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Wednesday, October 15, 1997 Tuesday, Iomega closed at $24 3/4, down $1/4 (-1.00%). TODAY'S RECAP: Deep Thought reigned on the Iomega board Tuesday, prompted by an announcement from Sony Corporation, which promised that a new backwards-compatible large-capacity floppy would be introduced sometime in the spring of next year. The drive would compete directly with Iomega's market-dominating Zip, but have twice the capacity, and would also be able to read standard 1.44MB floppies. The dimensions of this new threat were the main topic of discussion in the last 24 hours. Just a reminder: Iomega announces its 3rd Quarter earnings this Thursday, shortly after the close of trading. 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++ DaleVelk posts word of the new Sony drive.
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 12:01am ET 10/14/97. 1+++++++++++++++++++++++++++
Subject: New 200 Meg FLoppy In a Reuters Story a new 200 Meg floppy by Sony is discussed. Brief Snips: <- Sony Corp <6758.T> and Fuji Photo Film Co Ltd <4901.T> have jointly developed a next-generation 3.5-inch floppy disc system with very large storage capacity, the two companies said on Tuesday. > <The new floppy disc has 200 megabytes (MB) of recording capacity, larger than the storage capacity of conventional floppy discs, they said. > <Sony and Fuji Photo plan to commercialise the system in the spring of 1998, they said. The new system also features a maximum data transfer rate of 3.6 MB per second, they said. > <The system has read- and write-compatibility with existing 3.5-inch floppy discs, they said. > <Sony and Fuji Photo also said that they would propose the system's basic specifications to personal computer and computer drive makers and that they will display the new system at the COMDEX/Fall '97 trade show to be held in Las Vegas in November. > DaleVelk@aol.com 2+++++++++++++++++++++++++++++++++++
Subject: Latest Sony 200 info Hi Gang, The dirt I have managed to dig up on the 200MB Sony drive, Sony 200 is NOT compatible with Zip disks. (the disk appears to have a sliding media cover similar to a floppy disk but half the size, would not have expected floppy and Zip compatibility due to the very different way the heads mechanically move to the media) Sony has TWO connections, an ATAPI and Floppy The two connections makes it bootable with 1.4MB disks today on every machine. It is unclear to me if they can redirect 200MB data to the floppy port to boot. This would be slow but would let them boot on any machine today. I think not though. Two connectors may make the drive appear more complex to the consumer. Also, you kill your Sony 200 and you have NO WAY to boot the computer other than the hard drive. No standby floppy boot disk. Sony is shooting for 50% OEM and 50% Retail on the drive. They have talked with top 10 OEM box makers. No firm info on any takers. Sony will license the technology, current prospects ALPS and TEAC. Sony will not announce a drive until Spring '98. First disks to be made by Fuji. I think this sounds odd. Why would Sony let Fuji define the form factor for the disk? Finally, the Sony 200 is NOT rocket science. Iomega is capable of making a 200MB drive today. The only questions are: 1) can they make more money on the 200 2) will it "confuse" the consumer vision of the floppy replacement 3) do they need to make the 200 drive... yet I think Iomega cannot announce a 200 drive without hurting the valuable Q4 numbers (pentium vs pentium MMX of last Christmas comes to mind). My vision, and mine alone mind you, is for Iomega to announce a 200MB drive in January/Feb. and ship it in March (We can always dream can't we). That's all for now. sdtrent@iname.spam.com remove the spam to email me. -shane 3++++++++++++++++++++++++++++++++
Subject: Re: Sony/Fuji 200m drive Warning: Long Post. I would like to throw out some thoughts on the Sony 200 meg drive. It seems like a long time ago (help me here DaleVelk) that IOM announced that they had a working 200 meg model in the lab. A natural question comes to mind as to why IOM hasn't yet released such a drive, and will they now release the Zip 200 now that Sony has made their announcement. My thoughts are as follows: 1) Standard - KE's stated goal is to make the Zip drive the standard in replacing the floppy drive. We now have somewhere in the vicinity of 8 million zip drives sold. How many need to be sold before we approach a standard? I can't really answer this question, but I know a standard when I see one. A standard to me is being able to take a zip disk to a service bureau (any service bureau) and having that bureau have a zip drive to handle my requirements. Being able to exchange disks with friends, family or co-workers. In short, not being inconvenienced by not being able to use my disk where, when, and how I choose. I think that we are well on approaching that criteria. 2) Installed base - To become THE standard, you must have a large enough installed base to be able to meet the above requirements to becoming a standard. Not necessarily to be in EVERY computer sold. IOM's intention is to make the 100 meg Zip the standard. To do so, confusion of the consumer must be avoided. 100 meg Zip, 200 meg Zip, 400 meg Zip. What shall I buy? If the higher capacity drives are fully backwards compatible, maybe there isn't an issue. I am not so certain that the Sony drive would be backwards compatible with the Zip. I think KE is delaying the Zip 200 as long as possible in order to establish a standard. 3) Barrier to competition - The higher the installed base of Zip drives, the higher the barrier to the competition becomes. As you fragment the installed base (i.e. 100, 200, 400) the lower the barrier becomes. This is why IOM considers it good business sense to subsidize the OEM's by selling the Zip drives to them at less than cost. The installed base must be built quickly to raise the barrier to competitors. Again, put off the Zip 200 as long as possible to concentrate all your efforts to making the Zip 100 the standard. 4) Sony - Sony seems to be trying to force IOM's hand. Undoubtedly, the 200 meg version could be sold at a premium, drives as well as disks. The money to be made is not in the drives. Drives only act to facilitate the sale of disks. A 200 meg disk should have a cost structure not much different than the 100 meg disk. I believe that Sony/Fuji believe that a much higher profit margin could be maintained through sales of the 200 meg disk. I feel that they are trying to force IOM to bringing out the Zip 200 prior to when they would like it released. This way, Sony and Fuji win as co-branders of a more profitable 200 meg disk. But again, it is critical that the standard be set on the 100 meg Zip. IOM has proven that they are willing to sacrifice profits in the short term for the long term goal of establishing the Zip as a standard. Sony/Fuji may not have that same goal. Name Brand Recognition - I remember back a year or so ago when someone posted how the Sony and other co-branded disks were not selling as well as the IOM branded disks, even though in most cases the Sony/Fuji branded disks were cheaper at retail. Epson found this out with the drives as well. IOM has established their name as THE name in removeable storage devices. I think that Sony/Fuji would have to really pump up the advertising to overcome this name brand recognition. I remember when Sony announced that they were going into the PC business. Everyone was afraid of what their competition would do to the Dell's, CPQ's and GTW's of the world. I think it is safe to say that those companies have done quite well in spite of the competition. IOM can well take care of themselves. Just my thoughts. Fool On, Robert 4++++++++++++++++++++++++++++++++
Subject: Re: Sony/Fuji 200m drive In article <19971014174801.NAA22815@ladder02.news.aol.com>, rb61@aol.com (RB61) writes:
>This way, Sony and Fuji win as I would have to disagree with the above. Sony & Fuji will have a competing product to the Zip disks. If they do force IOM to introduce the 200MB don't you think IOM would be upset about them forcing their hand? IOM could simply not liscense Sony/Fuji the 200 MB Zip disks. This gets very complicated. What IOM can and can't do all depends upon the agreements they already have in place with Sony/Fuji. The most important agreement would be the one with Fuji to supply the media for Zip disks. Fuji could have tremendous bargaining power with the agreement. The agreement with Fuji over the supply of the media is a huge concern. This should be asked in the conference call. What guarantee is there that Fuji will continue to supply the media in the necessary quantities at a price that IOM can maintain their margins on the Disk? To take it one step further we should ask if there are any contingency plans should there be problems with the Fuji supplied media. Can you imagine what the stock price would do if Fuji turned off the Zip disk media faucet? Harry L. Roberts 5+++++++++++++++++++++++++++++++++++++
Subject: Re: Sony/Fuji 200m drive Great post Robert :) Great posts everyone actually. I was all ready to post my opinion that this board has always been too obsessed with future competition and this latest press release product will just be another in a long line of supposed "Zip killers" that will generate thousands of posts. However, the posts have been only factual and informed opinion. I guess when the option traders figure out enough to be dangerous the real product touting will begin. Discussing speed and other specs when all we have is what the developers want us to have has been fruitless in the past. I don't think speed is an issue as long as its faster than a LS-120 ;-) The real problem for this newest consortium is that by the time they ship this product the Zip installed base could approach 12-15 million drives. Too many to overcome IMO. How many people trade in computers in a given year? 60-80 million? Soon, almost 25% of all computer buyers shopping to upgrade will have been using Zip drives and disks. I see no reason for anyone to abandon the Zip drive for this product. Sony makes the case for abandoning the floppy (while also maintaining backwards compatibility) but not for abandoning the Zip drive. The Sony drive will not work in a Mac will it? Of course, Mac is disappearing so why care. ;-) The Sony drive is an internal only product. I don't think you can replace the Zip drive with an internal only product. Seems that the Sony brand name makes people nervous. I think its interesting that Sony would instill more fear than Matsushita or Compaq or 3M. All former floppy makers are searching for a new product as they must expect the floppy market to disappear. Sony, Alps, and Teac are the last converts. I think Sony would much rather license the Zip drive than try and push this technology against Iomega's market position. Could this all be a negotiating ploy? I have a hard time believing Sony could sell this drive for $25 next year.
TMF Keeler A Fool and his money are soon partying 6++++++++++++++++++++++++++++++++++++++++
Subject: Speculation I don't often like to speculate too wildly, but here is one possibility to consider (with a few shakers of salt perhaps). . . Sony and Fuji are both already Iomega partners by co-branding the disks. Perhaps the threat of introducing a competing drive is being used by these behemoths to improve their negotiating position to become Zip disk licensees, thereby getting a bigger chunk of the profits. Maybe co-branding isn't good enough and this is their leverage. The same could be true of becoming drive licensees. Even with a big head start on these guys, I'd hate to compete against them. =============
Eric Turkewitz 7+++++++++++++++++++++++++++++++++
Subject: Alfred E. Neuman "What, me worry?" "So what if Rome is burning," Nero said, "I'm wearing fireproof pajamas!" Matsushita/O.R. Technology/Imation are so desparate to have their LS drive succeed that they are blowing them out at $49 per drive. But, so what, price alone won't get people to buy drives, right? SyQuest is getting ready to announce a 1.0GB removable to compete with Jaz. At $199 no less -- much cheaper than Jaz. But, so what, price alone won't get people to buy drives, right? Sony and Fuji are going to announce a 200MB drive with 3.5" floppy compatibility. But, so what, if they can't deliver at the right price, who'll buy it. Herein lies one of the great Iomega Board Conundrums (Conundra?): We can wish away all the competition with whatever "fundamental flaw" is convenient to that particular competitor. Well, folks, it times or that buck to stop. And to stop now. People site the wonderful Zip penetration figures as evidence that "the game is over, Iomega has won." Won what, exactly? Microsoft, Dell and Intel apparently believe about 250 million PCs are currently in use globally. At 10 million Zips sold, Iomega would be approaching a remarkable 4% of the installed market! With OEM sales at about 40% of quarterly Zip sales of 2 million, Iomega is shipping roughly 3 million OEM drives a year. Given PC sales of 100 million, this hardly strikes me as all that remarkable either. There is no Zip monopoly. There is no Zip standard. There is no Zip tidal wave. Instead, there is a popular, successful peripheral that could someday be a standard and hold a monopoly position as the base removable drive used in personal computers. But it's success in that market is not guaranteed. And competitors make it all the more likely Zip will not achieve that kind of standardization. If you choose to continue to not believe this, then fine, that is your perogative. It doesn't change the facts of the matter. The Zip has miles to go before it hits any meaningful OEM inclusion rate and, therefore, before it can be considered a standard anything. If Sony's drive is overpriced, it will doubtless meet with the same fate as MD data -- irrelevance. But don't you think they already have learn that lesson? Sony is many things; twice fooled is not typically one of them. Iomega made a decision to pass on backward compatibility and Sony has, perhaps, come up with the ultimate weapon to hit at Iomega's Achilles heel: the Sony drive is 2x as big, probably faster, and backward compatible. The Zip is already looking small in a world with Shark drives, Sony HiFD, and $199 SyQuest 1GB drives. Of course, two of these don't exist yet, but they almost certainly will. Iomega has an increasingly competitive landscape in which is must convinced OEMs to adopt Zip drives at rates 20x higher than they currently do. Iomega will offer one carrot in the future: lower-priced drives. The competition will offer higher capacity, higher speed, and who knows what else. Are you all so certain the Zip is going to replace the floppy in light of that? I'm not. Less so than at any time in the past 18 months. Having made a great deal of money on Iomega stock and then having lost a great deal of that money, I have held on, believing I'd make back a bunch of it. So far, the less few months have been kind. Indeed, the next few might be kind as well. But the future is uncertain and my overriding belief in 100 million Zip drive sales in 2001 as the No. 1 reason to hold this stock for years is less rock-solid than in recent memory. No one citing a spec sheet or a niggling reason why the Sony/SyQuest/MKE-Imation drives are a little less good or a little more pricey or a little more this or a little less that is going to convince me. What will convince me is huge increases in Zip drive sales. Huge increases in Zip OEM inclusion. Evidence that licensees are producing or can produce so many drives that no one will fear for production capacity. This is where the future of Iomega lies. Can they get there? When will they get there? I don't know, but I'd sure like to see the analysts on the conference ask those questions for a change instead of focusing on trivial elements from the income statement and balance sheet. The stock of Iomega is not going to move meaningfully up in the short or long term based on this quarter's change in gross margin nor or European sales growth. It is going to move meaningfully based on market sentiment as to whether this once tiny company is going to "own" a piece of the PC. In fact, it may move down in the short run on fears about competition from SyQuest, Jaz tie ratios, etc. But those are the red herrings. The real suspect is: Where is Zip on the road to standardization? Will she get there at all? If so, when will the big harvest that results from that bear fruit? If not, can Iomega really grow 40% +/- per annum for five years? I, for one, am still looking for growth close to 2x that and think it can be achieved. But only if Iomega presents a compelling case as to why the Zip will not just thrive, but win. MarkRogo 8+++++++++++++++++++++++++++++++++++++
Subject: New TV ad campaign announced In tonight's Salt Lake Desert News, Brooke Adams writes about Iomega's new aggressive ad campaign to get the word out that floppies are history and your personal computer should just Zip it. Jeff Jeter, senior director of worldwide marketing said the multimillion dollar ad campaign will target seven top U.S. markets. Print ads will appear in November issues of monthly publications including computer and business publications PC World, Forbes, and Business Week. TV ads are slated for Nov. 17-30 and Dec. 8-21. They'll appear on such programs as Seinfeld, NYPD Blue and with sports broadcasts. The message is 'Create all you want, you've got the capacity'. The company will drive that point home with ads featuring a Condor aircraft, the world's largest cargo airplane. The campaign will focus on building consumer support for having Zip drives built into personal computers.
Dave, _______________________________
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