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Tuesday, November 12, 1996 Iomega was down $5/8 Monday, closing at $23 3/4 (-2.56%). TODAY'S RECAP: A couple of competitive announcements were made by Iomega rivals Monday. First, Swan Instruments released a statement saying its backward-compatible megafloppy drive would be on view at the Comdex trade show next week (see excerpts of this announcement in the post by ~SHERRMEYER~, 2++ below). Then, OR Technology announced plans to market a slimline version of the LS-120. These press releases are available for review by America Online members at Keyword: Market News. Also Monday, Ace Reporter ~MF Jeanie~ called Iomega Investor Relations to clear up some of our nagging questions about Tim Hill's recent sale of Iomega options. Her reports and the discussion that followed make up a good chunk of this morning's edition of I/T. Dig in, Iomegaholics! 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 IOM Today window and try again.
1++NOVWOO lists possible applications for the n.hand product. And now, the Best of the Board...Started 3 am ET 11/11/96.
1+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:n.hand Application List Date: 96-11-11 03:57:52 EST From: NOVWOO
n.hand Application List
For better understanding of a tiny bit of the far-reaching implications that n.hand technology may have for consumer electronic devices and the future of Zip and Iomega the company, please help me add on and maintain the following list of possible n.hand applications:
1) Digital Cameras 2) Cellular Phones 3) Hand-held games 4) PDA 5) GPS 6) Intelligent Printers capable of printing out digital images directly 7) Checkbook/Debit/Credit/ATM type of applications 8) Advanced Answering Machine 9) Special Handheld Voice Memo Machine (Random Access Play Back Recording) 10) Voice PDA, extension of 9): (A) Transcribing into written words into desktop using voice recognition (B) Advanced editing in voice with the help of desktop machines 11) A Big Screen Image Viewing Machine using TV 12) Some Sub-notebooks if even smaller than the slim laptop Zip form factor is required 13) Hand-held scanner: I like to have one with me in a library when I do research 14) On site test equipments: (A) Medical/hospital (B) Scientific and Engineering, they can be further broken up 15) Medical and other service records
The small size of n.hand disk makes a big difference in convenience, its large capacity opens up lots of applications and the much lower price will leapfrog flash memory devices to make new popular consumer products possible. With less than 1/3 of the surface size and about 14 times the memory of the old floppy and selling for less than $10, n.hand disks will open up lots of visions and inventive minds.
Price and convenience are keys to consumer electronic products. n.hand technology makes a lot of new stand-alone application specific devices sensible for consumers who don't like to tie down to desktop computers all the time.
Just keep in mind the advantages of n.hand technology: Random access; non-volatile; compatibility with desktop or laptop Zip; small size, large capacity and low price of the easy to carry around n.hand disks.
Please feel free to make corrections, suggest more usages one idea at a time, or edit and completely change my list if you want for fun. Maybe one of you will volunteer to keep track and update this list. While some applications could change the way we live, obviously not all or any of the above and the additions to the list may become products. I am only sure some of them won't, but please have fun exercising your creative minds and exchanging your brilliant ideas. 2+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Swan Announcement Excerpts Date: 96-11-11 10:12:50 EST From: SHERRMEYER
Here are some excerpts from Swan Announcement just out on the wire services:
<SNIP>----------------Nov. 11, 1996--Swan Instruments, Inc. will announce a series of high-performance, high-capacity, low-cost floppy disk drives at Comdex Fall `96 in Las Vegas. The company will also announce a series of strategic manufacturing and marketing agreements covering production and distribution of drives and media.
Called the UHC (Ultra High Capacity) series, the drives store 130 MB of data (formatted) on each removable diskette -- 100 times the capacity of conventional 3.5-inch diskette drives.
They operate at performance levels and transfer rates of hard drives, and are fully backward compatible with low-capacity 1.44 MB diskettes. UHC drives operate 20 times faster than conventional floppies, and are twice as fast as competing removable media drives. --------------<SNIP>
<SNIP>-------------------------- Prices are less than $100 in OEM quantities. Evaluation units will be ready by the end of the year. ------------<SNIP>
<SNIP>--------------Swan also announced various strategic alliances. Mitsumi Electric Company Ltd. (Japan), one of the world's largest suppliers of floppy drives, will act as principal drive-manufacturing partner in the alliance, along with Tottori Sanyo (Japan) and Samsung Electromechanical Co. Ltd. (Korea). -----------------------<SNIP>
I hope that this helps!!,
Sheree 3+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Swan Announcement Excerpts Date: 96-11-11 11:03:14 EST From: MF ETurkey
<<<<SNIP>-------------------------- Prices are less than $100 in OEM quantities. Evaluation units will be ready by the end of the year. ------------<SNIP> >>>
If that is when "evaluation units" will be available, then I would not expect to see any OEM deals, assuming they could get them, until at least next summer at best, though probably next Christmas. That would assume an OEM were willing to buck the trend.
This project seems to be behind the schedule that Eden Kim, CEO of Swan, layed out in SLC this past April, which already was well behind in the "first to market" race.
Even assuming the drive can be cost competitive, and assuming it is faster and a "better mousetrap", the questions are:
1. How many Zips will be "out there" by next Christmas?
2. Is it better by such a degree that consumers would suddenly reverse themselves mid-field and go another way?
Eric 4+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Swan/Syjet/LS-120 Date: 96-11-11 11:59:29 EST From: MF Jeanie
What's going to compete with Zip for Xmas '96?
Syjet delays shipping until late December - that misses holiday buyers.
Swan will have units ready for "evaluation" by end of year -- that's a mid-97 story at best.
LS-120, according to CNF, is not wanted by retailers, VARS, Compaq sales staff, consumers, or (so far) any OEMs.
The backward compatibility issue will raise its useless head again at Comdex when Swan shows its product - bet on it. Just as LS-120 received attention at PC Expo, so will Swan at Comdex.
I agree with Deanster that Swan's product seems to be competing with LS-120 -- and we all know what kind of market penetration that product has :-)
Expect confusion; but IMO, there's only one product that is ready now, priced right now, and has proven consumer demand, now.
Jeanie 5+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: n-hand, Why I feel confident Date: 96-11-11 16:02:45 EST From: Ken1Marcus
3 reasons why I like the n-hand
1. Iomega is not the type of company to invent something and then see if it will sell. I believe that if they are planning on making it, their market research has already showed them that there is a need for it. WHether the market is digital photography (nice tie ratio IMHO) or some nitch like gaming, or whether it becomes the standard for many diverse small electronic devices, does not reduce its importance.
2. II would buy an n-hand ready digital camera, I believe there are many like me.
3. . Any new product which leverages Iomega's expertise and diversifies their product line, is great. The more products out there, the more chance that one of them will be a runaway hit like the zip. Also, I like the revenue smoothing effect of multiple products.
Ken 6+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Call to IR Date: 96-11-11 16:20:00 EST From: MF Jeanie
<<Sigh, I am really bored with this insider sales issue, jeesh - enough already : )>>
Jeesh... NOW you tell me, RobertsonG? <g> ...and after I've spent the day trying to get some facts for you? Golly, you're ungrateful, since you're the one who really got me going :-) <kidding>
Well, fact is I just spoke with Andy Rothman at Kalt Rosen Investor Relations, and I don't know how useful this information (or lack of) is going to be.
Andy explained that the iomega compensation package is such that officers, like Tim Hill, are paid low salaries with a very nice stock option package. He further explained that Hill doesn't exactly "own" the stock until he exercises the options. When a given amount of options are vested, he can exercise. This is what he did on 10/24.
He further said many people do a buy/sell on the same day so they don't have to put up any cash. Usually, (hopefully) they are buying at a discount to that day's market value. He suggested that people not infer anything from the performance of options exercises, but focus instead on the company's performance.
He said this is the first time Hill has exercised any options since joining the company. I asked if he would now be given more, and Andy told me that was confidential information.
I then bluntly asked if Tim Hill was leaving the company and was told that iomega has not received a resignation from Hill.
That's all I could get.
Jeanie 7+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: IR calls back Date: 96-11-11 17:15:45 EST From: MF Jeanie
Just got another call from Andy Rothman at IR. . .
It was obvious he called the company after our conversation.
He wanted to reiterate that they have *no* reason to think that Tim Hill is going anywhere.
He also added that he assumes Hill should have many more options to look forward to.
He explained that the reason there have been options exercised by two officers and several directors all about the same time is that they were previously prohibited from selling. It seems there was a lock-up period imposed by the underwriters in which insiders could not sell for a period of time *after* the secondary offering. It would appear that the lock up extended until sometime in September.
In my opinion, this second callback indicates that iomega and their IR firm are attempting to address shareholder concerns as best they can.
Jeanie 8+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: 3rd call from IR Date: 96-11-11 19:16:36 EST From: MF Jeanie
Well, Fools. . . I just got another call from Andy Rothman of IOM investor relations. . .
He said the company called him again and wanted him to convey to us that they can *categorically* state that Tim Hill is NOT leaving iomega.
:-) Jeanie 9+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:n.hand Application List Date: 96-11-11 20:27:03 EST From: Rum Doodle
NOVWOO,
Here's another possible application for your n-list: Electronic books.
But first, a word from Macweek:
<<In addition to cameras, Iomega cited PDAs, cellular phones, game machines, Global Positioning System devices and "electronic books" as potential hosts for the drives.>>
Other tech-types -- Jon Tara, MF Ben, whoever -- please chime in and correct me if I'm wrong, which I often am, but "electronic book" technology is developing around the promise of small flat-panel displays about the size of a large paperback, which will eliminate glare and have the visual "feel" of a book. Out of this Negroponte-ish vision comes the proposition that book publishers will (in the not-so-distant future) be able to sell you John Grissom's latest novel or Motley Fools' latest Investment Guide for much less than the bookstores would charge, because they can eliminate so much of their printing and distribution overhead. Via the net to your e-book in just a few minutes. Ga-ching, your cybercash account is debited $1.20, and you don't even have to leave the comfort of your chair to start reading.
A 20mb n.hand disk should be enough to store, what? War and Peace? The Adventures of CynicalGuy? I don't know, but it's intriguing. And remember, you heard it from Macweek who heard it from Iomega... e-books are potential hosts for n-hands.
Rum (can't wait for "The Exploits of Huibs Pht") Doodle. 10++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:n.hand Application List Date: 96-11-11 22:24:18 EST From: MF Ben
<<>
War and Peace plus maybe 100 other books, plus assorted pictures. The write ability allows for notes or other little items to be added to the margins, etc.. A useful touch that a ROM technology doesn't allow. I read some stuff off my Newton 130. Not much.
I've often held to my belief, somewhat tongue in cheek, that electronic books (AKA, flat screens magazines/newspapers) won't really become ubiquitous until you can roll one up and swat a bug with it. THEN I think they will truly rule the world. <G> Personal theory.
Of course, the days of using it to throw away gum, wrap fish, and make impressions with Silly Putty will be well behind us. Progress.
Cheers,
Benjamin 11++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: IR's account of Hill's sale Date: 96-11-11 23:02:04 EST From: HYPEMENOT
Subj: IRs downplay of Hills Sale
MF Jeanie,
Your effort to get factual clarification from the source, re the Tim Hill insider sale is to be commended.
Having said this, and looking over what you learned from your conversations with IOMs IR rep, I do not understand why several other posters here seem to think this neutralizes the issue.
Maybe I misunderstood what you have said, and if so please correct me, but what you seem to have learned is that Hill (and perhaps several others) sold recently, because the underwriters insisted that the insiders agree (which is not unusual) to not make any sales for a specified period of time after the underwriting. So what does that resolve? All it means is that Hill may very well have wanted to sell EARLIER, and was forced to wait until recently to actually do it. It doesnt change the legitimate question of WHY he decided to sell more than 90% of his holdings. In one respect, it may even add further to some of the basic concerns raised when the sale was first disclosed. I say this because it would be easier to accept (and understand the motivation for ) the almost complete elimination of an insiders holdings, had it been done at the much higher prices that prevailed during the weeks just prior to the underwriting.
Certainly, if Hill had sold (or more accurately in this case contemplated selling) most or all of his shares when the stock was 45 or, better still, 50 that would be far more palatable. That he may have wanted to sell but did not because, legally he was precluded from doing so, still leaves the very important matter of why he then was willing to go through with the sale, just prior to a string of seemingly favorable announcements, and with the stock selling in the low 20s! I still dont see how, without evidence of extenuating circumstances, one can interpret Hills action as anything but a signal that he does not share the enthusiasm re these current announcements (and especially the release about the n.Hand) that keeps reverberating in this forum.
HYPEMENOT 12++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re: Why R&D? Date: 96-11-11 23:31:35 EST From: RB61
Research and Development (R&D), is a very misunderstood part of a company's fundamentals. One might say, "Well, if they hadn't spent soooo much on R&D, they would have smashed EPS projections for the qtr." Others may say, "They didn't spend enough on R&D. They padded their numbers by not spending enough to provide for the future." Is there a common ground? What is too much spending on R&D? What is not spending enough?
Let's look at IOM. The following are R&D expenditures from fiscal 1994 through Sept 1996 qtr end.
1994 1995 1996* Research & Development $15,438 $19,576 $29,008
*R&D from Jan 1, 1996 through Sept 30, 1996
As you can see, IOM has really been cranking up the R&D. I would assume that it takes time to bring product from the R&D stage to being able to actually market the product.
Kim Edwards started with IOM in January, 1994. Since IOM's product mix today (in excess of 90% of sales) in no way represents the product mix back in 1994, one would have to assume that the products being marketed today, were in R&D back then. Or, were a dream in some engineer's mind.
Let's see what that R&D has brought us since 1994 (From IOM's 1995 annual report and product announcements in 1996).
1) March 7, 1995. The Ditto family of tape backup products offers the industry's first $99 tape backup drive. 2) March 24, 1995. Iomega's innovative Zip drive and disks begin shipping to customers in production volumes. 3) June 6, 1995. The internal version of Zip is introduced and immediately adopted by Power Computing as an option on its Macintosh clones. 4) June 12, 1995. Iomega tops the industry's price/performance standard with its announcement of the one-gigabyte Jaz drive and disks. 5) September 18, 1995. Iomega creates a new standard for value and performance in tape backup with the portable Ditto Easy 800 at under $150. 6) December 20, 1995. December shipments of Jaz drives begin with internal versions going to key OEM customers in the audio and video industries.
1996:
1) 15mm small form Zip drive for Laptops announced. Shipping to begin 1st qtr 1997. 2) 12.7mm small form Zip drive for Laptops announced. Shipping to begin 2nd qtr 1997. 3) Ditto 2000 (Sony). Currently shipping. 4) N.Hand for multiple digital uses. Shipping to begin second half 1997.
I hope I haven't forgotten anything :>). As you can see, IOM's investment in R&D has radically transformed the company. Over 90% of today's product sales did not exist when KE came on board in Jan. 1994. Since IOM has really begun to increase spending on R&D in 1996, I have to believe that many additional products will emerge from R&D over the next 12 to 18 months. This is the way to ensure the health and vitality of the company going forward. Do not delay planning for tomorrow, because tomorrow comes awful fast.
Fool On,
Robert 13++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:IR's account of Hill's sale Date: 96-11-12 01:14:56 EST From: MF Jeanie
Hypemenot, at the risk of inviting flames, I think you are doing some very Foolish questioning and I admire your persistence to poke away until you have satisfied your doubts.
Unfortunately, I can't erase your doubts. . . and I hope my transcribing what information I did get from IR is not interpreted by anyone that this is supposed to neutralize all concerns.
My answer to your questions is: I don't know. I can do some guesswork if you like -- as long as you understand it's only guessing and not an attempt to pacify anyone into a comfort zone.
Speculation #1. Hill couldn't exercise until a vested time date was reached. That may have been in May or June when stock price was high and he was forced to wait due to secondary. #2. The vested date was in Oct and he did it then because he could and because he has many more options coming to him down the road. #3. He could exercise at a favorable rate... i.e., buy the stock at, say, 15% less than market and sell same day without having to put up cash. (netting him a profit of $750,000 on est. $5mm sale - which won't buy him the celebrity ranch, but still a very nice house).
Let me explain that last speculation a bit. IR said that "usual" options packages grant a number of shares at a certain *price*, vested over a period of time. As they vest, the employee then exercises them by buying at what is (hopefully) a discounted price at that time. Obviously, one would need cash to do this. But, as often happens, the person buys and then sells on the same day, which IR says can be done without putting up any money. I used the 15% as a hypothetical discount because that's what my brother used to be able to exercise his options for at the company he worked for. My brother got these opportunities at frequent intervals, and always considered the 15% profit as supplemental income.
Hypemenot, I'm still fuzzy about all of it. IR did explain that just because someone has stock options doesn't mean he actually owns the stock. That only happens when he exercises it. So, if I understand it right, Hill didn't just decide to sell 240,000 shares that he had sitting around in his portfolio.
FWIW, I did ask "why now? why so much?" Rothman's answer was, "who knows, maybe he wants to buy a house". I had to laugh at that answer -- since it seemed to be a favorite scenario here. Except under the hypothesis I outlined above... it would be a $750,000 house - not $5mm :-)
And, of course, it could very well be a sign that Hill doesn't think the stock is going up a lot more near term and his need for the money is more pressing.
RobertsonG -- I wish I had thought to ask if the options had to be exercised at the time he did it. I regret I didn't, because it's a good question. Now, as for this...
<< The next stage is to see if some of the directors who are selling stock resign from the board. Again consider how informed these people are - they are insiders. Most will pool stock and sell in a secondary - most secondaries are to provide an exit for the venture capitalists. These sellers are not waiting. >>
...that triggers something IR was trying to explain when I went over the list of directors and Idanta Partners who sold. I don't believe they were allowed to sell into the secondary because the underwriters imposed a lock out period. These sales took place in Sept and Oct., and the secondary was June 5. So it seems they did wait - at least 90 days.
Sometimes getting information raises more questions than it answers, doesn't it? :-)
Thanks as always for your views,
Jeanie
End Report. Posts covered through 3 am ET 11/12/96. _______________________________
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