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Wednesday, December 18, 1996 Iomega was up $1/2 Tuesday, closing at $17 3/8 (+2.21%). TODAY'S RECAP: Iomega finally broke its long string of losing trading sessions by scoring a modest gain on Tuesday. Nothing to write home about, to be sure, but certainly a relief to weary shareholders who have been watching their equity evaporate since the first week of December. The mood on our Iomega board was subdued, and the latest bout of trash talk seems to be waning. In the midst of it all, we found Fools mostly discussing Iomega's advertising, and trying to deduce just what this season's marketing efforts will mean to The Big Picture. 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++MF Ben argues for the Zip's prospects over those of the
LS-120.
And now, the Best of the Board...Started 3 am ET 12/17/96. 1++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:LS-120 Date: 96-12-17 11:01:43 EST From: MF Ben
Quick story: Forbes Magazine recently got 5 new PCs with Zip and Jaz drives in 'em. After about a week, the users started asking what that little slot was for. Which slot? The floppy.
The backward compatibility doesn't seem to be a problem. I'm just astounded when people believe that it is the number 1 issue. I agree with one thing in the old IBD article posted:
''Most of these (PC makers) would kill a relative to save $10,'' Porter said. ''They'd kill their mother to save $20.''
And let's face it. Any system that is a legacy system and tries to maintain backward compatibility will be inherently more expensive. It is easier to engineer a single use product than a dual use product.
The LS-120, as it has been joked, has specs that read like a 1975 NASA project. The Swan has one of its own disks permanently fixed internally as a "guidance" system. Oh, the burdens of a legacy system (ask any MAC OS System 7 user who is, essentially using the same OS from 1984, just stuff piled high on a now weary foundation -- same goes for Win95 and DOS though. NT4 and the BEos are non-legacy systems and show it)!
Not having a legacy product does mean the Zip is not compatible with the billions of useless floppies out there, but it also means it is inherently cheaper. I'm sure every PC manufacturers' CEOs' mom is relieved to hear that one.
BTW: does anyone miss LPs much? The CD wasn't backward compatible, it was a whole new technology that had benefits of its own. Maybe records weren't around long enough for me to get attached to 'em, but I don't miss 'em at all.
Little know product from 1981:
The original LS-100: a turntable/12" Compact disk player.
Cost $4,000. Units purchased: 27.
<G>
Cheers,
Benjamin 2++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Occam's razor (blade) Date: 96-12-17 15:17:13 EST From: Bigfootmm
Theories considering why Iomega is not heavily advertising in Q4 haven't made sense to me yet, ie., conserving cash, postponing to Q1 for an OEM kickoff, etc.
One could add hypotheses to fit the facts that production is not yet up to speed or that the company's infrastructure is overwhelmed or that marketing has determined that mass media ads don't move significantly more product than the limited ads already being used.
Those don't sound right to me either. What does enter my feeble mind in a feeble way is that just maybe our man of integrity, KE, is in a pickle. Let's say that he knows that in Q1 costs will plummet with Intel and the others supplying cheap innards to Iomega. Here's the dilemma: sell tons of product in Q4 at $149 with a huge advertising campaign, then in Q1 do it all over again at $99. Well, what's the problem? I'm asking myself how would I feel if a company made a big production on tv about its products, then a month later did it again only selling the same thing at one-third less? Hmmm. Sounds pretty Machiavellian, or Syquestish.
Admittedly, I am searching for a reason behind the limited mass advertising and what seems to me a limited push from the OEMs to include Zip drives in their machines right now. There seems to be lots of demand. Why delay? Could it simply be lowered costs coming next month and KE doesn't want Iomega branded as a "slick Willy" kind of company? He is after all a very long-term thinker and seems above all else concerned with making Iomega a household name.
Bigfoot 3++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Occam's razor (blade) Date: 96-12-17 16:25:30 EST From: MF ETurkey
Bigfoot writes:
<<<Why delay [advertising]? Could it simply be lowered costs coming next month and KE doesn't want Iomega branded as a "slick Willy" kind of company?>>>
When I hypothesized that iomega was delaying advertising until Q1 due to the confluence of new SKUs for the new Intel processor, as well as new SKUs for Matsushita derived OEMs, I had forgotten about the lower cost of Zips that would go with a Zip chip as bigfoot mentions. You can also add in Q1 the new laptop Zips being available.
This gives us multiple reasons to forsake the big Q4 advertising in favor of Q1 for those hard earned advertising dollars. The following all come together in Q1:
1. Matsushita production gives iomega new OEM deals/expansion of existing SKUs;
2. New machines from new Intel processor;
3. Cheaper drives due to reduced costs from Zip chip;
4. Laptop Zip becomes available for Apple, Compaq and Toshiba (?) machines.
If this is accurate, it means a rapid increase in new product introduction for multiple reasons for which advertising would be timed.
Hey, it's still a theory, but it's growing in logic.
BTW, if this theory is correct, it means extra money on the bottom line for this Q, though it will be promptly spent in the next Q.
Eric 4++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Seven Predictions for 1997 Date: 96-12-17 19:09:46 EST From: PKeeler
Since I'm on the spin meisters list I'd thought I make a pure hype post. All speculation on my part. All work and no play makes this board a dull place :D
This post is for fun. There is no way of proving any of this until at least 1/18/1998. Some of the reasoning behind these guesses can be discerned from other posts of mine in the last 6 months. But some are pure guesswork.
You could extract certain things that become obvious when reading my predictions. First of all, I expect to be reading this board on 1/1/98... ;-)
Drum roll please:
7 Predictions:
1. Zip disk revenue will exceed Zip drive revenue. 2. Iomega's net margin at end of 1997 is greater than 10% 3. IOM will trade between $15 - $58 4. First 1998 estimate is within 5% of $1.25/share 5. Iomega will announce a second source for n.hand (i.e. a manufacturer other than IOM) 6. Jaz will own a 48% share of the entire non-Zip removable market 7. An insider will sell some of his/her stock
Happy Holidays!
PKeeler Patrick Keeler 5++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: io Ad Spending Follow-Up #1 Date: 96-12-17 21:27:08 EST From: RobinBen1
Well here's my follow-up to yesterday's post. I found some additional data on newspaper spending so the dollars for Q1 and Q2 have changed somewhat.
Unfortunately this type of data usually lags by about two months, so it wont answer too questions about fourth quarter spending (although magazine and spot television spending is already in for October). It should also be noted that spending figures which are reported are rarely accurate. Magazine spending is based on 1x rates so any volume discounts are not taken into consideration. Newspaper spending is only reported for major markets. Television rates are based on industry averages and spot tv data is only reported for top 75 markets.
Magazines spending is through Oct. and is not available for Ditto or Zip separately. Newspaper spending is only available through June. Television spending is available through Oct. for spot (local) by brand. National cable is only in through Sept, but also by brand. All dollars are in thousands.
PRINT TV TOTAL
Magazines Newsp.
Jan. - 59.8 - 59.8
Feb. 158.1 181.1 332.4 671.6
Mar. 389.0 395.5 1,172.1 1,920.6
Q1 Total 547.1 600.4 1,504.5 2,652.0
%/Medium 20.6 22.6 56.7 100
Apr. 722.4 - 354.8 1,077.2
May 936.5 - 651.0 1,587.5
Jun. 1,387.8 - 10.6 1,398.4
Q2 Total 3,046.7 - 1,016.4 4,063.1
%/Medium 75.0 - 25.0 100
Jul. 1,269.8 N/A - 1,269.8
Aug. 738.9 N/A 2.4 741.3
Sept. 538.2 N/A - 538.2
3Q Total 2,546.9 N/A 2.4 2,549.3
%/Medium 99.9 N/A 0.1 100
Oct. 1,260.7 N/A - 1,260.7
Total 7,401.4 600.4 2,523.3 10,525.2
% 70.3 5.7 24.0 100
ADDITIONAL DETAILS
MAGAZINES ON SCHEDULE (most units are Full Page 4-Color, a few Spreads)
Business Week - 11 pages; Computer Life - 17 pages; Family PC - 11 pg; Home Office Computing - 8 pg; Home PC - 21 pg; Money - 2 pg; Newsweek - 20 pg; Outside - 1 pg.; Parents - 1 pg (probably a special computer issue); PC Computing - 14 pg; PC Magazine - 15 pg; Sky Mag. - 2pg; Sports Illustrated - 5 pg (all Demo editions which can be bought based various demographic qualifiers e.g. age, income , occupation, etc. Equivalent to 1.57 national pages) Time - 1 pg (regional edition in Oct.); Windows - 5 pg.
NEWSPAPER MARKETS
Boston, Dallas, Ft. Worth, San Francisco, San Jose, Salt Lake City, Wash. DC
TELEVISION BREAKOUT BY BRAND AND MEDIUM
DITTO ZIP
SPOT CABLE SPOT CABLE
Jan. - - - -
Feb . 242.8 89.0 - -
Mar 380.6 135.8 546.4 109.3
1Q Total 623.4 225.4 546.4 109.3
Apr. 168.6 - 155.7 30.5
May 295.1 1.1 354.8 -
Jun. - 10.6 - -
2Q Total 463.7 11.7 510.5 30.5
Jul. - - - -
Aug. - - - 2.4
Sept. - - - -
3Q Total - - - 2.4
Oct . - N/A - N/A
Total 1,087.1 237.1 1,056.9 142.2
WHERE THE TV AIRED Spot TV Ditto: Austin, Boston, Chicago, Denver, Houston, Salt Lake City, San Diego, San Francisco, Seattle, Washington DC
Zip: Chicago, Houston, Salt Lake City, San Fran, Wash DC
Cable TV Networks Ditto: Discovery Channel, Headline News, CNN, The Learning Channel
Zip: ESPN, CNBC
Well this is all the data available. This is all public information reported by Competitive Media Reporting/LNA. I cant even take a stab at the rest of fourth quarter since iomega has no historical data for me to make an accurate projection.
We in the agency world always use these numbers for comparison purposes to see year to year trends, but we dont rely to heavily on the actual numbers since every advertiser pays different rates.
WHAT DOES ALL THIS MEAN
As I said yesterday, I think MF ETurkey's theory is accurate, but I think iomega initiated this strategy this year as well, which is why Q1 and Q2 spending is so much higher than later in the year. I imagine that IOM front loaded so that OEMs and potential OEMs would want to include zips because there would be a demand for it. The markets where local advertising ran seems to support this theory (they ran in areas where high tech manufacturing occurs). I could talk about this more, but its probably enough to absorb for now.
Ill continue to update as new data becomes available.
Robin 6++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Rebate info Date: 96-12-17 21:48:54 EST From: SGOWLER
The rebate issue is really very fluid. How many total? 850,000? Since when? Remember IOM left an allowance for last quarter so where are we now for this quarter? 425,000? Or is the 850,000 totally bogus and rank speculation? Of the people who apply for the rebate, how many opt for the pack of disks? Certainly the disks don't cost IOM $50. How many people apply for the rebate properly? The company claims 50%. Does Epson have to pay IOM for the disks they offer in lieu of cash? There is no question in my mind that IOM is using the rebates in a very sophisticated fashion. They are not giving away a nickel without proper documentation. They are offering high margin disks instead of cash as an option. They are providing high margin disks to Epson- Epson saves cash IOM makes a little more on every Epson sold where the rebate is paid in disks. IOM is slow to process and pay rebates which allows for interest to be earned on the money held in reserve.
My biggest problem with the short argument that IOM is not playing fair with the rebate is that IOM is too good at it for you. The management is hosing you by not paying $50 cash back to 100% of the buyers at time and point of purchase. This rankles Jon because its a "ripoff". It rankles SOB because he really wants IOM's management to be so dumb as to set in motion a rebate program that bankrupts the company... even though there is no real competition as yet.
This stock may still be dead money from last quarter until now. It may never be a growth machine like last years again... last year was too dang good to expect to match annually. Competition still may be looming over the horizon, and the e.hand may suck goop from the bottom. But I think the rebates have been managed masterfully from the shareholder point of view.
JAN 16 will tell me if I am full of it. BS that is, and if I'm full of it I'll take my punishment then. 7++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: New PBell SKU w/ Zip! Date: 96-12-18 01:41:53 EST From: IAmErgoSum
Computer Retail Week is reporting that Packard Bell will add some new models in its line in January, 1997. One of these new models, the F177 will have Zip as standard. This "F" model is part of their "Multimedia" line. Currently the "D136" comes with Zip. Here is a section of the article with the link at the bottom:
<<Packard Bell returns to the low end in 1997 with a P-120 unit with a .39mm dot pitch, 14-inch monitor carrying a $999 expected street price, according to sources.
The company also is expected to introduce three Cyrix-based models in early 1997, although a specific ship date wasn't available. All three are P-166-based units. They are the model F173, with 16M bytes of RAM, a 1.6G-byte hard drive, a 33.6K-bps modem and a 16x CD-ROM drive, at a $1,199 minimum advertised price; model F175, with 32M bytes of RAM, a 3.2G-byte hard drive and a 16x CD-ROM drive, at a $1,399 MAP; and the F177, with 24M bytes of RAM, a 2.1G-byte hard drive, a 16x CD-ROM drive and a Zip drive, at a $1,499 MAP.
You can reach this article directly: http://www.techweb.com/se/directlink.cgi?CRW19961216S0002 >>
Regards,
Bill Polk 8++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Iomega A lot to respect Date: 96-12-18 01:49:20 EST From: CyberVster
Why? heres what I think
Although iomega has always been beaten down, and IOM has been beaten down since June (in September it rallied, Well maybe.... ). But in all honesty I think iomegas goal of replacing the floppy was not even factored into the stock in June.
So what do I think IOM should be trading for? I will try and answer that, but not with dollar figures. When iomega does achieve its goal it will have ramped zip production by a factor of more then 10 from todays estimated 5 million unit level. Skeptics can feel free to jump all over this but please try to introduce intelligent arguments, not the bearish fluff that follows an IOM selloff. Okay? Thanks. We can argue all day about whether iomega will or will not accomplish the paradigm shift they identified in mid 95, I think total floppy replacement falls into that paradigm, I think most long term holders of IOM are thinking the same way. But remember, floppy replacement does not a paradigm shift make. Iomega has the luck of being in the right place at the right time to greatly expand the role of removable storage. Consider the 20 million hard drive upgrades that are done each year, what percentage will jaz and even zip take of this "upgrade" market? Consider the internet itself? Consider how the role of the floppy will expand because the capacity of the zip facilitates it.
Those of us on this board for any length of time will remember when we could think outside of the box. Since this spring we have been stifled by panicked posts pleading that we not analyze the numbers online. We have been muted by what appear to be children posting cries that the sky is falling, some have become irked enough that they have left completely, yet, Kevinfurr (one of the original great thinkers this board has) is still here. I know many of the rest of you are still here because I see your posts occasionally. You all need to stay involved. The worry that the street has about IOM is partly due to this board. (that sentence should draw flames) The talent that found iomega and dissected the possibilities needs to reform and pick up the pace. I dont mean the original folks necessarily, there are a lot of bright informed people here. Iomega owes a lot to this board and in turn we owe iomega something, and in a lot of ways we come through, but with 100s of posts per day from individuals who just plain should not be posting here, we need to redouble our efforts. Well Ill get off my soap box and back to the reason for this post.
I understand the risk/reward model that stocks fall into. If I look at the risks of owning IOM I see several.
1. iomega management could fall apart and the company, zip and all could flush itself down the toilet. This is one of my worst case possibilities.
2. LS-120/Swan drive could invade the market like a locust storm smothering any appeal for the zip and causing a mass rethinking of the role of the 3.5" floppy, leaving zip in the dust and becoming the defacto floppy successor. This is my other worst case.
3. iomega sales could flatten out, leaving the company with a nice niche market. So we would potentially have zip, LS-120, swan and maybe even the 3.5"floppy all coexisting in a (by then) very confused market for removable storage. At this point consider other iomega products and reevaluate this investment.
Others? If you have any please post them. For the most part I think these 3 cover the major fears. I do not see any of them occurring, but they summarize the big risks.
So with some risks outlined what about the other side, the reward.
1. iomega locks the market and owns near 100% of all the OEMs and aftermarket removable storage sales. Okay, okay, 85%. Plus, those markets are expanding at a very fast pace. 2. in addition to #1 iomega achieves with n.hand a bit more success then they expect. Say about the same as with zip. 3. Other products iomega introduces fit the bill and succeed as intended by management.
I am sure that there are lesser degrees of success iomega could achieve, but I want to focus on the probability of them achieving their stated goals. As a long term investor I have no stop orders that will take me out of this stock on a selloff. I plan to hold this stock until the fundamentals no longer support my expectations. In other words I dont expect to sell this stock for many years if at all.
So whats the risk/reward ratio look like to me. 1/100 seems about right on this one. I dont know how fast any price appreciation IOM is due will come, but I do feel it is justified. I could scream that I think IOM is worth $100 but I know that doing so is futile, so I wont bother. Instead Ill remind you of this.
There are well over a billion floppy disks out there, all of them are hopelessly unproductive in todays world.
There are 20 million hard drive upgrades done every year, all of them are temporary patches to a growing problem. The problem of course is too much data.
There are some 50 million new computers shipped annually (is that US or world?)
Audio and Video are exploding into the digital scene.
There is plenty of demand to meet the digital information supply.
All these numbers are predicted to grow much bigger by the year 2000.
Gee wiz, this list could go on and on. There is a paradigm shift underway and it is being fueled by the internet and digital information. Iomega has the unique privilege of being in the midst of this shift, I could even argue the case that iomega helped start the wave in the first place, but thats another post or two, and a story that wont be clearly seen for a decade or more.
I want to read posts from both camps that are well thought out. I am pretty tired of the trash that lands here so often, but somehow the quality still shows through, IOM has a lot of people interested in it. Why? To me it is clear.
The next proprietary standard is being born. In December 95 (1 year ago) I was nowhere near as sure as I am today.
Important Last Point. I think zip is it, not just because it is a great solution (it is great IMO) but because there was no other choice to make. Had there been competition with several products hitting the market in the same time frame, maybe iomega could have been constrained. Now with revenue over a billion and market share to die for, iomega is the dominate player. Iomega has a world class management team, and iomega has a business plan that is being well executed.
I appreciate thought out comments from bull and bear. I do not intend to be cheer leading here just expressing my opinion. I want to hear everyones opinion, that is, if it is considered.
Mark Shelves are full again at retail. I wonder what will be left on the Dec 24?
End Report. Posts covered through 3 am ET 12/1/96. _______________________________
WE
DELIVER - Get IOM
In Fooldom Today delivered
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