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Wednesday, October 30, 1996 Iomega was down $1 Tuesday, closing at $20 3/4 (-4.60%). TODAY'S RECAP: Iomega shares were down again Tuesday on an altogether unpleasant day for tech stocks in general. Still, bullish Fools stepped forward to defend Mighty Iomega from all naysayers. Discussion of Iomega's accounting for the Zip rebate continued, as did the usual chatter about Iomega's notices in the off-line media. Up days and down, the Iomega board keeps churnin' away... 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++BarbPayneI replies to MonirM's charges (see yesterday's IOMG Today) that
Iomega is improperly accounting for the Zip rebates. And now, the Best of the Board...Started 3 a.m. 10/29/96.
1+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Zip problems Date: 96-10-29 03:34:15 EST From: BarbPayneI
>>>The delays in mailing out rebates are Iomega's method of shifting accounting charges from one quarter to the next, artificially boosting its quarterly profit for Q3.<<<
GAAP accounting precludes this. Reserves were taken in Q2 for product in channel, all rebate applications received and approved in Q3 should have been deducted from the top and bottom line in Q3, reserve was taken in Q3 for product in channel in that is eligible for rebate in Q4, at a % that IOM's accounting staff has concluded is likely to be redeemed. And they actually know the real numbers, unlike us.
>>>Remember, Iomega had prepared its financial statements to reflect an anticipated refund redemption rate of 50%, which is the figure that earnings estimates were based on for Q3. But it will not be until Q4 that the "adjustments" to the refund rate are finally recorded on the bottom line, since most of the refunds issued in Q3 were actually deducted from the corporate bank accounts in Q4.<<<
We are putting words in Mr. Edwards mouth again. Let's try to get this *right*. This number was not broken out more specifically than Mr. Edwards saying, "It is closer to 50% than to 100%". We do not know what the actual reserve number is. It is more likely that this is a function of the overwhelming increase in drives sold, and therefore rebates redeemed, even at a % closer to 50 than 100.
>>>In addition, since the rebate offer extends to the end of the Q4, the unpleasant drag on earnings will continue into Q1 of 1997.<<<
Another erroneous assumption. Is the glass half full, or half empty? Did the rebate actually increase Q3 (Company record) revenues? Did it encourage people to buy more drives and therefore add EPS to the quarterly statements (Annuity from disks) of fiscal years to come? This is what you call a drag on EPS?
>>>A $50 refund is not trivial, and it is clear now that the redemption rate will come in somewhere over 50%<<<
Yes, it is clear to all who actually listened to the conference call that the redemption rate will be closer to 50% than to 100%. This is the only hard and fast figure we have without drawing conclusions outside of the scope of our *actual* knowledge.
>>>The only question now is, how long can the true effect on Iomega's bottom line be deferred?<<<
When will you come up with a more original and believable argument than this tired chestnut? Every quarter the same old nonsense, chargebacks, lose money, cooking books, never happens.
MonirM, you still short IOM, long SYQT? Not that this would destroy your credibility, your specious arguments do that well enough.
Up much to early this morning,
Barb 2+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Zip Problems? Date: 96-10-29 08:08:19 EST From: HRPlbg
I am responding to MonirM and BarbPayneI recent post titled "Zip Problems".
First I think MonirM mistakenly indicated that by delaying payment of the rebate Iomega was artificially boosting its quarterly profit in Q3.
This is incorrect. I think what MonirM wanted to say was that by choosing the 50% redemption rate IO had chosen a rate that would turn out to be lower than the actual rate of redemption. If this is the case then IO will have to take additional charges in the future to offset this difference between what they thought would be redeemed and what was actually redeemed.
This would in effect artificially boost the Q3 numbers. No doubt about it. If the 50% turns out to be low they will have to take additional charges at some point in the future.
Do I believe KE said 50%? YES!! Do I think 50% is the correct redemption rate? NO! I think it will be much higher. So I would tend to agree with MonirM that at some point we may see charges against future quarters for the difference between the 50% assumed by IO and the actual rebate redemption rate.
I also think another point that was not stated very clearly is that IO by delaying the payment of the rebates has done what most business attempt to do and that is to maximize cash flow. The longer they can delay payment on any bill or accounts payable the longer they will be able to use the money themselves. We do it every day.
I agree with BarbPayneI that IO should actually know the true redemption rate. So why 50%? I dont know. It could turn out to be right but I think most are doubting it. $50 rebate on a $200 item is huge. How many people would not send in the certificate? Ask yourself and friends. Do you get 50% saying yes and 50% saying no? The only other explanation for the 50% redemption rate maybe the fact that not everyone is offered the rebate coupon. Thats all I can think of.
BarbPayneI does not believe that KE said 50%. I have to disagree. He did not say it at first but he did repeat that exact number a couple of times after being questioned more about the redemption rate. I feel that he did say 50%.
Disclaimer: Neither long or short at this time. 3+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: 4Q Seen as Slow!!! Date: 96-10-29 15:24:29 EST From: DCenturian
* Leeman Bro's say slower 4Q PC sales than previously expected and there was a huge 3 point drop of Gateway last Friday.
* Computer City head quits job. According to Soloman Bro's sources of decreasing sales. Said it would take "Herculean Sales" to turn that retail chain around.
* Soloman Bro's COMP USA slower sales in 4Q. Sell-off today of many of the Computer & Technology issues.
Lesson Learned: All you Iomega shareholders shouldn't look at the 4Q as the oasis in the dessert.
DC 4+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:4Q Seen as Slow!!! Date: 96-10-29 15:38:11 EST From: MF Ben
<<<* Leeman Bro's say slower 4Q PC sales than previously expected and there was a huge 3 point drop of Gateway last Friday.
* Computer City head quits job. According to Solman Bro's sources of decreasing sales. Said it would take "Herculean Sales" to turn that retail chain around.
* Soloman Bro's COMP USA slower sales in 4Q. Sell-off today of many of the Computer & Technology issues.
Lesson Learned: All you Iomega shareholders shouldn't look at the 4Q as the oasis in the dessert.>>>
Actually, I believe the lesson was learned in Q2: Iomega cannot control all aspects of their environment and can be positively or negatively impacted (Europe) by factors beyond their control, including the health of the retail market in general and PC retail in particular.
I tried to make a clear point of that in my take of Q3 numbers as I believe retail health, including Europe, definitely had a negative impact on Q2 and Q3.
However, I must say the constant "Sky is Falling" reports of the US PC market have, thus far, proved to be little more fun press. Last October I remember hearing the same reports.
Let's face it, while retail will move, somewhat cyclically, somewhat randomly, as will the general PC industry, PC sales have grown this year over last.
I'm not jumping to conclusions about Q4 sales based on these previous week's reports, especially not this quarters. Holiday sales can flood one week even though the previous two were drying than Utah <G>.
Gambling on what Q4 will look like on October 29th is a dangerous game. Maybe Q4 will be a general bust for PC makers in relation to expectations. I don't pretend to know anything except that it is WAY too early to tell and the chicken little impression has been pulled more than once in the past three years by the PC analysts. I don't put much stock (pun intended) in what they say 29 days into a 91 day quarter.
I see no reason, with the information at hand, to believe that Iomega will not meet current Q4 estimates.
Cheers,
Benjamin 5+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Zip Problems Date: 96-10-29 17:50:54 EST From: HRPlbg
KILLERKEVK said;
<<MonirM,
Please explain how you can determine that it is clear that rebates will come in more than 50%. To the best of my knowledge, I have not seen any indication of that.
Killer>>
Im not MonirM but the question could apply to me equally. I actually thought you were replying to my post until I saw MonirM at the beginning.
First, none of us here really knows for sure what the rebate redemption rate is and I would be willing to bet that Iomega doesnt really know for sure what the ultimate redemption rate will be. They may know what the current rate is but they cant know what the ultimate redemption rate will be. We can only make educated guesses.
I believe 50% is low. I think most would agree. Im sure it will turn out to be low if the rebate coupons are available at the point of sell. If the coupons are not available then this could explain the 50%.
Based on your profile you should have some knowledge about how these items are accounted for. Would you care to explain why you feel the 50% redemption rate truly reflects the actual redemption that will occur over time?
If you were to advise Iomega concerning this matter what % would you use? Would your % be considered conservative? Could you also tell us if you have every had any dealings in the past with a similar situation?
I would also like to hear some discussion on the reduced price of the Epson drives. Is Iomega taking a hit on the new pricing of the Epson Zip drives? I think they reduced the price to liquidate the inventory of the Epson drives.
It strikes me as a little funny to see Epson drive disappear from the market. It actually concerns me. I would have preferred to have seen the Epson drive succeed. The more brand names on the drives the better. The same for the disks. I wonder how non-Iomega Zip media is selling? Anyone know? Anyone here besides Cynicalguy use any other brand of Zip disks? 6+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Various Press Reports Date: 96-10-29 21:29:11 EST From: HYPEMENOT
Apathy must really be settling in on this board. How else could it be that it now falls upon the shoulders of a perennial critic like me to keep the rest of you informed about several significant items in the Computer press, most of which are favorable towards IO. I dont believe any of what follows has been covered by other posters, but if it has, just skip over the rest of this and accept my apologies for the redundancy.
THE GOOD In his regular column - Inside Track - in the 11/5 issue of PC Mag, John Dvorak gives a major plug to the AcerBasic, underscoring the fact that it will << sport a 100MB Iomega Zip drive instead of a hard disk >> Dvorak concludes by saying that it sounds like the << perfect Web-surfing machine >>.
In the November issue of Home/Office Computing, three computer configurations (with price points of $5000, $3500 and $2000) are recommended in an article entitled The Well-Equipped Office. In both of the more expensive (and obviously more fully-featured) configurations Iomegas products are recommended - the Ditto 3200 in the $5000 setup, and the Zip drive in the $3500 unit (which is actually a Hewlett Packard 7110Z with the Zip built in).
In addition, the November issue of the Computer Shopper contains an article entitled Mobile Megabytes, which reviews a variety of removable storage devices including both the Iomega Jaz and Zip drives (and clones of each from Epson and Glyph Technologies). Also included are drives from APS Technologies, Nomai, Prima International and Syquest. While the article is generous to all, in that it concludes that each of these devices has appeal depending on specific user needs, the evaluation of the Iomega based products clearly seemed to be the most favorable, with positive comparative comments made not only about the hardware, but equally favorable with respect to software/ease of installation. Of the other products, the Syquest EZFlyer 230 was also characterized in very favorable terms.
THE NOT SO GOOD On the not-so-favorable side, the same issue of Home/Office referred to earlier, also contains a very positive review of the EZFlyer 230 (in which they indicate they tested both PP and SCSI models).
THE UGLY Finally, the 10/28 edition of PC WEEK contains an article about the Swan Ultra High Capacity drive, entitled - Swans floppy drive does double disk duty. This is essentially a news article which contains a couple of pieces of information which, if taken literally, suggest this drive may become a formidable competitor to the Zip. While no performance numbers are given, Swan officials indicate in the article that EVALUATION units of these UHC drives, which can support either SCSI or advanced IDE interfaces, <<< are due by years end for less than $100 >>>. The article goes on to indicate that Swan has partnered with Mitsumi Electric and Tottori Sanyo of Japan, and with Samsung Electromechanical of South Korea to produce drives, adding that they expect to <<< turn out 3 million units per month when full production is achieved in late 1997 >>>. The article concludes with a quote from an analyst from IDC who stated that <<< The drives promises are impressive, but it needs to be available. >>>.
As always, there is no substitute for reading these articles in their entirety, and I hope my citing them will encourage those who are interested to do exactly that.
HYPEMENOT 7+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Various Press Reports Date: 96-10-30 00:04:07 EST From: PaulL73
Thanks to HYPEMENOT for the rundown of mostly positive news for Iomega's stuff. I can't explain why the lack of energy on the board except that maybe everyone is just feeling a little wrung out in general. Also, the dour news about PC sales, the downgrades of the PC makers, MUE's troubles -- none are positive news for Iomega or anyone else trying to make money through OEMs, so maybe there's some anxiety developing based on real facts instead of the bilious blatherings of the shorts.
I haven't seen the real Business Week choose-a-computer issue but the one online makes a very specific suggestion about buying a Zip for folks who find themselves in a storage crunch. Pretty interesting survey of the current world of equipment, at a cursory glance.
In a perverse way, I'm anxious for the Swan drive to actually come to market. I want to see how Iomega responds. It sounds like a genuinely competitive product. I'm impressed that the hype about it has been minimal. That would mean the Swan folks learned from SyQuest's mistaken strategy of touting devices months and months in advance, creating anticipation, then disappointment with the late arrivals of the machines, then indifference while the wait continued, then disappointment again when they came to market--only to find Iomega had already cut prices or worked several marketing angles or signed a few OEMs in the interim, and blunting whatever impact the machines themselves might have had. Swan seems to be wasting zero energy on hype. Home Office Computing magazine I have found to be a very straightforward, agendaless publication. I admire it for that reason, so it doesn't surprise me that they evaluated the Flyer simply on its own merits and found it admirable. It's probably just fine considered by itself. Thanks for the updates
End Report. Posts covered through 3 a.m. 10/2/96. _______________________________
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