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Monday, December 30, 1996 Iomega was down $3/8 Friday, closing at $17 3/8 (-2.11%). TODAY'S RECAP: Z-z-z-z-z... huh? wha? Oh, sorry. The Iomega Story has kind of put us to sleep lately. It seems all the newsmakers have taken time off to celebrate the holidays. Since posting was so slight and new information is so slim, today's report is coming to you in a single section, unlike the usual Monday two-parter. One small bit of news: reports have been trickling in this weekend that the new SyJet 1.3GB removable drive is showing up in scant numbers at retail outlets around the country. So at long last, it seems Iomega's Jaz drive has a head-on competitor. It is too soon to tell whether this is just a token shipment, or if it is the beginning of something larger. We'll let you know, of course, when the details become more evident. 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++Brian COG cites a Wall Street Journal story about the Acer
Basic. And now, the Best of the Board...Started 3 am ET 12/27/96. As always, the following posts represent the thoughts of our contributors, not those of The Motley Fool 1++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Acer News Date: 96-12-27 08:47:59 EST From: Brian COG
Article in Wall Street Journal 12/27/96, "Acer Sees Drop In Profit, Cites PC Chip Prices" contains this update on the Acer Basic, which has the Zip drive as its main storage:
<<...Acer also had found strong demand 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.>>
Brian 2++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Adequate marketing? Date: 96-12-27 11:01:42 EST From: RobinBen1
AHocherman writes: <<<My question is, is iom ready for prime time spots? Would it behoove them to exploit the momentum they earned from being first to market. As someone pointed out in "iom Today" (12/26) their sales force have done a great job in marketing their product (zip) as being the next standard. It would have been nice to see them slam the point home with "Prime Time T.V. spots". Thoughts? Opinions? Flames? >>>
When you say Prime Time TV spots, I assume you mean national network spots (ABC, NBC, CBS or FOX). And yes, it would be *nice* to see them. But the real question is, do they need them and can they afford them? National spots are very expensive and reach a very broad audience. At this point, I'm not sure if this is necessary. It seems that iomega's current targets are the heavy computer user market and OEM's. This makes sense to me and others on this board.
IO's strategy seems to be:
Gain acceptance from the influencers and get inclusion in the box.
Robin 3++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: IOM Prospective Date: 96-12-27 11:21:16 EST From: JHenrie
FWIW,
If the channel checks are truly reflective of 4QTR sells, then I believe that IOM has already passed the 5 millionth zip shipped mark and total storage solutions shipped should have also increased considerably. Why hasn't IOM announced these figures yet? My guess is any benefits from the news could be offset by the December effect (tax loss selling,window dressing, etc. This stock has reached and fallen from some lofty levels.) Therefore, management will delay the good news until the beginning of the year. Thank heavens its only a few weeks away. This is only my opinion. Whether I am right or wrong will shorty become evident.
One more thought and it only works for companies you truly feel that their future is bright. Its times like these that you buy. Lately, I have noticed in posts and in the chat room that people have become disenchanted with IOM. Not because of what the company has accomplished (e.g. over a billion in sales, numerous product awards, and far reaching consumer recognition and acceptance), but because of how its stock price has performed. Obviously the stock price movement has not been that enjoyable the second half of the year. When I look at the two -- company performance and stock price -- they seem a little out of balance. I believe it is because the market isn't convinced about IOM. If IOM continues its successful ways will the stock price turn around. Absolutely. The question each investor should ask themselves is do they think IOM will continue to succeed. If the answer is yes, then buy more (if money is available) or hang on for the long haul. If not, then they should sell.
As you may have already concluded from this and other posts I think IOM has a bright future. For this reason, I have hung on and am waiting. Yes, I have bought more also.
Take Care,
John 4++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: IOM to SYQT sales ratio? Date: 96-12-27 14:23:39 EST From: DaleVelk
In a copywritten Dow Jones Story SYQT reports that it is "on track" to return to profitability by the END of fiscal 97. SYQT will report a loss of $10.5 million, $.91 a share, revenues are $44.8 million (I think the auditors didn't check sales R&A too closely) You can probably get the entire article with a news search The article states:
" SyQuest is struggling to recover from a disastrous effort in 1995 to compete against Iomega Corp. (IOM), the fast-growing maker of the popular Zip backup disk drives".
SO the BIg question is if SYQT sold $44.8 million in the last quarter, how much did IOM sell? Perhaps 10X?
DaleVelk@aol.com 5++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: rebate ??? Date: 96-12-27 22:53:44 EST From: Hooligan70
There has been a lot of talk regarding how rebates will affect IOM's bottom line. Most of the folks that bring this up feel that IOM isn't reserving enough $$ to cover the tremendous response that IOM has had in the Zip rebate. I would like to study the inverse of this situation and see how it would affect IOM's financials. I would appreciate some feedback from those of you much better versed in balance sheets than I.
HYPOTHETICAL SITUATION(numbers are used for demonstration purposes only)
4th quarter sales
1,000,000 zips sold
minus 10% OEM purchases 100,000 zips = 900,000
Assume 75% of these sold in the USA and Canada where rebates are applicable
900,000*.75= 675,000 Zips that qualify for rebate
IOM is reserving for 50% of these $50*337,500= $16,875,000
From my understanding IOM will be subtracting approx $17 million from it's revenues.
Lets say only 45% instead of 50% turn their rebate forms in. 675,000*45%=303,750 zips
303,750 Zips*$50=15,187,500
$17 million reserved- $15.2 million actual rebate=$1.8 million difference
How would IOM account for this difference?? $1.8 million/126 million shares=1.4 cents per share
When would they add this difference to their revenue and ultimately their bottom line?
Thanks for your help 6++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: IOM - Can It Repeat History Date: 96-12-27 23:40:31 EST From: HYPEMENOT
KingZep,
Among other statements in your post a little earlier, you wrote:
<<< Will there be funds interested in this stock, especially at these depressed prices? Yes.>>>
And:
<<< Am I buying? Absolutely. But IOM taught me a valuable lesson: Bet with your head, not over it >>>
Of these two statements, I think the latter is excellent advice for anyone who, at anytime, has decided to buy shares in Iomega (or, for that matter, any company).
As for the earlier statement, and your characterization that IOM is at depressed prices, I assume you arrived at this conclusion because the stock is now trading at a price level which is less than one-third of the High reached in May. And while I wouldn't dispute the idea that, at the current price, IOM may very well be at an attractive valuation level, I think your description of the stock as DEPRESSED depends on how far back you go in this stock's price history.
Although, it is true that IOM is far below this year's high, the current price level is more than 30 times greater (3000+ %) than the adjusted low that it traded at ($0.54) in the 1st quarter of 1995. Now I understand that the Company has achieved a complete turnaround since KE arrived in early 1994, and that its growth in revenue has been phenomenal over the last two years. But consider the following. For the full year 1994, Iomega had total revenues of $141.4mm. After (far) more than doubling to $326.2mm in 1995, it seems clear that revenue will exceed $1.2 billion this year (my own guess is somewhere between $1,225mm and $1,250mm). Assuming, for the sake of illustration, that 1997 revenues escalate to $2.0 billion, the reality is that, while revenues over three years will have grown by an astounding 13+ times, IO's share price (even after the sizable correction of the past seven months) is still 30+ times greater than when this phenomenal rejuvenation began to take hold.
While I wouldn't maintain that there should necessarily be a 1-to-1 relationship between revenue growth and stock price performance (clearly there are other important factors to consider), the exercise I just went through has some validity. At the least, these numbers are worth considering before anyone is willing to accept the conclusion that IOM shares are depressed simply because because they are far below the recent peak.
HYPEMENOT 7++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Retail: good not great season Date: 96-12-28 12:45:54 EST From: MF Jeanie
Caviar won. Computers lost.
Report from Boston Globe (excerpts)
<<Northeast stores could have gains above national average, as luxury goods post big gains while PCs record dismal sales.
Retailers of luxury goods likely to see sales increases in the 15% range, while apparel, toys and home furnishings predict 7-8% gains.
Among the losers were home electronics chains that sell personal computers.
"The PC has become the VCR of the 90's -- stores practically had to beg customers to take them away."
This could mean subpar performance for Circuit City and Best Buy.
But at Staples, PCs represent only a fraction of their overall business and they enjoyed a good holiday off the strength of other product lines.>>
"other product lines"... hmm.... maybe I'm not the only one who got Zip for Christmas?
:) Jeanie 8++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Power Computing's growth Date: 96-12-28 14:50:10 EST From: Kevinfurr
Interesting article on CNET's News.Com a couple days ago, reveals some stats about the Original Zip OEM, Power Computer. From: http://www.news.com/News/Item/0,4,6492,00.html
>>>Power Computing, the first Mac clone maker, is getting to be a pretty good-sized fish........
......Mac clone makers as a group represented only 8.5 percent of the U.S. Macintosh market in the third quarter, according to market research firm Dataquest. Apple shipped 492,000 units in the third quarter while privately held Power Computing is estimated to have shipped 45,800 units.
..... Kahng said his company's revenues have since grown at a 40 percent rate from quarter to quarter, but he expects that to slow down in the near future to about 15 percent a quarter.....
.....Industry analysts estimate that Power Computing has shipped 80,000 units during the first nine months of 1996. <<<<
Some interesting points here. Power is coming on strong, if they shipped about 35,000 computers total in Q1 and Q2, then shipped 45,000+ in qtr Q3. (Yet Kahng says revenue has grown 40% qtr-to-qtr, figure the math??)
I wish I knew what proportion of Power Computers ship with a Zip drive. If Power's growth continues at the same pace this quarter, that would be about 63,000 computers shipped in 4Q. I believe the industry analysts have been saying mail-order PC demand is strong as ever this quarter, unlike retail sales, plus I believe Power's been shipping a hot new 225 Mhz model. 9++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Retail: good not great seas Date: 96-12-28 15:34:43 EST From: Tgizip
Looks like retail computer sales were pretty weak this season. Is this good or bad for IOM ?
There are two possibilities here.
The first is that weak PC sales mean less traffic in major computer retailers which translates into weaker than expected sales of computer related products; zips, modems, scanners, etc.
JPM seems to subscribe to this view, given their recent earnings downgrade on Iomega.
The other school of thought is that consumers still shopped the computer retail stores but were reluctant to shell out the big bucks for a new PC and instead opted to upgrade that old 486 or 68xxx Mac. This scenario could bode well for Iomega and other companies selling add-on products. It is a lot easier to justify spending a couple of hundred bucks for a zip or a faster modem to upgrade the old dog than it is to add 2 or 3k to the credit card balance for a new computer.
Well the week of Jan 24th will provide the answer that we all await. Lets keep our eyes and ears open for information on other peripheral product manufacturers such as USRX, HP, Canon and some of the software companies because they also rely on retail traffic.
Good luck to all
Tgizip 10++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Retail: good not great se Date: 96-12-28 15:51:41 EST From: MFortu
I'm long IOM but am concerned that we are kidding ourselves. I contend that if PC retailers are having a disappointing season it is naive to think that people are instead spending money on upgrades and peripherals such as zip or that this weakness is principally due to strength in mail order sales. This is mass marketing and the simple fact is that if PC sales are not as good as expected then it is likely that sales of IOM products are not going to be as strong as expected *at the retail level*.
How this effects the big picture this and next quarter is the big unknown.
Long and a bit concerned, Mike Fortuna 11++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: OEM zips & retail stores Date: 96-12-28 17:14:31 EST From: Kevinfurr
Despite what JP Morgan says, one thing I think is inevitable for this quarter is that Iomega will dramatically increase the number of Zips shipped in OEM computers, and not (to be exact) just because there are more computer companies offering it.
I'm basing this on the reports from this quarter and last. Until this quarter only Circuit City seemed to have computers with Zips. To put things in perspective I made a list of how many store locations each of the chains have, and how many Zip OEM's they've offered, as far as I know, below.
Company - symbol Stores # Zip SKUs 3Q # Zip SKUs 4Q
Computer City - TAN 100 0 1 Office Depot - ODP 502 0 2 Circuit City - CC 429 2 5 - 6 Best Buy - BBY 272 0 ?? CompUSA - CPU 122 0 2 - 3 The Wiz 50 + ?? several SKU's
Total.....................1475
Comparing this quarter to last: --the number of store locations selling at least 1 or 2 Zip SKU's will triple --The biggest retail seller of Zip OEM computers, Circuit City, has increased number of Zip SKU's from about two to 5 or 6. Fortunately CC is the 2nd largest chain of them all. --the main mail order companies who offer Zip options (Power and Micron) are rapidly growing --although 4Q at retail is supposed to be disappointing, 4Q is still always bigger than 3Q --lastly, there are lots of unknowns, such as how many are shipped by USA Flex, Acer Basic, European OEMs, etc. But it's hard to imagine those not also contributing to growth over last quarter. 12++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:IOM -Can It Repeat Histor Date: 96-12-28 18:30:24 EST From: MF ETurkey
HYPEMENOT proposes one way to look at an evaluation of iomega:
<<<But consider the following. For the full year 1994, Iomega had total revenues of $141.4mm. After (far) more than doubling to $326.2mm in 1995, it seems clear that revenue will exceed $1.2 billion this year (my own guess is somewhere between $1,225mm and $1,250mm). Assuming, for the sake of illustration, that 1997 revenues escalate to $2.0 billion, the reality is that, while revenues over three years will have grown by an astounding 13+ times, IO's share price (even after the sizable correction of the past seven months) is still 30+ times greater than when this phenomenal rejuvenation began to take hold.>>>
But along those same lines, you could look earnings, instead of revenues. The company lost 10 cents a share in 1994 and is looking to make ~ .45 cents this year and ~ .80 - .90 next year. But, you have to figure in the 6 for 1 split, meaning that the company went from losing 10 cents a share in '94 to making ~$2.70 this year and ~$5 bucks next year.
With that in mind, does a 30x increase in stock price look so unreasonable?
Eric 13++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:IOM -Can It Repeat Histor Date: 96-12-28 21:04:25 EST From: HMAletter
<<But along those same lines, you could look earnings, instead of revenues. The company lost 10 cents a share in 1994 and is looking to make ~ .45 cents this year and ~ .80 - .90 next year. But, you have to figure in the 6 for 1 split, meaning that the company went from losing 10 cents a share in '94 to making ~$2.70 this year and ~$5 bucks next year.
With that in mind, does a 30x increase in stock price look so unreasonable?>> Eric
Well, I guess not, if you look at it that way. But also, based on historical data, at post-split levels, Iomega was a penny stock back then also. Iomega was just a pipe dream. History doesn't really matter much for Iomega before 1995, since it was a total dog then,
But Eric, look at the current numbers that I assert attest to IOM's fair value today. Current price being 17 3/8
1996 p/e 1997 p/e Mean EPS .45 38.6 .83 20.9
Assuming that the forecasted growth rates do continue through 1997, Iomega appears to have finally gotten into the proper price ranges for this type of business. I know some posters here feel that every time revenues or earnings double, that the stock should too. But the stock had been bulled up so much last year and this year, that it had outgrown its investment value, and became a bit of a lottery winner for many, and they did in fact redeem their winning tickets. With no dividends, no Intel-like track record, and no sure future beyond a year or so, the speculators flew the coop with some well-deserved profits, and waited to see proper valuations.
I am sure that KE & Co. are very happy to see the prices remain relatively constant at current levels. Especially given that Seagate now sports a P/E of 39, due to the stock being run up on good news, and an approximate 32% increase in earnings for next year. Should Iomega be as lucky, the stock would trade at $32.37/sh with a P/e of 39. And so on.
I like Iomega, they have done very well. I do not like to continually pay for next year's earnings, then the following, etc... Just how many year's earnings should I be asked to pay for without earning anything on my investment? I think that Iomega will become a major powerhouse should the Zip become the standard device, Ditto sales triple, and the JAZ becomes a part of life. That is a lot of ifs. Until the ifs become a little bit clearer, then I stay at current levels, and I creep up with their reports.
Steve Hinchey
End Report. Posts covered through 3 am ET 12/30/96. _______________________________
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