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Friday, October 10, 1997 Thursday, Iomega closed at $24 3/8, down $3/4 (-2.99%). TODAY'S RECAP: As the 3Q earnings announcement inches ever closer, posters on the board continued to stretch their analytical muscles yesterday (see the post from ~Huibs pht~ reposting some work from ~TMF Keeler~). There was also a continuing debate on the effect of currency devaluation in Malaysia on Iomega's earnings as well as growing discussion on an article discussing IOM's recent success in Europe. Enjoy! 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++ TMF Cheeze with a hilarious "transcript" of celebrity responses to removable
storage questions.
Recap written by TMF Weekly; posts
compiled by TMF Weekly. As always, the following posts represent the thoughts of our contributors, not those of The Motley Fool.
And now, the Best of the Board...Started 9:01pm ET 10/8/97. 1+++++++++++++++++++++++++++
Subject: Re: Howard & Rush << Yes indeed, Rush Limbaugh, Howard Stern, Jay Leno and David Letterman have demonstrated Iomega's products several times over the past few years. >> ME: Hello, Dave? I was trying to decide on a removable drive, and I heard that you're the guy to ask. DAVE: Yes, I recommend Iomega's top-of-the-line Zip drive with much enthusiasm. For more on this, let me switch you to our home office in Yazu City, Arizona. ME: But-- (Click. 8 minutes of Muzak. Then...) JAY: Hello? ME: Yes, um, I wanted to know something about removable storage, and... JAY: Sure thing! Say, have you been following those campaign funding hearings? ME: Well, yes, but... JAY: Well, Bill Clinton and Iomega's Jaz drive have a lot in common, ya know. Both of 'em run pretty fast when you're talking about a video transfer. But I wanna tell ya... <rimshot> ME: Er, Jay... JAY: What is this, anyway -- Radio Shack? Please hold. (Click. 12 minutes of Muzak. Then... ) RUSH: With talent on loan from God, it's me, Rush, the man who thinks so you don't have to... ME: What? RUSH: Just say, "dittos," son. ME: Oh. Um, "dittos, Rush. RUSH: Good boy. ME: Rush, what removable should I get? RUSH: If anything should be removed, it's those liberals, from office! ME: No, I mean -- RUSH: That's the problem with this country. Too many people mean one thing and say another. ME: It's... just... RUSH: Justice! The nation needs justice! (Click. More Muzak... Then... ) HOWARD: You're on with Howard... ME: Yes, I wanted to know about Zip drives and... HOWARD: BELLLCH! ROBIN: Ha ha ha ha! ME: Pardon me? HOWARD: Bababowie... Bababowie... ROBIN: Ha ha ha ha! ME: What? HOWARD: Tell me, are you naked right now? ROBIN: Ha ha ha ha! ME: Never mind... <Click. Dial tone.> 2+++++++++++++++++++++++++++
Subject: Re: Trading floor. << I posted my 3Q97 estimate at the Fool's web page. This is not a conspiracy to get you to look there, its simply too hard to post a decent table on AOL. >> ..not so hard..:) ..I'm sorry Patrick, but I had to repost it here.. ..the web pages are dogs.....sorry, but that's a reality....not in content, but in speed/ease of use, etc.. ..so again, my apologies, but here's a snip from TMF Keeler, found on the Fool Web Site.. :) << Sales are in millions of units sold to retailers having less than 30 days worth of inventory. Revenue and Gross Margin is in thousands. All the totals are in thousands of dollars. Sales Price Rev GM% Gross Zip Ex 1225 $119.00 $145,775 12.00% $17,493 Zip In 625 $48.00 $30,000 -11.25% ($3,375) Zip-License 65 $1.25 $81 100.00% $81 Zip Plus/Laptop 0 $159.20 $0 $0 Zip Disk 12910 $8.95 $115,545 64.50% $74,526 Jaz Ex 180 $319.00 $57,420 10.50% $6,029 Jaz In 80 $239.00 $19,120 9.50% $1,816 Jaz Disk 789 $73.00 $57,597 61.00% $35,134 Ditto $24,000 9.50% $2,280 Other/Buz 0 $149.25 $0.00 -5.00% $0 Revenues $449,537.75 Gross Margin $133,985.12 (29.81%) SG&A ($66,897.60) (14.88%) R&D ($18,282.53) (4.07%) Operating $48,805.00 10.86% Interest/Currency Ex ($2,325.00) NIBT $46,480.00 Tax $16,314.48 (35.10%) Net Income $30,165.52 6.71% Shares $137,152.00 EPS $0.22 I think $450/$0.22-$0.23 is a great quarter when compared to last year's $310/$0.09. It would be hard to fathom Iomega matching the above numbers and trading lower than $22. But this is the stock market and anything can happen. Some interesting points to consider in my estimate. OEM Zip percentage climbs to 33%. Interest Income is a complete guess as Iomega warned the recent trend in this Income Statement variable would change for the worst. I think R&D will be significantly higher than last quarter as Iomega readies all these new products. I don't think Iomega will recognize revenue from any of their new products. Jaz disk tie ratios trend higher as the shortage in disks (due to recall) is made up. 1.9 million Zip drives are sold worldwide which probably brings the total close to 9 million sold by the end of the 3rd quarter. Patrick >> 3+++++++++++++++++++++++++++
Subject: NEC adopts LS-120 in portables (Oct. 7) http://www.pcworld.com/news/daily/data/1097/971007163159.html Dated Oct 7. so this could have been a factor in our little down draft. Once scary but hard to believe quote: "One of the first notebook vendors to adopt the new drive will be NEC Computer Systems, which plans to integrate the drive in all of its future notebook PC models, OR Technology said." Sure, every NEC portable will have an LS-120, and the check is in the mail. :-) Can you believe that OR Technology has the NERVE (and lack of legal counsel) to make such statements? Now I am just waiting for someone to buy a ton of LS-120 related stock and SUE everyone related to OR Technology when NEC decides maybe they will let the customer select their drive. You live and learn, and polish your resume. Sorry to be late getting this to the board. Just slipped under the radar. 4+++++++++++++++++++++++++++
Subject: Re: The decline in IOM << most countries in the world peg their valuation to the US dollar, which in turn is pegged to productivity. >> The dollar is a free-floating currency. Its value is derived from productivity in this country, sure, but it's also valued against the market for other currencies. It's not pegged to any absolute value. Imagine if Syquest tried to "peg" its stock price to that of Iomega, asking other companies to accept that stock as if it were worth as much as Iomega's. It works for a while, but eventually the game ends because the intrinsic value is not there and people won't accept it. Before the fall, it's a great thing if you have a bunch of rupiyah and want to buy yen or marks or barrels of oil with it, because you're getting something on the cheap for a currency that it propped up by the government. << The devaluation, by definition, reduces the cost of labor, facilities and most domestically provided materials to the rest of the world. The only thing that can negatively affect the windfall are cost of imported raw materials and political events. Otherwise..... a 30% devaluation is beneficial to outside manufacturers. >> If I'm making 1,000 rupiyah per day (that's not a real exchange rate) and the exchange rate is 1,000 rupiyah to the dollar and then the exchange rate drops to 1,300 rupiyah to the dollar, the wage rate is going to get to 1,3000 rupiyah. If the government lets the currency float, then prices will work themselves out. It's generally not a good thing to have unstable exchange rates and it doesn't make things cheaper in the long run. Workers aren't going to automatically accept 30% less in wages in the medium or long term. For the moment, things are cheaper, but don't believe that the local utility is going to charge Iomega 30% less in dollar terms to supply power to that plant and don't believe that workers are going to just accept a 30% drop in their international purchasing power. Eventually, they'll ask for a raise since the local utlity will be asking for a raise as will any importer. A devaluation isn't a deflationary event, it could very well be an inflationary event. Long-run, if handled properly, it doesn't signal a decline or rise in prices in the devaluing country, but if you would have to shade it either way, it's more an inflationary thing. I know of at least one economist on this board that can exlain this better or correct what I've said if I'm off on this one. Dale Wettlaufer 5+++++++++++++++++++++++++++
Subject: Re: The decline in IOM Raleigh. Good try in explaining the effects of devaluation. There's much more to it. To begin with, the US$ is the world's reserve currency and basic unit of value since 1973 when gold was totally abandoned. But the value of the US$ is not fixed (even if it is the standard) but relative to other hard (i.e. fully convertible currencies such as DMark , Yen, UK pound, Swiss Fr, etc). Therefore the standard itself is relative which is why there is what is called a "real" exchange rate abstraction which measures currency values against the US$ at real prices, ie. internationally traded commodity/factor prices at "equilibrium" exchange rates. For example, even if the French Franc is quoted at 5.82 Fr. per US$, if the FFr. is overvalued, the "real" exchange rate might be 6.2 FFr per US$ (meaning that US$ is undervalued). In a free trading system (of which there are none because of Central Bank and government interventions) the FFr. would trade at 6.2 per US$ rather than 5.82 (to offset higher labor cost, taxes and other market imperfections). But since devaluation is considered by politicians a sign of national dishonor, they resist it (did you ever hear any asking for devalution?No! they resist it) and thereby get a foot in the grave by making their exports non competitive, encouraging speculation by both their citiizens and foreigners, using tax revenue to finance subsidies for non-competitive sectors and firms, increasing entitlements (esp. to organized labor and political friends, etc.). Eventually, the bills come due, by means of higher taxes, and... yes, devaluation as financial institutions suffer (from their own excesses) and the nation (not only government) cannot service debt! The world is littered with the results of such misguided economic policies (from Argentina to Yemen and Zaire), beginning with the Latin kAmerican debt crisis of the 1980's and the more recent crises in Mexico and now Indonesia and Malaysia. As Milton Friedman said: "there's no free lunch". The principle has been proven, and it applies equally to national economies, governments, private firms, and yes...households and consumers. Command economies (USSR as well as Turkey) eventually collapse for this reason. 6+++++++++++++++++++++++++++
Subject: Re: News On Europe I don't consider myself to be a hyped IOM flag waver..... but this is BIG NEWS, and certainly has the earmarks of very positive earnings announcement and conference call. This time last year Europe was a big disappointment, as acknowledged by KE in the conference call. << After building up its distribution network and strengthening its management team, Iomega Europe was growing nearly three times faster than its U.S. and Asian units, said Kevin O'Hare, managing director of Iomega International SA. "Our third quarter ended September 30, and we are very encouraged by the continued success in Europe," he told Reuters after a news conference in Munich. O'Hare also said he was confident of winning a legal battle to stop a French company from selling disks for Iomega's fast-selling ZIP drives. >> 7+++++++++++++++++++++++++++
Subject: Reuters headline The headline over the Reuters article about Europe is actually more favorable than the article itself. The headline reads: "Iomega (NYSE:IOM) sees Europe leading strong Q3." This suggests that the quarter will be strong for the whole company, with Europe leading the way. However, the body of the article, while certainly positive, does not go that far. Kevin O'Hare, managing director of Iomega International SA, is quoted as saying he is "very encouraged by the continued success in Europe." A paraphrased comment attributed to the company refers to "surging sales" in Europe. But nowhere does the article indicate whether the success in Europe is being duplicated in the rest of the company. In the past, we have suffered at the hands of sloppy journalists. This time, if Wall Street pays more attention to the headline than the article, we may benefit. On the other hand, the facts actually reported in the article are positive enough for me. Last year we were worrying about whether the summer doldrums in Europe might keep the company from showing much of a profit. This year those doldrums have turned into "surging sales." Yet the stock price is exactly $1.25 higher now than it was on this date a year ago. Does the word "undervalued" come into anyone's mind? 8+++++++++++++++++++++++++++
Subject: Zip on Seinfeld Anyone else see Seinfeld? George Costanza's father is selling computers out of his garage. In several garage scenes, there is a prominantly placed SCSI Zip drive box in the background. The word "Zip" is fairly obvious several times next to George. That is, of course, one of the highest rated shows on TV. Can't hurt. _______________________________ End Report. Posts covered through 9:00pm ET 10/9/97. _______________________________
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