to the Zip in it's potential niche as the next floppy would have to have the following characteristics:
* Low drive price(probably less than $199 to start, with potential for $50 in the long run).
*low media cost with big potential for cost reduction.
* the user methodology(look and feel) of a floppy.
* form factor that fits into your shirt pocket.
* quick and easy reads and rights ala floppy of the past(now too slow and small).
* be available in a laptop form factor with easy insertion and eject ala floppy.
* have good options for current computer users to easily add this wonderful capability to their old machines, either internally or externally.
In my opinion all these wonderful new CD-related technologies will compete to replace the current CD-ROM drive, and Zip will win the battle to replace the floppy.
I believe that a similar argument could be made for the Jaz drive ( I don't have time). However, I believe that the competition here is more intense.
Dave 3+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:CD-R Date: 96-10-22 08:33:07 EDT From: RSchoensta
To a degree I disagree with those who say that rewritable DVD is not a threat to the zip. The degree depends on cost and timing. If there were an affordable rewritable DVD today it would be a serious threat to the zip. By affordable I mean costing the same as a CD does. That is the eventual goal of the DVD people. That is sometime in the future you will have rewritable DVD as standard equipment in all computers replacing the current CD at same cost.
If such a affordable device were available today it would decimate the zip. Why? Because it would replace one of the main functions of the zip. That is the ability to backup and archive data and to work as an auxiliary hard drive. And it would do this at no extra cost. And if the disks are affordable as well it could replace zips function as a means to transfer data.
However there is no such device available today. And it seems that such a device when it first becomes available will be unaffordable.
So this gives zip time to establish itself as a useful and for many an indispensable tool. And once zip becomes a useful and indispensable tool people will continue to use it, even if better tools become available - so long as it continues to meet their needs.
So timing and cost are everything on this issue.
Rich Schoenstadt 4+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Zip barriers to entry Date: 96-10-22 12:00:17 EDT From: MonirM
Only a few days ago, I was predicting that rewriteable CD technology would hit the market in 1-2 years, impacting Iomega quite severely.
Looks like that's a lot closer to 1-2 quarters! Rewriteable CD-ROMs means that within the next year, the Jaz drive is dead as a cost-effective storage solution. CD-RW drives will cost nearly the same as today's Jaz, but the disks will cost only 25% as much.
And all you need from here to destroy the Zip drive is a 3.5" CD-RW format that fits inside the full-size recorder/player, similar to the Sony 3.5" mini-CD model.
WITH CD-RW WE WON'T NEED THE ZIP TO REPLACE THE FLOPPY! WE WILL HAVE ONE DRIVE FORMAT FOR EVERY FUNCTION! 5+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Shorts Date: 96-10-22 23:01:02 EDT From: PaulL73
With the CD-RW announcement, the shorts, at last, have something to point to when they empty their threats onto the board. Aside from HYPEMENOT'S splendid hypernitpicking -- which has at least been food for thought -- and MF Ben's contrarian/long arguments, the short argument/input into the evaluation of the company has been limited to variations of ``it's gonna drop, get out now, I'm making a fortune, longs are idiots,'' rehashes of long-obliterated arguments and absent competition (the Swan, the LS-120, CD-R without the W, other hard drives, the 1.44 floppy, SyQuest), weak and irrelevant shots at the Gardner Bros., and of course the occasional good old outright lie. Or have we already forgotten the .02 a share whopper from earnings day?
I'd have to say that the CD-RW could possibly cut up the price of Iomega stock simply because the usual gang of surface skimmers in the popular financial press still haven't bothered to figure what any of these products actually are. Like their counterparts in the world of political reporting they are obsessed with the process and not the underlying issues: how will the CD-RW announcement affect Iomega's stock price? (How will Dole's 15% tax cut affect the polls?)
CNBC probably will not examine the announcement from the standpoint of whether it really matters to Iomega's market for removable storage that CD-RW really only overlaps in that one area and seems obviously designed to serve other primary functions (archiving or delivering games and other multimedia products) and will have a far greater impact on a market Iomega doesn't even compete in (the franchise of the CD-ROM).
Doubtless, if you have the money to buy CD-RW for all its features and don't mind the relative slowness (my presumption is it will be slower than Jaz or Zip), you could forego purchase of that Zip or Jaz you might have had your eye on and use CD-RW as your storage of choice. If you don't mind that CDs are clumsier to carry around than a floppy, that a scratch can annihilate data, that these new drives will, presumably, not be portable or adaptable to a laptop, then you could probably safely ignore the Zip and use CD-RW.
Perhaps all these arguments explain why, after this supposed competition hit the news, that the shorts remain mired most of the day and night in the usual name-calling and empty predictions that have constituted their argument for so long. At least in the early days of the board, the shorts had genuine vaporware to hang their claims on! :) It's tougher now. The shorts have to spin what by any objective consideration was a positive third quarter report into a death knell and do it by sheer force of repetition rather than backing up their arguments with even a whiff of logic.
I don't know where the Zip will be a couple of years from now. It could be buried under the preemptive strike of a new technology, it could be installed on every desktop in America, it could be one of many players in a segmented, hotly competitive market. My guess is that it will be somewhere between options two and three.
For now, I'm still looking for a good reason to sell, and the arguments keep coming up short. 6+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Optical Fact Sheet Date: 96-10-22 23:23:54 EDT From: MF Ben
Optical Fact Sheet
1982: Compact disk introduced 1987: US installed base is 25 million players 1994: US installed base is 100 million players (source: Sony)
After 13 years, the audio compact disk player had a 48% US household penetration rate. (source: NYT)
In 1995, 10 years after introduction, the US household penetration rate for computers with CD-ROMs was 19%. (source: NYT)
1992 worldwide CD-ROM shipments was 2.5 million drives 1996 worldwide CD-ROM shipments is estimated to be 54.5 million drives (source: DiskTrend)
CD writable drives (including all incarnations) total shipments was around 500,000 in 1995 and the total is expected to top 4 million drives in 1999. This includes CD-E and DVD-R. (source: DiskTrend)
Matsushita Electric Industrial Co., Ltd., is the leader in optical disk drive sales, with 18.1% of the industry's $4.8 billion 1995 sales revenues. (source: DiskTrend)
The DVD user data rate (nominal) is 1.1 megs/sec. Capacity: 4.7 megs/8.5 in a future incarnation (source: Philips) 7+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Why Rom Rules: 1 Date: 96-10-22 23:23:58 EDT From: MF Ben
Please refer to the previously posted Optical Fact Sheet.
When I penned a quick Fool Take entitled "DVD, Storage, and You" back in April it was to counter what I saw as a misguided campaign to belittle optical technology due to the conception that optical, including the now silent PD and the very vocal DVD, would compete with Iomega's core product line.
While that has changed somewhat, in part due to CynicalGuy's posting of the "rumor" that Iomega may be entering the DVD business (something I believe to be either false, foolish, or incorrectly relayed), the expected announcement of CD-E seems to have shaken the tree somewhat.
Unfortunately, it seems that shaking the tree also loosens all the nuts. :-)
Without further ado, a quick MF Ben look at the world of optical:
The Recordable Side of Optical: Small and forecasted to remain so.
* According to DiskTrend, writable and rewritable CD drive sales is expected to increase 25% next year, to a total 2.6 million units, 25% in 1998 and 22% in 1999. Not exactly mind-boggling growth or astounding unit numbers, especially when compared with the high capacity flexible disk drive projections. For the record, those are 125% growth next year to 11.5 million units, 63% growth in 1988 and 35% growth in 1999 to 25.5 million.
* Non-CD based optical storage is not much more impressive: around 1 million units this year with forecasts to trend up to 1.4 million by 1999. 40% growth over a 4 year period is not exactly the stuff of high-tech dreams. Those who believe that Iomega should get into the optical market, please take note.
The Current Optical Market: ROM Rules and will for years
* The current CD and optical markets are positively dominated by ROM with a 95%+ marketshare. DVD is not expected to surpass CD-Rom until 1999 and, according to the analysts, ROM based optical should maintain 90%+ market share of the optical market.
* Where does that leave recordable optical? Niche markets. For now. DVD-RR is going to change all that, in 2000. Am I excited? Hell yes. Am I excited for DVD-ROM. Hell yes. But I'm a digital video kinda guy.
* Optical has a huge installed base growing larger each day. The DVD consortium has quietly and neatly mapped out a nice migration path that, if it holds, should take care of most of the arguments well through 2002.
FINAL NOTE:
My quick look at optical has nothing to do with Zip, Jaz, or Iomega except that it highlights why I believe the optical market just ain't worth IOM's trouble -- but is ultimately their call -- and that the DVD market is, contrary to posted rumor, just so far from IOM's mission statement that I can't believe it.
While Disktrend and the other sources are only making predictions, and their predictions in the past have, at times, proved to be far from the mark as new and sudden changes to the market -- like the Zip -- can and will occur, I believe that on a certain level their analysis points to the fundamental qualities, both advantages and disadvantages, of the underlying technology and medium. In this way, I believe that their projections, qualified and supported by research, to be a commentary, rather than a road map, on the migration of technologies.
I can point to specific projections and state why I believe that DiskTrend (or others) will be "off" by 30%, 40% or more, in either direction. However, I still believe in the underlying TRENDS that the projections rely on.
I hope my little walk through Optical Park has helped some rid themselves of the "Optical Scare" that seems to happen every so often for no reason at all. Kinda like a Jets fumble.
Cheers,
Benjamin 8+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:IO Tdy, CD Rom etc Date: 96-10-22 23:31:03 EDT From: JonTara
<<and all the techs went down and now here comes the CD-ROM! at $750 a pop and every Hairy, Dick and Thistles will buy one spending $750 to put it in their $400 486, $1,200 Pentium 133s and $2,200 Pentium 166s.>>
How much were microwave ovens when they first came out?
How much are they now?
VCRs? Who in their right mind would spend $1500 on a VCR? Why, they have no future!
Yes, $750, the *introductory* price, is too high. That will change.
I think the warning here for IOMG shareholders is that you have got to stop valuing this company as if it is a given that the product will enjoy it's current popularity for years to come. There is GOING to be a better widget.
What is IOMG's next widget? Better answer that question before you let your valuation include too much of the future. 9+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:IO Tdy, CD Rom etc Date: 96-10-23 00:04:25 EDT From: Squidbite
<<How much were microwave ovens when they first came out?
How much are they now?
VCRs? Who in their right mind would spend $1500 on a VCR? Why, they have no future!
Yes, $750, the *introductory* price, is too high. That will change.
I think the warning here for IOMG shareholders is that you have got to stop valuing this company as if it is a given that the product will enjoy it's current popularity for years to come. There is GOING to be a better widget.
What is IOMG's next widget? Better answer that question before you let your valuation include too much of the future.>>
Jon, your inconsistently makes me question your motives, but this is curious to me because from your posts I would guess that you don't own the stock.
But about 15 posts ago you alluded to the fact that Zip cartridges are priced too high to replace the current 14.4 standard floppy disk. Why is it that you can see a $1000/unit CD-RW machine as able to achieve price effectiveness, where you fail to see the possibility that if ZIP were to become a replacement for the floppy, that the cartridges wouldn't become "affordable" to the lower-end consumer? I don't follow your reasoning... 10++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Is the grass greener . . . Date: 96-10-23 01:43:20 EDT From: MF Ricster
. . . where the other techs live? Take a walk over to the other side of the hill, specifically to the Intel folder.
Blow out earnings sent the stock to 114 a week ago. Everyone was sure the next stop was 130, where there would be only a slight pause on the trip to 200. After all, everyone agrees that this is the greatest company on any stock market.
Then what happened? Well, no one knows what happened, or I should say why it happened. Actually, *what* happened is easy. The irresistible force apparently met some sort of immovable object. Somethin's gotta give, and this time what gave was the force. When last seen this afternoon, it was at 105, a distressing bounce off the object, whatever it was.
*Why* it happened has everyone baffled, even the TA boys, who were good at predicting the rise, not so good at prophesying the fall. Except that now that it has started to come down, they see it going farther.
Now, the reason I mention this is because of the obvious parallel to what has happened to Iomega in the past couple of days. Until late last week, many of us thought it would continue its ascent, especially if the earnings report was better than the forecasts. Well, the report was better, and the stock responded in the wrong way.
Why? If you can tell me why Intel went down, maybe you can tell me why Iomega did. Then, maybe you can explain why the same thing seemed to happen to Microsoft today.
I bet the newspapers tomorrow will mention the curious phenomenon of stocks retreating on better than expected earnings. Does that mean they are all weak companies? Of course not.
But it is another indication -- to me at least -- that maybe there are some people out there who can reliably predict short-term stock movements, but I am so sure that I will never be one of them, that I will never try. I also know this, however. All of these stocks will reverse the movement of the past two days.
Now I am sure there are people who disagree with that. But if so, then (whatever snide and unthinking comments they care to make about Iomega), they must believe that Intel will go down forever.
MF Ricster
End Report. Posts covered through 3 a.m. 10/23/96. _______________________________
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