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Thursday, November 07, 1996 Iomega was up $1 5/16 Wednesday, closing at $24 (+5.79%). TODAY'S RECAP:You want Iomega news? Today we've got Iomega news in buckets. How about: 1. IOMG shares rose sharply Wednesday for the second day in a row, in heavy trading. 2. Iomega Wednesday announced a new "slimmer" Zip drive, just 12.7mm thick, designed for those ever-shrinking laptops, to be available to OEMs in the second half of 1997. This new drive is in addition to the 15mm Zip drives already slated for release in the first half of next year. America Online members can check out Iomega's press release on this new drive at Keyword: Market News. 3. Set your alarm! Program your VCR! Iomega CEO Kim Edwards is scheduled to appear on CNBC's "Squawk Box" this Friday morning at about 8:40 AM Eastern Time. Last time KE appeared on this program, viewers will recall that he did his best Ron Popiel imitation, selling Zip and Jaz drives to the camera like he was hawking Flowbees or Thigh-Masters. This time, Mr. Edwards appears in connection with Iomega's move from the Nasdaq to the New York Stock Exchange. 4. Speaking of the Big Board, remember: beginning Friday, Iomega's ticker symbol changes from "IOMG" to the sleeker, more streamlined, pared-down-for-the-90s "IOM." 5. A new Iomega product? We have a report from last night's discussion that Iomega will be offering a miniature version of the Zip drive for use in cellular phones, personal digital assistants, and other small portable devices. Details are uncorroborated and sketchy. Interested Fools should check out the post by ~Tintin2000~ (++11, below), who reports this news from Thursday's edition of the New York Times. (Like all true New Yorkers, Tintin gets the next day's Times before he goes to bed and so no one else here has seen the paper to confirm the story. We should know for sure sometime today.) 6. Finally, proving that your crack Foolish News Team will go to any length to get you the story, our own ~MF Jeanie~ interviewed Greg LeVeille, CFN's VP-Marketing, by phone yesterday, to learn more about CFN's new "InnerBay" Zip drive, designed for Compaq laptops and announced earlier this week. LeVeille's perspective is quite intriguing. See post ++7, below. 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++NOVWOO considers the new Gateway OEM. And now, the Best of the Board...Started 3 a.m. 11/6/96.
1+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: New OEM Matters Date: 96-11-06 06:13:54 EST From: NOVWOO
The official Gateway 2000 announcement matters because it is the first major OEM announcement since the Intel story with Iomega. The Intel story with Iomega is about increased production capacities and cost reductions of Zip chips and Zips. People have been excited. But then they asked, "Now Iomega will soon be able to deliver more Zips and at lower prices, but where is the evidence of increased demands to go with this volume production?" They want to see some direct evidence of demands before the next published quarterly results. Gateway 2000 announcement offers such evidence.
CNF news with Compaq notebook Zip has similar effects. They add together for stronger evidence and give IOMG the delayed upward movement.
Lots of things happened since the early days of unfulfilled OEM rumors (lots of them fulfilled) and the recent Gateway 2000 news. Back then there were enough OEMs matching the production level of internal Zips and Iomega probably couldn't produce more Zips to sign up more OEMs. More OEMs, rumors or not, didn't make good sense then. The Intel story with Iomega was one of the bigger things since happened that drew attentions. It promises one of the many measures Iomega has taken to ensure adequate supplies to OEMs. With all these favorable factors in place, new OEMs now mean more and may be looked upon with greater importance.
New developments offer a fresh look of old news. The integrated picture of Iomega keeps looking better with each colorful addition. Maybe I didn't exaggerate too much when I posted two days ago that "Gateway 2000 announcement... may be the ignition of a rocket that has been sitting on the launching pad." How far will it go? 2+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Some Gateway Q & A Date: 96-11-06 07:36:04 EST From: NOVWOO
Gateway questions with speculative answers:
1) Why external Zips?
Still not enough internal Zips. May take a little bit longer for Iomega to shift production towards more internal Zips. Could also mean both internal and external Zip demands are very high and in particular the internal Zips (OEM) demand is much higher than expected.
2) Does it make sense to purchase external Zips from Gateway?
Yes. I suppose when purchasing with Gateway systems, Zip software will be pre-installed and everything else will be properly configurated. Even it is so easy to install an external Zip to any computer, most users would still prefer to have everything including Zip configuration come pre-installed with the system.
3) Why didn't Gateway wait for internal Zips?
Demands can't wait. External Zips are better than no Zips.
4) Why the slightly delayed announcement?
Didn't plan to announce. Planned to announce with Gateway internal Zips that should come soon. But since people were so excited anyway, so the announcement followed the fact.
5) Gateway Zips only optional?
Gateway computers are custom made as requested. Most everything in the system could be optional if available from Gateway. Availability from Gateway is the key.
The above answers are my guesswork only. 3+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:NEW ZIP for laptops Date: 96-11-06 09:34:01 EST From: MF Ben
<<<Well sports fans, what do you think? Is the 12.7mm Zip a big step? >>>
Heck yes. Seen the new IBM laptops (he says longingly as he lugs around a 7 lb Toshiba)? Thinner is better.
If I had one product I'd like to see on shelves this holiday season, it would be this one. Alas, alack, Iomega says Q1 for the 15mm version.
For those with the propensity to mention "monster" markets may want to check on the growth of laptops on the PC scene.
I would forego digital camera Zip for the thinline Zip (Zip lite?) anyday.
Too bad the press release doesn't give a time frame. My guess would be tail-end Q1. I can wait.
Cheers,
Benjamin 4+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Questions for Mark Haines Date: 96-11-06 12:05:52 EST From: MF ETurkey
<<<I would like to submit 4 questions that we come up with, two from bulls(Cynical,Ben?), and two from bears (Hypemenot, JonTara?) What do you think?>>>
Dave,
If you are going to write to Mr. Haines, then perhaps thoughts about the questions should be company oriented, not people or stock oriented.
Assuming the objective of asking questions is to get information, as opposed to throwing easy lobs to him so he can merely chat up the stock in general and tell us things we already know - there is no shortage of questions:
1. Is iomega looking at the digital photography market, and if so, in what context?
2. You said recently that internal versions of the Zip, the kind that gets built into the computer, were now about 10% of the overall Zip sales, to what extent do you see either Zips or Jazes "in the box" by Christmas 1997?
3. You have said a number of times that you see the disks as the key to iomega's future, what can you tell us about the ratio of disks to drives being sold? Are you disappointed by the Jaz disk to drive ratio?
4. What are your biggest competitive concerns going forward?
5. You have said that you see the Zip ultimately being priced at $99. When do you see this happening?
Eric 5+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Questions for KE Date: 96-11-06 16:13:04 EST From: HYPEMENOT
Waverunner
It may come as a surprise to some (although it shouldnt to those who have read my posts in their entirety), but my position is not that far different from what was expressed by JonTara. While I have reservations about some aspects of IOs fundamentals, I have no doubts about the companys basic soundness and the strong (and still growing) appeal of both the Zip and Jaz products. Thus, similar to his position, much of the concern I have felt (especially when the stock was at far higher levels during April, May and early June), relate to what I believe has been excessive enthusiasm resulting, at times, in extreme overvaluation. And while I want to underscore that I dont think the current valuation is necessarily excessive, another 4-5 points on the upside will bring the stock to a level where, IMO, the risk/reward ratio becomes decidedly unattractive.
As to sensible questions re KEs upcoming CNBC interview, I have to tell you first, that given the usual logistics of these Squawkbox CEO appearances (choppy little segments interrupted by frequent commercial breaks) it is a framework that usually produces catchy SOUNDBITE type comments, rather than detailed, substantive responses. Assuming there is time for a serious interview, I would very much like to have KEs in-depth thoughts on the following:
1) A thorough description of the competitive challenges IO faces, dealing not just with devices that now, or in the future, may compete DIRECTLY (i.e. EZ Flyer 230, Swan/Mitsumi, LS-120) with Zip, Jaz and Ditto), but all the other categories of storage peripherals (permanent and removable) that impact, albeit indirectly, on IOs products (hard drives, CD-R, PD-CD,etc.). These questions should focus very heavily on the pricing and profitability impact that such present and potential competition may have.
2) An in-depth discussion re the external capital needs which IOs growth will generate, with particular emphasis on whether, and to what degree, the Companys current thin profit margins can be improved (which links to the competitive aspects in topic1) so that a greater portion of these financial needs can be met internally.
3) A realistic discussion of IOs disclosure policy. Do competitive factors really justify the Companys very restrictive stance in this area? And, if so, at what point in time does KE anticipate liberalizing disclosure to provide such information as unit sales for IOs major hardware products, and disk tie ratios (to name just two important voids) that will allow investors to more accurately gauge the Companys health and progress (and help to broaden the brokerage communitys currently very narrow coverage)?
HYPEMENOT 6+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: AnotherBrickPatent in the Wall Date: 96-11-06 17:21:22 EST From: RunngMoose
Fellow Sports Fans,
I have not been checking patents as frequently as in the past partly because it costs money to do each and every search, but also because the Iomega patent action has slowed down. However, here's the info on the latest new Iomega patent:
US Patent #5,570,252 issued Oct 29, 1996 (filed for on Jun 7, 1995)
"Disk Drive Cartridge Door"
The patent is for the metal-band door design used on the Jaz cartridges. The stated advantage is that it allows a larger disc to be used in a given form factor.
The 1. (most generalized) claim allowed by the examiner appears to provide broad coverage against any other disk cartridges that use a flexible door/cover that slides in a track.
Another brick in the wall.
Regards, Dave 7+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Interview with CNF VP Date: 96-11-06 17:47:02 EST From: MF Jeanie
This is going to be a long post. I want to thank DKorman1 for suggesting I make this call.
Just got off the phone with Greg LeVeille, vice president-marketing for CNF.
First, I was impressed that I got thru to him immediately by just giving my name and no company affiliation. Once he came on the line I told him I was an IOMG investor and a MotleyFool staff member.
Mr. LeVeille said he heard that the MF message board had been full of talk about his company's announcement yesterday (he seemed pleased) and he enthusiastically gave me permission to post everything we discussed.
Where my notes are word-for-word complete, I'm using quote marks. In other places I have to paraphrase. (forgot all my shorthand)
"Iomega and CNF have a strong strategic relationship. IO worked with CNF supplying product, tech support and marketing support for CNF to develop the InnerBay Zip Drive.
I asked him if this new drive was the thinner version just announced - at first he said yes, thinking I meant the 15mm, but then I said 12.7 -- and he said: "Oh, has that been announced?" I told him Iomega announced it today and he said future drives will be that size, but these first ones are 15mm. He also told me that the 12.7 had to be developed because some notebook configurations require a thinner drive. Now the Zip drive will be able to fit in just every manufacturer's notebook.
I asked what about the bay for standard 1.44 floppy? He was quite dismissive of that -- said: "the 1.44 has been losing steam for a number of years. It's popularity has eroded with the development of larger storage, such as Zip, Syquest, etc., but the Zip is the *most* popular drive. It is strongly positioned to be the defacto standard." Pressing again my concern about not having 1.44 compatibility, he explained that multi-function bays are solving that problem for now. Apparently one just removes a zip bay and inserts a regular floppy bay if needed. His attitude seemed to be that it's pretty unimportant and only an interim need at best <---note: my interpretation here.
The LS-120
To my question: But you developed the InnerBay Zip *specifically* for Compaq's notebooks, right?
he answered: "Yes."
So what about the LS-120?
"Well, the LS-120 has been there for about 3 years, but most manufacturers are reluctant to jump on that bandwagon. The feeling seems to be that Zip is the most popular drive and it's (LS-120) just too late."
He explained that Compaq was one manufacturer that was "looking at the LS-120" of course. . . but when I said that CPQ obviously has a vested interest in it, he sort of laughed, and said "yeah... but we (CNF) have a great number, ...a large number, of Compaq's corporate customers who want the Zip drives. And Compaq's sales people want the Zips, because that's what their corporate customers want. The large distributors and reseller chains don't want to stock the LS-120 because [there's not a strong latent demand <---notes fuzzy here] and the LS market is unproven."
He repeated that the demand at many levels is for the Zip and we discussed the importance of giving the customer what he wants.
Finally he said that Compaq management will probably just sit back and watch this for another 30 days or so.
I asked him again for reassurance that it was okay to quote his comments about Compaq's internal conflicts, and he was most agreeable. In fact, he's heard so much about this message board that he said he would pay us a visit -- so, I gave him the keywords and invited him to participate anytime :)
Mr. LeVeille ended the conversation by inviting us to stop by and see him at Comdex.
I'd like to add that throughout our whole conversation his enthusiasm for Zip and CNF's collaboration with Iomega was contagious. In his mind it seems Zip Is It.
:-) Jeanie 8+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:AnotherBrickPatent in the . Date: 96-11-06 18:02:20 EST From: RunngMoose
Sorry, sports fans, but in my haste to get a bite to eat before my next meeting, I forgot to state the most important implication of the new IO patent on the Jaz cartridge---It appears to provide strong protection against unauthorized cloning of Jaz cartridges!!!!!!!
If a cartridge does not have the now-patented roll-back cover system, the jaz drive won't open the cartridge correctly. The sketches and description contained in the 12-page patent provide a lot more detail then I can quickly relate here, but you get the point, if it isn't the IO-patented door, it ain't gonna work in a Jaz drive. :)
Dave 9+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Interview with CNF VP Date: 96-11-06 18:57:43 EST From: MF Jeanie
Big Oops....
This post from JJKozub just sent me back to my notes...
<<Personally I don't care whether it is CPQ or Tosh that fits IOMG into their computers;>>
When I asked Mr. LeVeille if CNF was making the InnerBay Zip specifically for Compaq -- he said,
"Yes, and also for Toshiba notebooks"
So sorry to leave that very important part out :(
Also - it's worth repeating, the stroke of genius was from a member ~DKorman1~ who took the Foolish initiative yesterday to call CNF when their press release came out. It was he who suggested I call myself to see if they would allow being quoted on our message board.
So thanks again, Fool. This was your idea.
Jeanie 10++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: GATE number crunching Date: 96-11-06 22:38:32 EST From: GoBowsGo
I've run some numbers to estimate the impact of the Gateway OEM on Iomega's earnings. The numbers are based on the potential impact if Gateway had been an OEM for all of 1996. First off, thanks to Patrick Keeler for helping me with some of the crucial assumptions.
Gateway revenues (1995) = $3.7 billion (Source: Morningstar) Assume 25% growth to give 1996 revenues = $4.6 billion Average cost of computer sold by Gateway = $2500 (from Gateway news release) Thus, number of computers sold = $4.6B/$2500 = 1,840,000 units (for comparison, Gateway indicated shipments in last nine months were 1,290,000 in a press release)
Assume penetration at various levels: 5, 10, 15, 20% of computers sold by Gateway Assume Gateway pays Iomega $119 per Zip drive (40% discount below $199 retail price) Assume Iomega's net income ~ 3.5% of Zip price Thus, earnings per Zip = .035 x $119 = $4.15
With 137 million shares outstanding, the table below shows earnings from drive sales is paltry.
Now for the disks (thanks again, Patrick) Assume a tie ratio of 8:1, with net income of $2.50 on a $12 disk Earnings per drive on disk sales = # drives x $2.50 x 8
Pene- Zips Drive Drive Disk Disk Total tration% sold Earnings EPS Earnings EPS EPS 5 92,000 $381,800 $0.003 $1,840,000 $0.013 $0.016 10 184,000 $763,600 $0.006 $3,680,000 $0.027 $0.033 15 276,000 $1,145,400 $0.008 $5,520,000 $0.040 $0.048 20 368,000 $1,527,200 $0.011 $7,360,000 $0.054 $0.065
If Iomega earns $0.42/share in 1996, Gateway sales alone would have added between 4% and 15% to earnings, depending on the penetration rate of drive sales. What do you all think? Any feedback would be appreciated.
Gerald 11++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: YEA I HAVE THE BIG NEWS!!!! Date: 96-11-07 01:18:11 EST From: Tintin2000
From the New York Times--Thursday (just got it off the news stand)
<<The Iomega Corporation, which makes the Zip Drive, a removable data storage device, said yesterday that it had developed a smaller version,which could be built into personal digital assistants, cellular telephones ,digital cameras and other portable devices . The miniature drive called the "n-hand", will be sold to equipment manufacturers for less than $100, with each 20 megabyte removable disk selling for about $10, Iomega said. Shipments are expected to begin in the second of 1997. Iomega officials said they expected the new device to outsell memory cards--which contain a type of re-usable memory chip -- by offering greater storage capacity at a lower cost >>
End Report. Posts covered through 3 a.m. 11/7/96. _______________________________
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