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Thursday, October 31, 1996 Iomega was up $1 5/8 Wednesday, closing at $22 3/8 (+7.83%). TODAY'S RECAP: ...Boo! The market played Halloween pranks on Iomega traders Wednesday, dropping the IOMG shares to $20 1/4 before charging to a closing price better than 10% above that intraday low. Call it trick or treat: a trick on those who watch the ticker all day, and a treat for shareholders who only learned of the large price gain at the end of the day. One new development, however, has caused some concern among IOMG longs: Iomega Marketing VP Tim Hill has apparently filed to sell a portion of his IOMG holdings. The significance of this move is currently under hot consideration in The Motley Fool message folders and a generous sampling of this discussion awaits your perusal below. Finally, Iomega formally announced its move to the New York Stock Exchange. According to the press release, the move will take place Friday, November 8. Shares will then trade under the new ticker symbol "IOM." 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++Joe War110 discusses disk-less network computers. And now, the Best of the Board...Started 3 a.m. 10/30/96.
1+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Network computers Date: 96-10-30 04:00:26 EST From: Joe War110
Diskless network computers (NC's) are now receiving a lot more attention with business interest and media coverage increasing strongly. Although an NC wouldn't work for me, I can see the advantages of such a solution for businesses that want to lower maintenance costs and from consumers with minimal computing requirements.
Businesses may lower their overall PC costs by not having to worry about diverse hardware/software configurations, upgrades, import of virus code via online downloads or user introduction and lower hardware costs. I believe that the statistic for home computer ownership is around 33%. Yet many home users only minimally use their PC's for basic word processing, tracking finances, playing games, getting email or surfing the web. For the average consumer, PC's are vastly overpowered and difficult to maintain and configure.
Apparently, margins on computer sales are declining at a faster than expected rate as reflected in the current market selloff of PC manufacturing companies. IMO, manufacturers are surely going to be looking to save every penny possible and probably won't be as willing to add extras like zip drives as standard items (which increases the overall price of their systems). Potentially, I can see NC's reducing the growth of sales of full-blown PC's as consumers no longer feel forced to buy a full PC and businesses think that returning to the dumb terminal paradigm cuts overall costs. If so, then future revenue for existing PC manufacturers will be lower than many are predicting. If less PC's and more NC's are sold, then there will also be a corresponding decrease in storage manufacturer sales.
Since all information will theoretically be maintained on a web server in an NC environment, it would seem that computer storage maker unit growth will be adversely impacted if the network computer gains a foothold. Also, as more people get networked into the web (hopefully at cable/T1 or better speeds) then file/program transfers will not require a transportable storage medium such as floppy or zip disks for mere movement of data from one computer to another. One would simply email or FTP the file to wherever necessary. Add in the likelihood that CD/DVD-RW technology will become markedly cheaper and pervasive by the end of 1997 and one might also predict that the need for tape or zip drives for backup will virtually disappear.
Given the above and the relatively high valuations in today's market, I have to wonder if IOMG (and other storage makers) are overvalued with market prices based sales projections into 1998.
JW 2+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: IO Pricing & Margins Date: 96-10-30 16:28:46 EST From: MF Jeanie
In reading AOL's announcement yesterday, I was struck by some of the analysis and how it compares to Iomega's current situation.... i.e., the concerns expressed about profit margins being hurt by Iomega's rebates.
Here's are some quotes regarding AOL's decision:
"AOL's moves are critical for their survival"
The new pricing plans "may cut into AOL's margins, but it is essential for them... they can't compete if their pricing is out of date"
It would seem that part of AOL's recent troubles stem from the fact that they waited and watched while new competition arrived with better pricing structure.... and they were then forced to compete *after the fact*.
Iomega has been using their market lead-time to test out the pricing structure they know will be needed ultimately to deeply penetrate the market and stave off new competition as it arrives.
KE stated last Spring (when product availability was still sporadic) that he intended to reach a $99 price point for Zip. By summer Iomega began the rebates, effectively lowering prices to the $150 range. By Fall he had addressed the question of increased production capabilities, effectively lowering IO's costs. Iomega is getting closer and closer to the goal of a $99 Zip that will *still be profitable* for them.
Yes, it cuts into margins in the short term. But, as AOL just demonstrated, in the long term such price cuts become "critical for survival".
Isn't it better to see it done proactively, as Iomega is doing... rather than reactively, as AOL was forced to?
Just some random thoughts... feel free to tear them apart :)
Jeanie 3+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Tim Hill Date: 96-10-30 18:45:54 EST From: Cynicalguy
<<Subj: Tim Hill Date: 10/30/96 6:27:31 PM From: BarbPayneI
Heard in the chatroom that Tim Hill and one other insider filed to sell shares today. Tim Hill Filed to sell ~500,000 shares. Seemed to come from a reliable source, was wondering, if true, is this something to worry about?
Barb>>
This comes from IR.
Tim filed to sell some options a while back. The number is closer to 250,000 shares. This is less than half of the options he has. He has never sold a share before. And technically he still hasn't. I was told to read the proxy to understand how Iomega compensates its employee's and why their selling of these options is not a big deal. Iomega's compensation plan is geared to option selling.
Very often when somebody has never sold a share, and has options, there can be great pressure from a spouse to sell some options and put the money in a big new house in Utah. Something to think about. :)
Onto other things.
This unlimited AOL will mean a great deal more downloading. From the Web and AOL. Where ya gonna put that stuff?
Damark is now selling the Jaz & the Zip. I think this is big. Read their catalog and see what they carry and why.
GO IO!!!!!!!!! Cynicalguy Bill Bronsteen the plan coming together the NEW beginning of the beginning 4+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Tim Hill Date: 96-10-30 18:52:50 EST From: BarbPayneI
5.65 million dollars (250,000 X 22 5/8) will buy some RE in Utah. Might even *buy* Utah, for all I know. Well, let the Zips fall where they may, I just know that I sold IMPX at 16 when there was significant insider selling, and that was definitely the right move then....
FWIW
Barb 5+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Tim Hill Date: 96-10-30 21:38:45 EST From: MF Logman
<< I just know that I sold IMPX at 16 when there was significant insider selling, and that was definitely the right move then....>>
Barb,
Keep in mind that the IMPX insider selling was of much larger proportions than we have here. Both the incoming and outgoing CEOs, as well as the CFO, liquidated practically 100% of their positions above $18 per share. There were a whole host of other insiders that sold too. (Never mind the fact that the stock was terribly overpriced at the time using any reasonable valuation method.)
I wouldn't be much worried about Iomega insiders exercising options that are included in their compensation package. Additionally, both the CEO and CFO are still holding the shares that they bought more than a year ago on the open market.
Logman 6+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Tim Hill Date: 96-10-30 22:15:55 EST From: BarbPayneI
Also, to set the record straight, I am not predicting any move one way or the other. I said only that *if* IOM made an equivalent move with IMPX that it would be ~$4. I think you only need to read posts from the last week to find me battling tooth and nail over the 50% rebate nonsense.
All I am saying is that Mr. Hills sale has made me uncomfortable, and put this security outside my risk tolerance level. I would never forgive myself for not selling out if the stock was to decline into the abyss, but if it were to rise, I could.
MF Logman is correct that the insider selling was rampant at IMPX, but if you go back a few posts DR IMBECILE has provided a Vickers readout with a number of trades this month, all sells. Mr Hill was not the only one to file to sell today, another more obscure person (whose name I can't recall) did also. It certainly seems that the insiders are selling out. Especially when you consider that for a period of time from (I think) Nov 95 to July96 there were *3* insider trades. From 8/96 to 10/96 11 sells.
Barb 7+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Tim Hill Date: 96-10-30 22:44:47 EST From: SGOWLER
Barb is right from a short term perspective. I think this news will blunt the rally as people like Barb sell and go short on this news. This is a reasonable short term strategy. The question that begs an answer is why all the sales in the last 3 months? Clumped like this they seem to be options related. the other alternative is that the rats are bailing (see Syquest). I do not buy this. The story is too compelling. 1. Comdex will further solidify IOM position as market leader.... no matter what the other companies do in the near term, they are still chasing IOM from a distinct and disadvantageous distance. 2. Dream team will affect profit margins positively for IOM. 3. Q4 and Q1 are best Q's for IOM. (Last year the stock kicked booty after Q4) 4. Lap top Zip ready for '97, partners in place to meet demand. 5. Jaz tie ratio problem may be fixed when Seagate gets its platters to work... this assumes pent up demand. We will see.
Wild cards are: 1. Rebates. (I think reserves held will be adequate) 2. Tim Hill cashes out and heads for XXXZ Corp. (I don't think so) 3. Jaz tie ratio sucks until we see common usage of 4 gig hard drives in the boxes... and the applications get larger and larger to fill the void. (Time will tell) 4. Fool Portfolio sells amid huge media uproar and goes short. 5. Bizinsider goes long... CGuy writes daily column for Herb. 8+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Barb..and the sell off Date: 96-10-30 22:50:30 EST From: MastrMoni
I think you might be missing some big points here....As it was explained to me in respect to stock options to buy or sell when one is a company employee....There are many many factors one needs to consider.....Generally when your employment starts as an officer or insider U are assigned an amount of stock you can purchase at a set cost...the cost depending upon when you became part of the company.....An example....lets say you are Ted Leonis of Aol has the *option to buy 50,000 share of aol at 10 dollars a share.....( employee benefit) U have to watch your own personal tax liabilities, losses in the market etc because the tax consequence is the difference in your option amount and what the stock is trading at now....so if aol is trading at 27 and u can buy up to 50,000( or any part there of) share at 10 do u buy the stock when its 27 or buy the stock when its 70. Certainly if you buy the stock at 10 when its worth 70 there is a 60 dollar/share gain...along with the tax liability...but perhaps Ted exercised some of his employee benefit stock purchase plan when aol was 70 and then the stock tanked to 27( as it did), his tax liability was huge and his long term gain was only from 10 to 27...hardly enough to make up the 35% tax liability on the 60 point difference......I know I'm not being perfectly clear...but I know for the big boys it is not an easy decision when to exercise their stock purchase plans.....it depends on everything one has done in the stock market this year....For all we know....the fellow in Iomg may think the stock is going straight to the moon....pay the smallest difference to Uncle Sam now, lets say from $2/share to 22/share and then wait for his $2/share to be worth 50 by end of q4. In fact, I would bet that this is exactly what he is doing.....
any opinions.... michael 9+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Tim Hill Date: 96-10-30 23:08:10 EST From: MUHNEY
A 144 filing to exercise 230,000 options is not a big deal. This is the real world folks...maybe he wants to post a gain in 1996 vs. some other capital loss, or maybe he has to exercise before they expire, maybe he is tax planning for 1997 because of another event. You do not have any idea what the options cost him initially, or what the proceeds from a sale will be. Maybe he wants to use the stock as collateral in a margin account for some other investment. Don't lose any sleep on this...it happens every day.
Muhney 10++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Tim Hill Date: 96-10-30 23:53:26 EST From: GoBowsGo
Let's keep our eye on the ball, folks. Many posters on this board have been clamoring for discussions of substance regarding this company. Barb, et al, have raised an issue that merits serious discussion. Let's try to do so, without the acrimonious barbs (no pun intended) we've seen tonight. This is the first significant insider sale by a major officer I recall seeing. It has obviously spooked Barb, and it is likely to spook others. While I believe the long-term effect of this sale is minimal, others may disagree and take their money elsewhere. At the least, the timing could have been better.
To build on this topic, can any Fools out there give a clear example of how stock options are granted in growth companies like Iomega? Perhaps if we understand the mechanism better, the situation will be less speculative than it has been today.
Gerald 11++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re: Tim Hill & Barb Payne Date: 96-10-30 23:53:47 EST From: DavePellow
Hi Barb-
>>Well, you folks do what you will, I think I'll err on the side of caution with the Tim Hill thing. As I said before I sold IMPX @ 16, now 2 13/16, a corresponding drop would put IOM at ~4/sh. I won't be surprised by a gap up and then a sell off.<<
Barb, its your money and you do what is best for you, but I will not be selling as a result of Mr. Hills sale. I once got excited because the CEO of one of my holdings sold 50% of his stock in the company---only to learn later that he HAD to sell the stock as a result of a divorce settlement. Don't know if this is the case with Tim Hill, but that could be one explanation.
In his book, "One Up on Wall Street," Peter lynch writes "Insider selling usually means nothing, and its silly to react to it. <SNIP> in normal situations insider selling is not an automatic sign of trouble within a company. There are many reasons that officers might sell. They may need the money to pay their childrens tuition or to buy a new house or to satisfy a debt."
I am always happy to see insiders buying, but never get too excited if there is limited insider selling---unless ALL of the insiders decide to bail out at once. This does not appear to be the case with IOMG at this time.
Good luck in your future investments.
Dave Pellow 12++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re: Tim Hill & Barb Payne Date: 96-10-31 00:09:55 EST From: Huibs pht
>> I am always happy to see insiders buying, but never get too excited if there is limited insider selling---unless ALL of the insiders decide to bail out at once. This does not appear to be the case with IOMG at this time. <<
..agreed, and don't forget...Iomega the company was buying IOMG the stock, just a few weeks ago..
..the fact that Iomega was buying its own stock is WAY more significant than Tim Hill's selling..
..huibs.. 13++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Tim Hill Date: 96-10-31 00:31:36 EST From: HYPEMENOT
I don't think that one insider filing to sell shares, BY ITSELF, is adequate reason for anyone to decisively change their opinion about IO. At the same time, this is a filing from one of the Company's most senior officers, and it represents (according to the posts I have read tonight) approximately 50% of Hill's total position. Also, a need for the amount of money that would be generated is not easily explained by assuming normal events (i.e. the purchase of a house, or a Ferrari, or even a house AND a Ferrari). Therefore, as has been suggested by several posters, this is a matter which deserves careful consideration. There can, of course, be circumstances involved which would mitigate the normal negative connotation that (prospective) insider selling carries, but IMO, it would be foolish to assume this is the appropriate conclusion without facts to support it.
Finally, having read a number of her posts in the last week, it strikes me that BarbPaynel already had some concerns prior to the Tim Hill news. Given that, I don't understand why so many people are flaming her for deciding to sell. Even if she happens to think that the Hill news alone is reason enough to sell, that is her prerogative. And, by the way, there are plenty of experienced investors who place a very high priority on insider selling, that would agree with her decision.
HYPEMENOT 14++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Tim Hill Date: 96-10-31 01:22:29 EST From: LRiley9900
<< A 144 filing to exercise 230,000 options is not a big deal. This is the real world folks...maybe he wants to post a gain in 1996 vs. some other capital loss, or maybe he has to exercise before they expire, maybe he is tax planning for 1997 because of another event. You do not have any idea what the options cost him initially, or what the proceeds from a sale will be. Maybe he wants to use the stock as collateral in a margin account for some other investment. >>
Form 144 is filed when an insider *sells stock*. Period. It is not filed because of an option exercise and hold. It is filed when one exercises and sells.
I never filed one for a client until the day the trade was done. You must postmark it to the SEC on that day at the latest. It is almost certain that Mr. Hill has indeed sold the shares. Why else file and disclose intent to sell?
FWIW.
Louis
End Report. Posts covered through 3 a.m. 10/31/96. _______________________________
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