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Monday, December 16, 1996 Iomega was down $1 1/4 Friday, closing at $18 3/4 (-6.25%). TODAY'S RECAP: Perhaps adversity brings out the best in people: even in the face of last week's sharp decline in share price, postings in our Iomega folder over the last three days were long, numerous, reasoned, and fruitful. Discussions of J.P. Morgan's 2-cent downgrade were frequent, as was analysis of a new bullish report from Emerald Research. We could have easily doubled the size of today's I/T with thoughtful debate of this company and its prospects. On a sad note: We learned from reports in our forum that ~Chipcorder~, a frequent contributor, passed away this weekend. At times, the citizens of cyberspace seem distant and remote from one another, but despite the obstacles which abound in this unfamiliar new universe, he made his presence here felt. We knew him as "Chipcorder." Offline, he was Brad Oxley. We will miss him. 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++PKeeler considers Iomega's production capacities.
And now, the Best of the Board...Started 3 am ET 12/13/96. 1++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Production Date: 96-12-13 10:52:10 EST From: PKeeler
Seagate says the Jaz deal is off. Except for Howard Kalt's statements to Ronald, I never knew it was on. In the 3Q conference call KE had said they were having trouble getting Seagate platters to work. Maybe it was just too much trouble and Iomega re-jiggered its production.
Add to this mix of questions where the new Zip drives are coming from. Most of the Zip drives I see now have "Made in the USA" white stickers on the box. Most Zips up until this month had either "Made in the Philippines" or "Assembled in the US using foreign and US parts." What was being made in Roy? Whatever it is it has been moved, IMO.
Ditto was being made in Penang and at First Engineering Plastics corp and maybe at Roy. Zip disks were being made in the Philippines (Megamedia) and in Roy (I think). If either of these production lines were moved to Penang that would free up Roy production for Zip drives. Not making Zip drives in Penang would free room for making Jaz disks.
Is Sentinel making Zip disks? Did Iomega already move its corporate offices? Both of these would free up production in Roy. What about Matsushita?!? Where will Iomega make the laptop Zip?
Hopefully this will all be cleared up on or about Jan 18th. It is possible that Jaz production targets 6 months ago have proven to be too high at present. I think the high cost of the Jaz disks are leading people to come up with ways of re-using them. Jaz and CD-R are very complementary in this sense. Work on the Jaz then archive onto CD-R. In light of the recent eps downgrade this really doesn't matter. JPM never mentions Jaz or Ditto. None of the analysts do. As Waverunner said "Its gravy."
PKeeler Patrick Keeler 2++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Emerald Research Date: 96-12-13 11:03:45 EST From: TokyoMex
Just bought 700 more at 20 1/2 at opening. The following is excerpts from 22 page new Emerald Research "IO has exceed all our goals.---Emerald expects strong X-Mas with revenue of $409.6 Mil. generating EPS of 16Cents. 97 estimate at growth of 38.3% EPS of 92 Cents. Based on this we are setting 2 month target of $35. Graph - Zip and Jaz has surpassed all other storage device by 400 million % by 4th qt 96. Syqt - Io has flaked syqt on both ends and with new 2GB next year ? --- OEM - Zip is poised to be the new standard out moding 3.5 floppy LS120 - we view a threat to IO but needs following issue -- standardization issue, lags Zip by 1 year, being oem/var product there are no true retail version of the drive. LS uses 5 head and can not meet Zip's cost. Zips shipped in PCs in 96, 62 mil units 97, 82 mill, 99 105 mill units. Conservatively we estimate 25 Mil Zips in 98 and 125 mil in 98. Where we go from here? New IO is much more forceful than the old IO. We are confident that in the future company will leverage its current assets. 2 GB Jaz will be introduced in 97 and capacity doubled every two years for next several years. Zip will be sub $100 in 97 and sub $75 by 2000. 200 MB zip in 97 or 98 400 mb 2 - 3 years. N Hand - $10 disk media could be the biggest thing to hit the storage market with 17 billion photos snapped last year. IO supplying parts to MCI will hit the market under Panasonic Gateway offering Zips. It has been rumored that IO has not enough cash for rebates, however industry standard is 40- 50% and IO has met the 50% and is more closer to 50 than 100%. Accusation of key officers selling stocks - they were prevented from exercising options earlier due to black outs, refinancing, stock splits. In the future since these officers has locked in the rewards we will not see the future selling. Currently 14.2 % held by institutions but we expect increased participation as io grows in earnings. Based on 30-40 times 1997 earnings we believe 12 month target of $35 and rate IO short and long term buy. Whew I feel emaciated with exuberant satisfaction of unknown kind which was long over due now off to meet with Ladies of IO and drink champagne. Bravo IO 3++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:JPMorgan revision Date: 96-12-13 11:45:06 EST From: PKeeler
>>> Sloppy logic on JP Morgans fault -- and yes, they are coming to interview at CBS next month but for some reason, I don't think I'll get invited. Oh well.
The mystery of the downgraded EPS continues... <<<
FWIW, I think this board is giving too much credit to the Street analysts. The reason MF Ben's and other's attempts at using logic seem to fail is that I doubt the analyst goes from the bottom up. IMO, JPM starts with $0.17 then comes up with a reason. This doesn't mean you should dismiss the number, its the most important number for the next 36 days and demonstrates huge growth in net income from just 3 months ago.
I still think it will be hard to double 3rd quarter results. From my observations lately, and reading other poster's channel checks, Zips are selling at much greater frequency than in the prior 9 months. But does Iomega make significant money on the sale of a Zip drive? How many disks are holiday shoppers buying with the drive? It might be hard for Iomega to add significant net income when disk sales will not keep up with drive sales temporarily.
I think Iomega gets closer to $140 for a Zip than $169. The Zip has been a big hit with retailers because it has a 25% margin for them (CMD article source). Distributors and UPS must take at least $10. After the rebate is reduced, Iomega gets on average $115. What is the gross margin on a Zip drive? If total gross margin on Zip products is 30%, and the disks are over 50%, can drive margins be more than 25%?
If Iomega gets around $10 for every disk and every customer buys a drive and 9.34 disks (in 8 weeks), then total purchase over two months is around $235. Of this, the drive is 58% of the total. A quick algebra calculation shows Zip drive gross margin at 17%. This datum is a little old (March 96) and JPM did mention the improved manufacturing costs, so its probably closer to 21% now.
Iomega spent 16% of revenues on SG&A and around 3.25% on R&D last quarter or 19.5% of gross margin on these items. Figuring these will drop just from the boost in revenues from the greater Zip drive sales, you will maybe get a total of 18% of revenues. Doesn't that leave operating margin on Zip drives at 3%? Less taxes net margin is 1.83%. Shows you why they burn cash.
So if Iomega sells 1 million Zip drives at $140 they would produce net income of only $2.5 million dollars or less than $0.02/share. Its obvious that JPM is being simplistic when they say they reduce estimates by $0.02 for 373,000 Zips; when I can only get $0.02 total for 1,000,000 Zips.
BTW, if you get $0.04 from Ditto and Jaz, where does the other $0.11 come from? If each 4Q drive buyer buys an average of 6 disks, and all the other Zip owners buy an average of 1 that would give sales of 9 million Zip disks. At 20% net income and wholesale price of $10 you would get net income of $18 million or $0.13/share. Total eps would be $0.19.
That's not the point of this post though so don't write that down :) The point is that $0.17 is the number whichever way Kunstler came up with it. :) Add in the fact that disk sales could lag into the 1st quarter (should be a very nice 1st quarter eps wise btw), I would not hold this on margin if you think Iomega reporting $0.14-$0.16 would send the stock plummeting. In Wise speak: The bar, though lowered, is still very high ;-)
PKeeler Patrick Keeler 4++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Jaz Date: 96-12-13 13:24:55 EST From: MF ETurkey
Assuming Greenberg's piece is correct about Seagate discontinuing Jaz, and I have no reason to doubt it since he gave his source, this brings back an interesting issue.
Many people were thrilled to have Seagate on board not just for production capacity, but for expertise in the disk arena. Now it seems that they have had problems, and that they have discontinued it (not necessarily related), but it brings us back to the fact that iomega, which has not been in this type of drive business before, is left on their own to build.
If folks were delighted about the prospect of Seagate coming on, due to reports of Jaz unreliability, doesn't the inverse also hold true?
I can't say I'm a happy camper on this one.
Eric 5++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: mood swings Date: 96-12-14 14:18:41 EST From: Kevinfurr
Times like this are why I'm not one of these cheerleaders. You can say GO IO!!! all you want but I guess if you were clever you might have sold at $26 and you'd be hoping the stock drops still further so you could pick it back up on the cheap.
As for me, I think I prefer to see the pessimism that's suddenly emerged now, than the hype and the Ben-is-a-short-because-he's-not-in-our-cult crap. My only advice is: if you're agonizing, just sell down til you can worry less. Maybe you'll regret it or maybe you won't. I don't care.
Ironic that such pessimism has suddenly erupted at a time when the analysts agree that quarter-to-quarter earnings will almost double, and Besecker projects revenues will be above $400 mil. I guess pessimism about Iomega's long-term viability increases as the stock price goes down; just as the hype increase as the price goes up.
The bears & Greenburg can have their fun, but I don't see much having changed for Iomega. Zip still has no real removable competition. Mitsumi's pretty far off; there's no apparent demand for the LS-120 no matter how much capacity it's makers keep touting. Any recordable DVD device is almost as far into the future as fusion-powered lawn mowers. And as for network computers replacing local storage--about the only thing that's emerged from any of that hype is a Cisco server with a built in Zip drive.
Zip will be bootable very soon on new computers. That's fine with me because I just threw away about 200 floppy disks that I haven't ouched in 2 or 3 years. Zip disks, on the other hand, I use constantly both at home and at work. When I have a bootable-Zip-BIOS I *will* throw away my floppy drive. Being an enlightened Zip-owner I'm just a little ahead of the rest of the slobs.
At least, that's what I think. But I don't know what the stock's going to do this week.
KF http://members.aol.com/kevinfurr/index.html 6++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Q4 and 1 million zips. Date: 96-12-14 19:12:47 EST From: CyberVster
So, in a quarter where retailers can book 60% of their business, iomega sales are going to be nearly flat with only one million zips drives sold?
I dont care how you try to justify the numbers i.e. revenue, eps, whatever, the thought of iomega only selling one million zip drives this quarter feels wrong.
My reasoning:
March 95 zip drives start shipping Feb 96 - 11 months later. 1 million zips / 10 million disks shipped. June 96 - 4 months later. 2 million zips / 3 million solutions shipped. Sept 96 - 3 more months. 3 million zips / 5 million solutions. Dec 96 - 3 months again. 1 million zips in Q4! We shipped that many in Q3! Well, almost and maybe more then 1 million in Q3 we have no real numbers but look at the trend, and Q2 and Q3 were the slow quarters.
JPM says only one million zips in Q4, basically flat with Q3, but EPS will be up 80% Q over Q. How? Please explain it to me again, Im pretty dense anyway but this one really stumps me. What are we selling 100 million dollars more of in this Q then we did last Q? Emerald says 409 million plus and .16 eps. But we are only selling 1 million zip drives! If we use Bens $169 zip revenue (WAY to high) the million zips will net $169 million revenue. So the other stuff ( jaz, ditto, and media) must be fetching $235 million. Gee, I thought jaz sales were slow, and ditto cant be much more then last year, can it? After all Ditto is a well established product. So jaz sales must not be that slow? Or, tie ratios are way up.
In June iomega slipped and let out a number near 8 million (was that zip? Or total solutions?) KE was forced to correct this by clarifying that 5 million zips could be produced in 96. If iomega ships 1 million in Q4 they will be way under that June statement. I had expected 5 million zips and 8 million total solutions to be announced by early January 97.
Has zip sales growth slowed so much and so fast that iomega will only sell 1 million drives in Q4 (the biggest Q of the year)! My own channel checks and all those Ive read here indicate a big increase from the summer months. How, under any circumstances can these numbers be correct?
If zip drive sales are mostly flat at 1 million per quarter what product increased sales by $100 million? I mean really, where is the extra $100 million coming from? jaz drives, zip/jaz disk sales, did Ditto market share increase 150% this quarter?
I agree that net margins will be up this Q (economy of scale and all), but if zip drive revenue is flat from last Q where will the extra profits come from? And what happens to all that marketing research that speaks of price/demand curves and xmas quarter increases in sales.
Why would JPM think zip sales will be so bad Q over Q but still see .17 cents in earnings? It makes no sense at all. Please discuss this for me.
RB61, I would really like to hear your thoughts on this. Someone please crank up your spreadsheet models and try to find a reasonable fit for this. I am really stumped and need to understand, thanks.
Also, this Cisco Webserver has me intrigued. Zip built into a webserver! Talk about validity in the market! I wonder if Cisco releases unit sales? I would love to see how this webserver sells in 97.
Mark 7++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Price Priority over Capacity Date: 96-12-14 21:32:57 EST From: MF Jeanie
In terms of existing products (Zip, Jaz, Ditto) Iomega is expected to develop additional models during the coming years. Emerald believes Iomega can increase revenues and earnings for *at least the next three years* based on the three existing technologies alone.
ZIP - regarding 200MB, which Iomega stated is operational in the lab, Emerald believes this will be announced in 1997 or 1998, and a 400+MB drive two or three years later.
"We believe Iomega will prioritize price reductions over capacity increases for Zip"..... "with a sub-$100 street price in '97 and sub-$75 by the year 2000".
JAZ - Emerald believes a 2GB will be introduced in '97 and capacity will be doubled every two years for the next several years.
DITTO - They expect IO to maintain focus on mass market segment and "milk tape technology as much, and as long, as possible before it is ultimately replaced by another technology (i.e., Zip, CD/DVD...) The company has found the market sweet spot for tape to be between $99 and $149....."
"It's The Disks, Stupid" -- "Investors should look at Iomega as a razor blade manufacturer in order to assess its true potential."
...and then there is this astonishing (to me anyway) remark:
"With only 18 months of production, Zip has proven to be one of the hottest storage technologies, being adopted 20 times faster than CD-ROM".
Jeanie 8++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: iomega and 97 Date: 96-12-14 22:25:07 EST From: CyberVster
I read and digested the Emerald report last night and this afternoon. My first reaction is that there is nothing new in it, I consider myself well informed on iomega and this board does a good job of keeping us all up to date.
I suggest to anyone concerned to read last years reports from Emerald and Brous and compare them, the numbers are not the point, as an example in last years reports the analysts were predicting a price in the $40 range (pre-pre split) last December. In the current report Emerald says IOM is up 800% from last May. Believe me they did not predict that in their May report!
Reading this report was fun because it validated a lot of what we could only hope 12 months ago. Last year you would get serious burns from the flames if you suggested in a post that zip would replace the floppy. I think E and D turkey can back me up on that.
Also 12 months ago I recall IOMG being the most hated stock there was. Gee I guess some things dont change that much.
Why is iomega in the dumper these days? My thoughts are not pretty but they are realistic(to me). Although I had a hard time coming to grips with iomega and the market I want to share my conclusions here.
Iomega in 84 or so created a great product (Bernoulli) and its stock soared, but soon after Syquest stepped in and ate iomegas lunch. Iomegas stock hit the dumper and a lot of investors were burned. This old iomega memory still haunts the new iomega and has investors wondering "can this happen again?". Add to that fear the internet "hype" (read discovery) of iomega, stir well, and you can see at best reluctance to believe.
The shorts are good at fostering this attitude by continuing to equate zip with optical or DVD storage. Problem is there is no comparison, zip is a floppy, optical is not, floptical is a hybrid and expensive but no one cares about actually understanding these differences. Everyone on the street is being told that iomega cannot succeed with zip, just like Bernoulli it looks good but already LS-120, Swan, PD, etc... are eating iomegas lunch. DVD will surely kill the zip if something else doesnt sooner, and DVD is just around the corner, here already! According to some.
The street expects iomegas revenues to flatten and actually recede to old iomega revenue levels. The fear that the skeptics are able to keep alive among investors is real only because iomega let them down before. Even if you were not invested in the old iomega would you (without these boards) be able to filter through the trash and actually understand this company and the new attitude consumers have toward them?
H&Q still has a buy on dips rating on the stock, JPM has a buy rating but does not encourage anyone to invest, in fact JPM has been a net seller of IOM/G and carries a very small position if any at all. Emerald and Brous are considered boutique analysts and are little known to many investors (but both have excellent records for finding great investments early on).
Iomega really has no institutional coverage that really believes in iomega to begin with. This has got to change.
Last year we discussed the stages of a story stock. The graveyard holds an accounting, in general I remember 3 stages, institutional coverage/ownership was stage two, Stage one being retail/Foolish investors discovering the company. Stage three was the sell off after Institutions ran the price up by buying 70+% of the shares (stage two lasted years). This has not happened yet. Will it? Actually if we are right about this company it will. Wall street is not inclined to ignore a company growing like iomega is.
Wall street may hate iomega today & possibly tomorrow, but at some point the 40% growth rate will get their attention. With the disk business that iomega has created EPS will grow at a rate better then revenue growth and patient investors will have their new highs and everything else we expect.
Shorts who do not cover will be forced out at a huge loss or will ride this thing up for years hoping for the demise of the zip disk like AMD wishes Intel would just go away.
Maybe the zip will fail, but I see Microsoft losing to the Internet as just as likely. And the very same Internet wave that could drown MSFT would carry iomega on its crest.
Let the market do its worst, iomega is well positioned to prove it wrong. And Microsoft will probably react in time (or at least buy the companies that do J
Mark 9++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Price Priority over Capac Date: 96-12-14 23:04:21 EST From: JonTara
<<From: MF Jeanie
...and then there is this astonishing (to me anyway) remark:
"With only 18 months of production, Zip has proven to be one of the hottest storage technologies, being adopted 20 times faster than CD-ROM".>>
Yes, I find that astonishing too, given that CD-ROM has reached near-100% saturation, and that Zip hasn't and probably won't.
It's also an apples and oranges comparison. To make a proper comparison, you'd had to compare adoption of removable media disk drives for PCs - including the older SyQuest and IoMega Bournolli drives to the adoption of CD-ROMs.
If you make that comparison, CD-ROMs definitely win, since the removable-media disk drives have taken much longer than CD-ROMs to reach even the current level of market penetration. 10++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Q4 and 1 million zips. Date: 96-12-15 11:24:37 EST From: PKeeler
Cybrvster wrote: >>> Has zip sales growth slowed so much and so fast that iomega will only sell 1 million drives in Q4 (the biggest Q of the year)! My own channel checks and all those Ive read here indicate a big increase from the summer months. How, under any circumstances can these numbers be correct? <<<
They aren't. One thing to keep in mind is that its 1 million external Zips. OEM Zips are not included. So if you think Iomega sold 1 million Zips last quarter that is only 900K external Zips. There's 10% quarter to quarter growth which is still way to low for Christmas and what I've been seeing. If you make the leap that IDE Insider sales have risen to 200K you now have 1.2 million Zips sold in 4Q96. Throw in a bunch of IDE mechanism sales to MCI and you are getting some more revenue. Doesn't look like enough (200 K Zips, half being OEM) for $100 million extra in revenue.
>>> If zip drive sales are mostly flat at 1 million per quarter what product increased sales by $100 million? I mean really, where is the extra $100 million coming from? jaz drives, zip/jaz disk sales, did Ditto market share increase 150% this quarter? <<<
$100 million in Zip disk sales would be worth about $0.14/share all by itself. So it can't be that unless you think all the rest of Iomega's business is worth $0.03/share.
IMHO, I really think they wanted $0.17 more than they needed to explain it.
PKeeler Patrick Keeler 11++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Devil's Advocate Date: 96-12-15 12:33:26 EST From: MF ETurkey
<<< What is the achilles heel of Iomega?. . .This challenge is open to all.. shorts and longs alike>>>
This response is not for this quarter, but for the company as a whole. . .
For Zips - No one really knows just how well it will be accepted by the masses as an internal device. The degree of penetration is extremely important. This pertains to overall tie-ratios also. We are dealing no longer with those who "need" it, nor the technologically adept who rush out to get the latest toys, but with those who may (or may not) say "sure, why not. . . let's throw one in".
For Jaz - Technological problems (based on anecdotal evidence since iomega denies problems) cause some type of revamping and/or write-offs. The loss of Seagate means that their talents are lost, and that they may now be a competitor.
For Ditto - Well, tape drives are commodities with low margins.
For n-hand - Someone else beats them to market with a better/different product.
Eric 12++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Devil's Advocate Date: 96-12-15 13:35:21 EST From: MF Jeanie
Okay, Eric... I'll see your Devil, and raise ya this:
You say: <<For Ditto - Well, tape drives are commodities with low margins.>>
Emerald says: <<The recent introduction of a 2GB Ditto drive... with it's "proprietary" 2GB cartridge provides Iomega with a razor blade revenue that Ditto previously didn't have>>
Or.. as they summed it up "It's The Disks, Stupid" :-)
You also say: <<For n-hand - Someone else beats them to market with a better/different product.>>
And Emerald says: <<At Comdex, Mitsubishi introduced a competitive technology called Flopico, to be avail first half of '97. Although Flopico's 1.44MB capacity is only 7% of n.hand's capacity (20MB in a 1 7/8-inch square disk)... Mitsubishi claims a 20MG follow-on product will be avail by end of '97. Both their $75 drive and $5 disk are slightly smaller than the n.hand equivalents.
We consider Flopico has a few strengths, such as earlier availability for OEM development and PCMCIA interface compatibility. However, we have low confidence that Mitsubishi can increase the capacity to the 20MG level in the timeframe claimed because of its small disk area.>>
My personal opinion from a marketing standpoint. . . *Flopico* is a most unfortunate name for any new product.
And one other important reason why n-hand may/should be a successful product for Iomega -- it creates demand for Zip. By offering a future version of Zip that reads n.hand disks, users have another reason to buy Zip.
This is fun :)
Jeanie 13++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: More on n.hand from Emerald Date: 96-12-15 13:57:34 EST From: MF Jeanie
Excerpts:
<<N.hand technology leverages Iomega's expertise in flexible disk recording, and the component relationships announced during the past few months- which are key to creating a small, low cost drive.
Following are some of n.hand's benefits to Iomega:
Incremental market -- the n.hand market is large (because it is tied to high volume consumer products) and it doesn't compete with Iomega's existing products.
Razor blade strategy lives on -- as with Zip, success with drives creates a large market for high margin disks.
Lower Zip costs -- because it is a similar technology, Iomega can use low cost components developed for n.hand in Zip.
Creates demand for Zip --by offering a future version of Zip that reads n-hand disks, users have another reason to buy Zip.
Emerald believes it was not too early for Iomega to announce n.hand now because of the long design-in period of OEMs. However, there won't be any material revenue and earnings contributions from the new technology before 1998.>> 14++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:More on n.hand from Emera Date: 96-12-15 15:06:50 EST From: MF Ben
<<From: MF Jeanie
Razor blade strategy lives on -- as with Zip, success with drives creates a large market for high margin disks.>>
<<<From: JonTara
In other words, ripping people off.
How long do you think the public will stand for this? How long do you think they will continue buying Zips (or nHand) when a competitor comes along that uses a non-proprietary, industry-standard, non-ripoff media?>>>
Jon,
What competitor would bother with a non-proprietary standard now? Your opinion is that some company should spend millions in R&D to come out with a product that anyone can make? Unfortunately, it seems that technology is truly only upgraded when someone has something at stake: the almighty dollar.
"Open" standards such as Unix can do well, but they rarely get the massive technological boosts that closed standards get: Microsoft Windows, Intel Pentiums, etc.. No one WANTS to spend money on something when it is so hard to recoup R&D in a commodity market.
Hence, the consortium. Look at DVD, SCSI, the modem protocols as examples of how "open" or "semi-open" (such as DVD) standards work. However, even there, the technology surpasses the consortium's abilities to agree with the necessary speed. V.Fast was not an "official" standard but it had to do as V.34 was mired in the world of corporate politics. USRobotics new X2 is another excellent example of how "open" standards lag behind proprietary technology.
Why has the floppy (the "open" floppy, not floptical) progressed so damn poorly? The thing has was invented, I believe in '54, used by IBM in '67 and, since 1985 its capacity has grown by 75%. 11 years to go from 800K (the 3.5") to 1.4 megs? Because no one can really make money on it.
Sure, a perfect world would have massive corporations spending millions on R&D then "giving" the standard away for the common good, permitting perfect competition and low prices for all. The world just doesn't work that way. Netscape gives away their browser for a reason, to sell the server software. It always comes back to the almighty dollar.
I wonder how long the public will stand for patents on drugs? Why DO companies and the government protect intellectual property? Because without the incentive, progress slows to an annoying trickle.
I wonder where your white-knight competitor is. Who will R&D a QUALITY product and then open it up to the world for free without any licensing fees?
Answer: No one. It costs to much to make a great product. Why give it away.
Cheers,
Benjamin 15++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Some storage history Date: 96-12-15 19:38:04 EST From: MF Ben
<<<The bernoulli was developed in 1982, a year earlier than the CD-ROM, and neither it, nor it's successor - the Zip - have been able to achieve this.>>>
JonTara,
Your logic escapes me. The Zip is more "floppy-like" than Bernoulli-like. The floppy was 1967 and is now everywhere.
If you want to look at technology and date it from its first variation, then Zip= floppy.
If, what I think is more useful, you want to look at MAJOR changes to a technology as a resetting the clock, so to speak, then Zip is indeed blowing CD-Rom out of the water.
CD-Rom took 8 years (1983 to 1991) to get included in PCs as standard equipment.
Zip took less than 1.
The "Scandanvian rule" is pretty much the one I like to look at going forward -- it took something like 10 years for cell phones to get even 1% market penetration in Scandinavia but only a few more to triple that.
I pretty much consider 1995 the year of the CD-Rom. It took 12 years for it to get there.
Zip has done a pretty damn good job in the past 18 months, much better than CD-Rom did in its first decade. As they say, past performance is not an indication of future performance. However, as long as IOM doesn't lose sight of where it butter comes from, they should do just fine.
In case they forget, they can look at the quarterly revenues by technology graph and the quarterly gross profit by technology graph in the Emerald report -- didn't find much new in it, pretty much a rehash.
Jaz looks to have leveled out and their Q4 Jaz numbers don't look much different than their Q3 numbers. My experience now is that I may have been very wrong in considering Jaz an excellent second source stream of income. I think it may not be much more than a trickle due to quality control problems as well as other things. Emerald seems to highlight that in their graphs.
What I do find interesting is the massive percentage Zip and Zip disks make up in those graphs. Visual aids always do help.
It pretty much becomes clear that Zip is it. Many believe n.hand will take over the world, much as I believed Jaz could do incredibly well. I now see Jaz as a hard-learned lesson: you can't predict the markets (consumer, not stock).
I don't really believe Iomega NEEDS much more than Zip right now though. Zip done right gives IOM a seat at the Intel/Microsoft table of owning a seat at the proprietary standards table. Quite a feast.
What am I looking for going forward now? Honestly, I now don't give a whit about Jaz or Ditto or even n.hand -- till I see it SELL -- let them add their meager slices to the plate. Whatever. I just hope Iomega doesn't lose sight of Zip. Ever.
IBM didn't go to the 3.5" floppy until two full years after Apple and five full years after HP first put it in their HP150 computer (1983).
Zip has been out since March 1995. Life does move faster now than in 1983 or even 1995, but if we are going to look at history, let's not rewrite it. Zip is as much the successor to the floppy as it is to Bernoulli technology. I don't understand how your above statement can be construed as having a meaningful impact on our ability to forecast the future.
It took 5 years for the 3.5" floppy to gain real acceptance. It took 12 years for the CD-Rom to gain real acceptance.
Let's look at Zip again in March 1997, 2 years after its launch and re-assess then.
Cheers,
Benjamin
P.S. in what year did Microsoft STOP finally making their software available on 5.25" floppy disks? Hint, don't go back TOO far! :-) 16++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Emerald, etc. Date: 96-12-15 19:51:05 EST From: HYPEMENOT
Jeanie,
In your response to my post you stated the following in support of why you think people will continue to buy current versions of the Zip, even though they are not compatible with the new n.Hand technology.
<<< Because maybe they need it now? N.hand is still mostly a year away and designed for other uses (digital photos, etc.) that today's consumer isn't even thinking about yet.
Just my opinion, but I think Zip awareness is only beginning for the rest of the world (we non-techie types). N.hand capabilities aren't even a gleam in their eye. They don't know this is something they will need a year or two down the road.>>>
You posted this before I posted a second message in which I quoted KE's verification in the CNBC/Haines interview that, in fact, n.Hand will not be compatible with current versions of the Zip drive. In my later message I also mentioned the expected future introduction of a 200mb Zip as a SECOND reason for consumers to wait. Since you point out (correctly I think) that the typical consumer is unaware of the n.Hand (its interesting that you talk about a YEAR or TWO down the road, whereas many others here have tried to argue that it come as soon as Q3 of 1997) let me ask you, and anyone else who cares to respond, a couple of questions.
First, do you agree with my characterization that the n.Hand press release put out by IO was deliberately ambiguous on the matter of backward compatibility, and my contention that IO has been unusually vague about the timing of the 200MB Zip? With regard to the latter, keep in mind that while IO was willing to tell the world that the timing for the n.Hand would be 2nd half of 1997, they have been far less precise about the 200MB Zip - an item which they said they had a working laboratory model of at least six months ago!
Second, regardless of whether you think Iomega already has or will, in the future, deliberately downplay the potential introduction of improved (i.e. n.Hand compatibility and 200MB capacity) versions of the Zip drive, to avoid diluting the appeal of current models, how can the Company avoid a significant CONSUMER BACKLASH when the improved versions become a reality? Iomega aside, my experience is that consumers do not take kindly to buying a product and then, soon thereafter, discovering that it has been supplanted by something noticeably superior.
In short, I believe IO faces a real dilemma. Either be vocal and forthcoming about intended improvements to the Zip drive, and risk inhibiting demand for the current versions or, remain relatively silent (at least in terms of sensitizing the consuming public about intended Zip enhancements) and run the distinct risk that many of these people will blame Iomega if they buy a current model Zip, and then discover that it has been replaced by a materially improved version.
HYPEMENOT 17++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Emerald, etc. Date: 96-12-15 20:21:09 EST From: Huibs pht
<< and my contention that IO has been unusually vague about the timing of the 200MB Zip? With regard to the latter, keep in mind that while IO was willing to tell the world that the timing for the n.Hand would be 2nd half of 1997, they have been far less precise about the 200MB Zip - an item which they said they had a working laboratory model of at least six months ago! >>
..imo, IOM is waiting for a competitive threat before introducing the 200MB ZIp..
..the 200MB Zip will be ~30% faster than the 100MB Zip, and will be backward compatible with 100MB discs, although the speed with the 100MB discs will be slower, as the head needs two passes..
..if/when Swan introduces a 130MB drive that's 30% faster than a 100MB Zip, IOM will announce the 200MB Zip, as fast as the competition, with more than 50% more room..
..why are upgrades such a threat in your mind??..hell, the LS-120 folks have ALREADY said their drive will have future, higher capacity iterations, and they havent sold ANY drives relative to iomega..
..jeeze, now iomega's biggest competition, is their own newer drives?..
..my scanner: ..Agfa Studio Scan...OUTDATED 3 months after I purchased..
..my computers: ..Apple 8500...outdated 4 months after I purchased.. ..Apple 540C, discontinued 6 months after purchase.. ..Apple 7500, discontinued 6 months after purchase.. ..Apple IIci, hahaa..
..hard drives??.. ..1.2GB drive, cost me $2400..
..printers??.. ..HP 4M 600dpi laserJet..outdated 3 months after I purchased..
..I could go on and on, you should hear my Radius stories.. :)
..the LONGEST LASTING PRODUCT I'VE EVER OWNED WITHOUT BEING LEAPFROGGED??
..my Zip drive , of course.. :)
:) huibs.. 18++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Valuations Date: 96-12-15 23:17:21 EST From: PKeeler
Iomega is very cheap on several valuation levels. Contrary to a prior post, value investors should be interested in Iomega. Certainly anyone who has cash they are looking to invest for a 3-5 year period should definitely look further into IOM.
Enterprise Value/Price-to-Sales:
Iomega has a total EV based on 3Q sales and cash levels of $1,340 million. That puts the Price to EV (modified PSR measurement) at 1.9, an historically low level.
Buying Iomega at less than 2.0 EV or PSR is a bargain, IMO.
PEG:
Trailing 12-month earnings = $0.36 1997 mean eps estimate (0.77, 0.82, 0.90, 0.92) = $0.85 Growth = 99.3% PE = 52.1
PEG or Fool Ratio = 0.52
Buying Iomega at a 0.52 PEG is a bargain, IMO.
YPEG:
No analyst gives a long term growth rate estimate. However using a BETTER source, the CEO, we can calculate YPEG.
KE stated he saw Iomega growing to $3 billion in revenues by the end of 1999. In other words, growth from roughly $1.2 billion in sales per year to $3 billion in sales per year in 3 years. This represents 35% annual growth. Using the above $0.85 mean estimate, we can calculate the YPEG price and ratio.
YPEG price = $0.85* 35 = $30 1/4
YPEG ratio = ($18 3/4)/($30 1/4) = 0.62
Not as low as the others, but is based on a very conservative CEO's estimate.
Happy Holidays!
PKeeler Patrick Keeler 19++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Insider Date: 96-12-15 23:46:04 EST From: RobertsonG
Insiders sold in droves in mid 20's. Dead horse issue? Well I guess BarbPayne and MF Jeanie and others were onto something but let the clamour drive away steady reflection. Growth stock insider selling is the most important indicator one has - if you get bored with that one then why bother trying to figure out the sales of Zip drives in some obscure mall? The effort here seems to find issues that are obscure, recreating the romance of last year, while if you would just open the curtain and look in the backyard an elephant is sitting on your fence. Time to get a new fence. Also, the insider sales at IOM were massive, far beyond the completely ridiculous guesses that came here, from divorce to getting a house when folks tried to ignore the obvious with Hill's sales. The insider sales were pervasive - many insiders sold. I dont have numbers but IOM likely enjoyed the largest group of insiders selling the largest percentage of stock owned than any reasonable company I am aware of in the last quarter. If you think this is scare mongering to help the "wicked shorts" and other blather and then just drop it, and dont deeply consider what has happened in front of you - you are truly a fool. In 1933 and 1940, the SEC went to great efforts to legislate key reporting requirements for the public just so the public could not be hammered by insiders with always better knowledge selling on top of them. This was revolutionary legislation and powerful. Follow closely insider sales, it is there for you.
Now IOM is a good company, maybe even a great company. There is still much that is attractive about it. If insiders sold at around 22 to 25, where did IOM insider's or the company itself buy? Well, KE told you that one last quarter, with that brilliant short squeeze the company implemented. Where did IOM buy shares last quarter? That is your support now. Forget all that ridiculous charting and TA - look at the record.
Also, the shorts on IOM are likely a lot less than anyone thinks. I would bet it is about 1 MM shares or so now. The reported short sales one reads in Barrons are the structural hedges investment banks put on to effect what are basically unreported insider sales., or "short against the box", section 1042 of the tax code. The NYTimes thought enough of this little game to give it front page coverage on Dec 1. Anyone read it? What it means is that only now a true short interest is developing and likely wont be at risk to be squeezed until IOM is at 13 to 15 - which the company, knowing alot about the the true short interest and conditions, bought their own stock last quarter. I wouldnt be surprised that KE has targeted mid teens to 25 this year, then likely 20 to 40 next year as the managed level for IOM stock.
One thing KE does not want, in about the same manner that Greenspans doesnt want a overall stock market bubble, is a bubble in IOM like last winter/spring. Be rest assured the company has no interest in all that hype unless earnings and structure can support it - like Groves is doing with INTC now. It does tremendous damage for a company with its financiers to have a bubble like IOM went through this year. It completely screws up financing and makes growth tough, unless you get a secondary out - and then you risk being sued or enraging your investors when the bubble collapses. I think IOM is going to be steady and much more dull that experienced the last year for about 2 or 3 years, until structure and growth is realized. Why do you think they moved to the NYSE and lost all the support of the SOES bandits?
End Report. Posts covered through 3 am ET 12/16/96. _______________________________
WE
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