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Thursday, December 26, 1996 Iomega was down $1/8 Tuesday, closing at $17 7/8 (-0.69%). TODAY'S RECAP: You want quiet? Try the Iomega Folder on Christmas Day. Not a creature was stirring, which was not all that surprising, since only one-fifth the usual number of shares changed hands during Tuesday's abbreviated Christmas Eve trading session. Still, the lull in activity gave those Fools who did find time to post an opportunity to gather their thoughts, and thus our board exhibited a more measured and considerate tone than usual. Nice sentiments for Christmas. 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++PAUCLAIR considers 4th quarter sales and zip production
costs. As always, the following posts represent the thoughts of our contributors, not those of The Motley Fool (Keyword to: aol://4344:505.legal.604694.500319179). And now, the Best of the Board...Started 3 am ET 12/24/96. 1++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Sales comparison Date: 96-12-24 07:27:05 EST From: PAUCLAIR Like many others on this board, I have periodically done channel checks for about 1.5 years. In my estimation this quarter has far exceeded any other period regarding supply and moving product and, while purely a subjective observation, I believe it has been significantly greater (possibly 2X or greater). Considering the number of Zips that JPM's 4Q estimates for revenues and earnings were based on, it would seem that at least the revenues may surprise many to the upside. IOM's retail presence has been impressive, as we were told it would be by Mr. Edward's in the last conference call. Two questions regarding LS-120/Zip. We are all aware of IOM indicating a future Zip retail price of $99 and seem to be fast approaching it. Does anyone (especially if you have disassembled one or more Zips) have a feel or prediction for what the manufacturing cost for the Zip will be later this year after the chip integration and other ramping economies are in place (Kevinfurr, Arentz65, others)? Secondly, knowing the vastly superior utility of the Zip over the 3.5 floppy, and estimating a $15 OEM cost for the floppy (same amount of labor to install 3.5" or Zip), what would the cost of the Zip have to be for all OEM's to install them standard strictly on a price basis? If they were the same cost would anyone argue that all boxes would still not have them installed (because of the costs of the disks for instance)? If so, I disagree. Anyone that has used the two alternatives would have no doubt. So what is the price differential that will ensure universal adoption and how far are we from that price? Seem like simple enough questions. 2++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Universal adoption Date: 96-12-24 08:22:34 EST From: JKnuth5871 Premature posting, I hate when that happens! It is not only price which will dictate the possibility of universal adoption, it is the path of dependance on installed base as well. Sub $50 zips internal to oems would make a large difference,Imho. Wasn't it Emerald who estimated a 50% lessening in cost in 97 due to integration and economies of scale? If this can happen, I would think internals could be produced somewhere between $40-$45. At that point, the capacity and performance, zip vs. floppy, should compel more oem inclusion. Higher % inclusion by one or more oems begets others to follow. It may be 98 until a much higher oem inclusion rate is evident. Any guesstimates of inclusion rate for 96? In the third quarter, I believe the percentage of revenue to oems was 10%(31,000,000). This was for all storage solutions, not just zip, though I believe if that were broken out by units, zip would be the largest percentage. Even so, if internal zips are $80 and captured 20,000,000 of that 31,000,000 figure, 250,000 were shipped to oems in q3. Small in comparison to total computers shipped. The next year, and how quickly Matsushita gets high volume production, are critical to IOM's future. As always, time will tell.
Jim Knuth 3++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Personal Attacks........ Date: 96-12-24 08:57:22 EST From: MNNML
>>From: RSheph5278 My research concerning iom being a dominant long-term player should have nothing to do with some of the shorters...... "opinions". << 1. The street doesn't believe the company will deliver a 'standard'. That is why its one of the most shorted issues. 2. The street thinks another product will result in decreased sales/slow growth at IOM. They are not convinced that the nHAND will be the saviour. (Note, this product need not be the LLS120 or Swan, but another) 3. Just because people want the stock to go up, doesn't mean that there won't be disagreement. IOM announced a 'problem quarter' a couple of months ago. This was a couple of months after a secondary offering at almost twice where the stock is trading now. When they announced the secondary, it was several dollars below the market price. IMHO, it isn't the short who 'have blinders' on, and just fail to realize what a fantastic 'sure thing' an investment in this company would be. It is the longs who seem to seem to grasp the issue that their arguments are for some reason 'falling on deaf ears'. IOM isn't a small undiscovered company anymore, everyone knows about it its on T.V. all the time. 4++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Diffusion of Innovations Date: 96-12-24 10:35:53 EST From: JeffV27982 I was just reading the December issue of INC. magazine and it had a section entitled "The Classics .. The complete guide to the best business books ever written". What I found pertinent to Iomega was an old book they listed as one of their "best business books". It discusses why some products become standards and others fail: "Diffusion of Innovations" by Everett M. Rogers (1962) (summary by Jim Collins) Rogers presents the definitive exploration of how new innovations become adopted by the general public, why some superior innovations fail to become adopted while inferior innovations become standards, and why some innovations take decades to proliferate while others spread seemingly overnight. Roger's key concept, the "innovation/adoption cycle," should be as much a part of your tool kit as the concept of supply/demand. When a new innovation hits the market, it appeals first to a rare breed of "venturesome innovators" who habitually experiment with novel ideas and products. Rather than waiting for the social approval of other users, these people ignore the ridicule and skepticism that often greet a new idea, and become its first champions. In the next stages, the innovators influence a group of "early adopters," who in turn influence a larger group called the "early majority," who then act as role models for the skeptical "late majority," who finally convince the traditional, change-resistant "laggards." Nike, for example, moves first from elite athletes (venturesome innovators) to serious wanna-bes (early adopters) to weekend warriors (early majority) and eventually to the vast majority of people who wear weird-looking, bright-yellow-and-fuchsia running shoes around the house. *** Many entrepreneurs make the fatal mistake of jumping directly to market with an innovation. They fail to grasp the central dynamic of innovation adoption: most people respond NOT to the superiority of an idea but to whether other people are using the innovation. Most people don't want to look dumb trying something novel that turns out to be stupid. To make an innovation successful, first you get the most influential venturesome innovators and early adopters and move sequentially through the cycle. If you jump straight to the mass-market laggards, your idea will probably fail. *** ---------------------------------- If you think of these ideas in terms of Iomega, I think a few questions that have bounced around here can be brought into context:
1. Why do we see Iomega drives in computer stores only and advertising in computer magazines (not TV?) Iomega has been working through the cycle. I think they already sold the "venturesome innovators" and "early adopters". We are still at point though where we are selling to the "early majority". We still need to sell to the people who are going to adopt this technology up front. Selling to a mass TV audience at this point would be a waste and would skip steps in this cycle. 2. OEM involvement? I think we are probably at about the same stage with OEMS. ACER and some of the early companies that adopted the Zip drive in models are on the "venturesome side". Other OEMs fall in the middle. We still haven't convinced the change resistant laggards such as Apple and Compaq. 3. What approach is the LS120 taking? Is the LS120 using this cycle? Have they gotten to the early groups? Or are they trying to skip it and go right to the mass market (I could consider internal drives the mass market). This book, which has been proven to be accurate, says going right to the mass market will fail. 4. Iomega's approach? The Iomega approach was to first appeal to the people that thought it was cool to have one. Now they are moving to others who will buy one "not because of the superiority of the idea but because other people are using the innovation" What are other people thoughts on Iomega in this perspective? Anyone read this whole book? Jeff 5++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Universal adoption Date: 96-12-24 11:03:18 EST From: HYPEMENOT Jim Knuth, Based on available information, your guesstimate re third quarter OEM inclusion of Zips, reproduced below, has to be well above the real number. <<< In the third quarter, I believe the percentage of revenue to oems was 10%(31,000,000). This was for all storage solutions, not just zip, though I believe if that were broken out by units, zip would be the largest percentage. Even so, if internal zips are $80 and captured 20,000,000 of that 31,000,000 figure, 250,000 were shipped to oems in q3.>>> I say this because, in IO's 3rd Qtr conference call, Kim Edwards stated that sales of Zip drives to OEM's was approximately 10% of total Zip sales. As far as I know, even the most optimistic estimates on this board place Zip drive sales in Q3 at no more than 1,000,000 units. This, of course, would suggest a maximum of 100,000 units sold to OEM's. HYPEMENOT 6++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Zip sales Date: 96-12-24 14:16:34 EST From: Kevinfurr >> It goes on to say how well computer hardware is selling and stuff. Well isnt IOM hardware? Oh well.....I guess we will find out in Jan.....GO IO << People keep pondering this since the JP Morgan revision. Here is the bottom line: Computer sales are up this year, mid-double digit growth. BUT, News through November is that computer sales at several retail stores, such as the Tandy stores, Best Buy, etc are either down or suffering disappointing meager growth from last year. If you're wondering how to resolve this conflict, the answer is that mail order sales and corporate sales of computers are up significantly. The winners in this are probably Intel, Dell, Micron, etc. Kunstler at JP Morgan jumped on the disappointing retail sales as an excuse to lower estimates, guilt by association, less impulse buying, etc. If he's wrong and Iomega beats estimates, everyone's happy. Other people make a good argument that if people aren't buying new computers, then they'll probably buy peripherals like Zip drives instead. Meanwhile, a lot of people are posting channel checks that suggest Zips are selling out in many places (although availability is as good as or better than ever in my town). 7++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:hypemenot Date: 96-12-24 14:35:54 EST From: JKnuth5871 My notes from the third quarter conference call indicate that Mr. Edwards stated that OEM's were responsible for 10% of total revenue. If someone has a tape of the call, they are welcome to correct this or confirm it. The actual point of my post was to try to arrive at some upper limit of oem inclusion of zip in the third quarter, and then to compare that to total computer sales in the third quarter, just to have some quantitative view of how small the total inclusion rate of zip is in relation to total boxes sold. The fact is that IOM is nowhere near a standard yet, and the price of the stock reflects that. The fact is that IOM has a HUGE lead over any other high-capacity drive TODAY. Compare the total zip inclusion to the total ( any other high capacity drive) inclusion. Who has the better opportunity? We disagree. Thanks for your concern in bringing the LS-120 potential risk to our attention. Jim Knuth 8++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Universal adoption Date: 96-12-24 15:32:04 EST From: Foolshdog Jim Knuth posted: >>> Sub $50 zips internal to oems would make a large difference,Imho. Wasn't it Emerald who estimated a 50% lessening in cost in 97 due to integration and economies of scale? If this can happen, I would think internals could be produced somewhere between $40-$45. At that point, the capacity and performance, zip vs. floppy, should compel more oem inclusion. Higher % inclusion by one or more oems begets others to follow. <<<<<<< I agree completely. When and if the internal units get in that $40-$45 cost area it should be a no-brainer for the OEM's. Hopefully that will occur by say the end of 1997. >>>>>> It may be 98 until a much higher oem inclusion rate is evident. Any guesstimates of inclusion rate for 96? In the third quarter, I believe the percentage of revenue to oems was 10%(31,000,000). This was for all storage solutions, not just zip, though I believe if that were broken out by units, zip would be the largest percentage. Even so, if internal zips are $80 and captured 20,000,000 of that 31,000,000 figure, 250,000 were shipped to oems in q3. Small in comparison to total computers shipped.. <<<<<<<< I concur with Hypemenot on this one. I believe KE was referring to 10% of Zip units in Q3. So that means somewhere in the 80-100k for OEM Zips in Q3. I think we can double that for Q4 and throw in a little bit for the first half of the year and we get a total for 1996 of about 300k OEM Zips. Divide this by the 60-70M PC's sold in 1996 and we get .5% penetration at best. This really puts things in perspective doesn't it. As successful as IOM has been in the last two years, they still have only penetrated PC sales by a half of one percent. It is this information, that makes me laugh when I hear people say "IOM is dead" or "Zips time has come and gone". We are just starting folks. When I see and read posts that indicate that some of the biggest computer retailers are displaying say 30% or more Zip included PC's, I have to conclude that the penetration rate will increase considerably next year. I understand they face competitors but with all the information I have obtained, I feel there is an 80% probability that Zip will replace the floppy by the year 2000. Jim, I think your dead on track in your recent posts. It would be helpful to me if someone more in the know could post the latest PC projections, geographically broken down if possible. Also a breakdown of the top 15 or so PC manufacturers along with unit or marketshare. What I would really like to know is how much of the PC market do the little guys have(small mail order houses, ma and pa stores, second tier box makers, etc.). Maybe someone could point me to a website or two. Thanks in advance. Jim Arden(Foolshdog) 9++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:earnings? Date: 96-12-24 19:53:10 EST From: JKnuth5871 I don't think that it's appropriate to assume spot shortages in some parts of the country means that Iomega is back to selling all they can produce. Unequal distribution due to higher demand in some parts of the country than others is by far the more likely scenario. Possibly the level of inventory at major resellers would be a better gauge of sell-through. Jim Knuth 10++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Acer Basics News Date: 96-12-24 19:54:10 EST From: DaleVelk
Recall that the ZIP is being offered with the Acer Basic (standard on some models, option on others as I recall). From today's 12/24/96 WSJ (A brief bit) <"So next year, we believe there will be big growth in notebooks," Mr. Shih added. He said Acer also had found strong demand in Asia for its AcerBasic, a stripped-down desktop computer designed to tempt consumers who can't afford or don't need to buy a full-featured computer. Mr. Shih said Acer had sold between 5,000 and 10,000 AcerBasic computers a month since August and that it had a shortage of the machines in China, where the company had received monthly orders for more than 5,000 AcerBasics.> Every little bit helps! A Very Merry Christmas Greetings to all, Longs, Shorts, and "Good Samaritan Only" posters as well. DaleVelk@aol.com 11++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Software on IOM Zip Floppie Date: 96-12-25 11:21:22 EST From: MF ETurkey <<<Does anyone think that software may soon be available on the 100MB Zip Floppy?>>> It is highly unlikely that such an event will occur due to the cheap price of CD-Roms. But. . . It would not surprise me if Quicken or TurboTax came out on Zip disks (perhaps the as-yet-unreleased 25 meg kind), and charged a $5 premium for it. Given how folks care about the privacy of their money, there would seem to me to be a potential market for this being all kept on a removable disk, notwithstanding any password protection that already exists in the software. It also makes it nice and easy to bring that kind of info from one machine to another. Also, when those cheap Web machines start appearing in hotel rooms and libraries all over the country in the coming 12-36 months, I could see some kind system software coming included on Zip disks being sold. Eric 12++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re: Computer Shopper Date: 96-12-25 14:08:38 EST From: Gar Shon Top Products of 1996 in January Computer Shopper. Best Removable/Backup Drive ----- Iomega Zip Best New Product of 1996 ------ Iomega Jaz Both reviews are even-handed and favorable. From the review of the Jaz: "The last time we reviewed removable solutions, we found one mildly irritating trait with the Jaz: it's slow to respond when you first insert a cartridge.Overall, though, the Iomega Jaz is one of the most ingenious new products to come along in some time. Our reader poll only confirms that it has a following". Gary
End Report. Posts covered through 3 am ET 12/26/96. _______________________________
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