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Wednesday, December 04, 1996 Iomega was down $1 3/4 Tuesday, closing at $23 1/2 (-6.93%). TODAY'S RECAP: Tuesday IOM gave back most of Monday's gains in an active and volatile session. For most of the day, our forum was surrendered to the day-traders, but finally, after the lights on Wall Street were switched off for the evening, some of our better thinkers showed up to give some substance to the discussion. Most notable of these was ~MF Ben~ (see post 3++, below), who returned after several weeks without posting to offer a long and thoughtful overview of the current state of Iomega. America Online subscribers who missed Monday's televised Nightly Business Report interview with Iomega CEO Kim Edwards might want to mosey on over to Keyword: NBR, where a complete transcript is now available. 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++MonirM argues the case for SyQuest. And now, the Best of the Board...Started 3 am ET 12/3/96.
1++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: SyQuest rising Date: 96-12-03 12:58:04 EST From: MonirM
SyQuest has risen about 10% today on heavy volume. It looks like the market is starting to see it as a well-positioned challenger to Iomega in the high-end data storage battle next year.
The SyJet stores 50% more than the Jaz, it's about 60% faster, and about 50% smaller. Plus it's a lot sexier looking. And it will list for the same price as today's Jaz. And Iomega has not announced any plans to revamp its aging Jaz at any time in the next year.
SyJet has corrected a lot of the mistakes that brought down the EZ 135. The new management has improved marketing, created a slick-looking product line (vs the clunky EZ135), and is doubling the price/performance ratio of its upcoming SyJet in relation to the Jaz.
It looks like SyQuest will take a take piece of the high-end market in 1997. 2++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: The Price of Things Date: 96-12-03 16:29:22 EST From: MF ETurkey
Two prices issues to ponder:
First: At my local computer store, J&R in New York, single Zip disk are now going for $14.95 for the Fuji and Maxell brand, but $19.95 for iomega brand. A huge difference. What does this say about the iomega brand name?
Second: The low end Kodak digital camera (DC20?) is now offered for sale at $199, a remarkable drop from the over $300 price it was just at. What does this say about the Input Revolution?
Eric 3++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Lessons 1 Date: 96-12-03 18:27:15 EST From: MF Ben
Gee, I haven't posted in three weeks. Was there any news? ;-)
I wrote in my Q3 Earnings write-up that I hoped the lessons of the previous two quarters would be taken to heart by IOM shareholders, including myself.
First Lesson: Short Squeezes Don't Last
Sure, that short squeeze in April & May sure was fun. Heck, I loved watching my portfolio value increase wildly almost every day due to my IOM holdings. However, short squeezes tend to be short-lived, artificial price rises. Why? The buying pressure ebbs and without that buying, the support vanishes and the stock gives back most of the gain (sometimes more, sometimes less). See June and July if this concept confuses you. See other short-squeezes as well.
If it's just a short-term boost, why do I even care as a long term Fool? Because the volatility scares the hell out of equity analysts and fund managers -- though traders and brokers make out like bandits -- and the more analysts covering this stock,the more funds holding shares for the long haul, the better.
I just don't understand what a long term shareholder gains from a short squeeze. Someone recently suggested another poster should check out a chart. I just did. May looks great but July looks like someone flipped the image. Nasty. Short squeeze? I don't WANT one. As a long term holder I have little to gain but I do lose as the added volatility scares off the institutions. I frankly don't get the allure. Short squeeze? Keep it. Rising on FUNDAMENTALS is ALWAYS better.
Second Lesson: IOM ain't a puppy anymore.
Contrary to some poster's beliefs, IOM is no longer a small-cap, NASDAQ stock, capable of $10 jumps up and down and capable of growing revenue 150% every single quarter. Looks like many learned this and that the outrageous "predictions" have slowed, somewhat anyway.
Third Lesson: IOM Doesn't Exist in a Vacuum.
This is probably one of the hardest lessons to learn. I had to kick myself a few times to make sure I didn't just glaze my eyes over and convince myself otherwise. Sure, the Zip is a great product -- NO ONE doubts that. Jaz, Ditto, etc. all quality products -- though my SECOND Jaz drive dies last week and is going back to IOM for replacement. However, Europe in Q2 showed that if the economy is weak, if the customers don't go IN the stores, if they don't buy ANYTHING but inelastic goods, IOM sales are GOING to suffer. Even the best product won't sell if no one is going in the stores.
With that in mind, I have tried to do a little digging on how Holiday '96 USA sales are going. Bear in mind, these results cannot be used to DIRECTLY extrapolate Iomega sales in any way, they only give us an indication on how IOM may be doing given the general retail sentiment. Without a correlation number, guessing is dangerous. I do feel comfortable saying, on the basis on the retail sales '96 analysis and results I have seen so far, that IOM should not be handicapped by consumer spending this season, as they were in Europe this summer, but will probably benefit if retail sales (and PC sales) are as healthy as they now look to be. Caveats below.
One of the best sites I've come across, in terms of what I consider accuracy and lack of bias, is the International Council of Shopping Centers (ICSC) site. The ICSC has been around for almost 40 years and is not-for-profit, BTW.
I like looking at mall sites for a variety of reasons, but mostly because I think mall purchasing is one of the more accurate "pulses" of the typical American consumer. It also helps me contrast my own extremely urban experiences. You can reach the ICSC holiday research site at http://www.icsc.org/holiday/
Some quotes from them:
"Sales per square foot in specialty stores at the nation's malls over the Thanksgiving weekend increased by 11.9% over the same period last year, according to a national sample of 57 malls..."
I consider this an excellent indication of how the season MIGHT end up. However, I find another line an extremely plausible explanation for the increase, indicating that sales may not be so strong after all:
"The council said part of the gain should be attributed to the fact that the three-day weekend fell five days closer to Christmas than it did last year and nearer to the Dec. 5 start of the Jewish celebration of Chanukah."
[For those curious, here are the "Hot Gifts" this season, according to the ICSC: Nintendo 64/"Space Jam," "101 Dalmatians" and "Toy Story" apparel, accessories, and toys/Humidors for cigar smokers/Hand-held computers/TV satellite systems/Bell bottoms and hip huggers/Brain Warp colors and numbers game for kids/Barbie/Compact disks and CD-ROM games /Massager chairs]
My point? I'm keeping a close eye on consumer buying this holiday season. According to the analyst report on the site, "Opinions are less clear with regard to the electronic items, such as the TVs and stereos category and the computer/computer products categories. For both categories, about half the analysts foresee moderate popularity, however, a substantial number are also split between whether those categories will be extremely popular or not popular."
My take: Consumer purchasing looks pretty promising this season but that could be the Chanukah factor, yet somehow I doubt it. As well, analysts don't seem to know WHAT to make about computer sales even IF consumer buying is strong. Why? Many reports I've read cite the massive PC penetration as one reason they expect PC sales growth to be slower than last year. Ironic, huh? That could bode well for the aftermarket IOM products, but maybe not so well for the OEM SKUs. Mixed blessing. I don't trust the analysts too much in their ability to gauge computer hardware sales though. I do think there is a positive correlation between general retail purchasing and PC hardware purchasing so a strong retail season should most probably indicate a somewhat stronger PC retail season. How much stronger then becomes the question.
Various Bits:
Based on the good start to the season, I'm cautiously optimistic about the season. Heck, really bad storms the week before Christmas can pretty much wound most retails hopes for a green Christmas and anyone who doesn't believe that such an event would hurt IOM sales is living back in April. I don't count on such things, only recognize as many factors as possible. Right now I think two items are of pretty high importance to how IOM does this quarter: 1) general retail sentiment and specifically PC buying, both boxes and aftermarket items 2) rebate redemption rates as many have noticed, as have I, that the coupons are not always obtainable.
I DO like the retail numbers I've seen so far and if they hold, this should be a damn fine season for retails and, by some correlation (but not 1), IOM. I'm still dismayed at the growth slowdown on new Zip OEM SKUs and not too happy about having a second bad Jaz drive. Anyone else who has done any retail purchasing research for this holiday season, would love to hear from you.
Cheers,
Benjamin
P.S. Basing IOM's future stock price on AOL's is silly. Was it REALLY the NYSE move that got them moving again or was it something else? If it was something else, like the equity analyst coverage, then we can infer little correlation between the two events (the move/the stock's rise). Do the regression. AOL is up, IMO, because of news, including equity analyst coverage. IOM will not necessarily follow, either UP or DOWN.
IOM=IOM. Simple. 4++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Lessons 2 Date: 96-12-03 19:19:25 EST From: PKeeler
>>> I'm still dismayed at the growth slowdown on new Zip OEM SKUs <<<
I think this has more to do with when OEMs announce new SKUs and not much to do with OEM acceptance of IDE Zips. Just from observations, you get Spring and Fall announcements of retail computers. Mail order can happen any time (Dell will sell external Zips with a purchase, BTW). Further, Intel hasn't released any new processors in quite some time so no new SKUs are even needed.
PKeeler Patrick Keeler
P.S. Iomega has not announced that USA Flex, Quantex and Zenith are OEMs even though all three offer Zip drives as part of standard configurations and advertise such (look in PC Mag). 5++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:SyQuest rising Date: 96-12-03 19:30:26 EST From: PKeeler
>>> and is doubling the price/performance ratio of its upcoming SyJet in relation to the Jaz. <<<
First, the SyJet will not have a 6 ms access time, 20 MB/s burst transfer rate, and 14 MB/s transfer rate (double the Jaz numbers). From all published sources I've seen the SyJet will only equal the Jaz in performance but will have a greater capacity. This is if it ships.
Second, you seem to know Syquest well. How many removable drives has SyQuest ever made that had more than one platter? What leads you to believe the engineers at SyQuest can even develop a drive with more than one platter? How far into the future does the ship time have to slip until you worry that SyQuest engineers cannot get their first attempt at a multiple platter removable drive to ever work?
The Jaz drive technology is way beyond the SyQuest 270 or 230. Further, if Nomai could ever get someone to distribute its Nomai 540, SyQuest would go out of business. IMO, they are only hanging on because EZ-135 owners learned of its cancellation and stocked up on disks. That is a one time event and far fewer EZ-135 carts will be sold in the future.
PKeeler Patrick Keeler 6++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Lessons 1 Date: 96-12-03 19:53:06 EST From: Ind Sales
Thanks, Ben, for a pretty good look at investing in the rest of the 90's. I agree with everything you said. Especially the short squeeze point. The shorts are there for a reason, and by and large, they do far more unbiased research than most of the bulls here.
I don't agree with the shorts on IOM or AOL. I think they heavily discount the future, as Bill Gates did in 1994-1995. He caught up and then surpassed the industry, and I expect the shorts will quietly cover and go into other issues too. But if their positions hold through late December, then they can't all be stupid.
You seem bewildered that so many here don't seem to fit the long-term investor mold. Don't be. Many on this board and others are drunk with stock fever. Although their temperatures have gone down somewhat from April, they still remain high. My own personal position this month is to increase my high-yield REIT positions, buy more Larson-Davis, and look over profits to take.
No, I don't expect much from 1997. Except for MSFT, INTC, DELL, CPQ, HWP, AIG, NEDI, S, AOL, VTSS, GE, RHI.
Steve Hinchey
IND SALES 7++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: rebates Date: 96-12-03 21:29:45 EST From: SOBurnham
doesn't anyone think it odd that iomega management only thinks they will get 50% of the rebate certificates back from customers? isn't it odd that the $100 million rebate liability was only listed as $16mm on the q3 balance sheet? iomega burned through $60 million of cash in q3 and probably didn't pay any rebates. liability for rebates is now most likely $200 million, iomega doesn't have the money. isn't it odd that iomega books the sale of a $150 drive at $150 when the sale is actually $100 after the rebate? couldn't sales thus be overstated by 50%? 8++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:AOL Lead Date: 96-12-04 00:23:13 EST From: BDKliewer
> You will NEVER see any of these analysts start coverage of IOM in your lifetime. No way.
bang... bang... bang... another nail in the coffin of efficient market theory. :-)
But seriously, one of the reasons I like IOM as a long term holding (my small anti short aside) is that I see some of the same attributes that led me to harp relentlessly on my parents until they were convinced to buy into Microsoft's IPO (at the time I was just out of college, strapped for cash and running up credit card debt, so couldn't invest myself, darn it). It was the only good call I made until this year when I discovered the Motley Fool and learned how to analyze a company's financials with respect to the stock market.
The thing that struck me about Microsoft back then is that it was so blatantly obvious to anyone who knew anything about computers. Here was a company that had a virtual monopoly on the operating system for the most popular PC made by another company known for virtual monopolies. On top of that, they were really ramping up the application end of things and it was also obvious their inside knowledge of forthcoming OS enhancements would give them quite an edge in the market (it was the continued emphasis on this point that finally convinced my parents).
With Iomega, it's not that strong. But still, having the dominant position in this industry is a massive advantage. Success builds on success. BIOS support, packaging deals with other companies--it looks to me that Iomega just about has this market wrapped up. The next major step, as I see it, would be for software vendors to start packaging their software on Zip disks. I won't hold my breath on that one (but if management's smart, they soon will [if they are not already] working on software vendor incentives for such distribution).
I suspect the analysts will jump on board at some point. Maybe not in the next month or two, (maybe not even in the next year) but at some point Iomega will prove itself to the skeptics... of that I am confident. 9++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: 17th SKU ! Date: 96-12-04 00:44:13 EST From: IAmErgoSum
At PKeeler's prompting I went out tonight and bought myself a copy of the latest PC Magazine (Dec.17th) and sure enough, on pages 106-107 is an ad for the Zenith Data Systems "z-station vx 200" which comes with the Zip 100 as standard. The system is one of three in their Multimedia line and comes with a 200 MHz Pentium, 32 MB of RAM, 3.2 GB hard drive and an 8x CD-ROM. The price is $2,629, including a 17" monitor.
What is also interesting is that if you look in the index under "Swan Technologies" it says "See Zenith Data Systems Direct on pp. 106-107". Now nowhere in the Zenith ad is Swan mentioned! Only Iomega. This leads me to believe that Swan WAS going to have an OEM deal with Zenith but lost it at the last minute to IOM. (Remember the Swan Press Release pre-Comdex that said that they expected OEM announcement at Comdex). The ad copy was changed but not the index. Perhaps BLBREW can confirm that Swan lost this OEM ;>).
I was not able to confirm any SKUs with Zip from the USA Flex ad and Quantex had no ad this month (at least was not in the index), so if someone (PKeeler?) can give me a specific ad reference I would appreciate it.
Regards,
Bill Polk 10++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:17th SKU ! Date: 96-12-04 00:59:31 EST From: Deanster2U
<<if you look in the index under "Swan Technologies" it says "See Zenith Data Systems Direct on pp. 106-107". Now nowhere in the Zenith ad is Swan mentioned! Only Iomega. This leads me to believe that Swan WAS going to have an OEM deal with Zenith but lost it at the last minute to IOM. (Remember the Swan Press Release pre-Comdex that said that they expected OEM announcement at Comdex). The ad copy was changed but not the index. Perhaps BLBREW can confirm that Swan lost this OEM ;>).>>
Wrong Swan. These guys make desktop computers not floppy drives
End Report. Posts covered through 3 am ET 12/4/96. _______________________________
WE
DELIVER - Get IOM
In Fooldom Today delivered
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