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Thursday, October 16, 1997 Wednesday, Iomega closed at $24 9/16, down $3/16 (-0.76%). TODAY'S RECAP: After a few days off, TMF Weekly returns to the fray that is the Iomega message board. (Many thanks to TMFs Jeanie, Cheeze and Debit for doing an excellent job recapping the board's activities while I was away.) On the eve of Iomega's 3Q earnings announcement and conference call, message board posters continued to debate the potential impact of the newly announced Sony/Fuji 200MB drive -- to ship next spring. This discussion grew to incorporate other competitors, most notably OR Tech and SyQuest, as well as the validity of such comparisons. Most posts yesterday dealt with this new drive in some fashion or another. On a lighter note, ~TMF Cheeze~ shared his list of Things to Do while awaiting IOM's earnings report, and ~TMF Meows~ provided conference call info. 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++ BLBREW continues discussing the new Sony/Fuji disk drive
announcement.
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 10/14/97. 1+++++++++++++++++++++++++++
Subject: Re: Barry's FUD More FUD.... Sony/Fuji drive.. Not the same at this time as Mitsumi/Swan drive. Sony is only going to preview specs to OEMs at Comdex. Mitsumi/Swan drive will be introduced at Comdex with shipments to begin in the spring. As was discussed by these folk and IOM at the conference in San Francisco, everyone in the storage business was there. Until one company is able to ship enough drives to capture 20% of the new computer business it cannot be considered that there is a standard established. Or words to that effect. I agree. Seems to me that there is not going to be ANY clear standard set by price or performance. Production, production, production is going to be the key. Seems like I have said that before... At this time I do not see anyone that is ready to embrace a standard to the point of ramping to 15 to 20 million drives per year in the next 12 to 18 months. This leads me to believe that we shall continue to see fragmentation of the sector. UNLESS .... Several of the majors get together and decide on a drive that is a kind of hybrid. As was done to create the current floppy technology with IBM and Sony colaborating. Could this be happening again? Isn't Alps Electronics the old IBM drive manufacturing unit? Wasn't Fuji incremental in establishing the media for the current 3 1/2 floppy. Isn't Mitsumi the largest manufacturer of the current 3 1/2 floppy, with 30% of the world market at this time. It seems likely, not a sure thing, but likely that there will be some kind of consolidation of technologies if not companies. Fragmentation of the business does not benefit the big guys. IOM is not yet one of the BIG guys, or they would have more partnerships for production and would be happy with revs from discs. On that note ...is it true that IOM makes 60% margin on discs? Not real good. BASF disc cost of production $1.35 or under for Mitsumi. wholesale $6 to $7. As long as Sony and Fuji are making money on disc sales why should they care whos disc it is? Zip, Mitsumi, Syquest or any other. Same goes for Fuji. they sell media, that is there business. Like 3 M sells media, like BASF sells media, it is a profit thing. Let the competition subsidize there own product, nice deal. For Sony/Fuji. No one is going to take market share away from IOM. But are these developments going to slow their growth is the question? IOM wi;ll survive, KE is not dumb. He has known for at least as long as I have that Sony Fuji thing was coming, just came a little sooner than we expected. Seems odd to me that Sony should annunce a product hat they can only show specs for at Comdex. Vaporware it would have been called a year ago. Question ...IS IT? Those most likely to be hurt are those with small sales and manufavcturing capacity, they will loose the race for sure. they may always sell product, but rate of growth will not be as it has been in the past. 2+++++++++++++++++++++++++++
Subject: Re: New TV ad campaign announced The story on the new Iomega TV campaign is also covered in the Odgen Standard, go to the business section, it is the second story and is titled "Iomega adds Zip to drive ads few snips: the new key phrase is "Zip Built-In" This will be Iomega's largest advertising campaign ever new ad focuses on availability of built in ZIPS from CPQ, DELL, Gateway 2000, and Micron ads start mid November and run through Christmas also new print campaign campaign will cost several million dollars, no exact costs released until company announces earnings on thursday 3+++++++++++++++++++++++++++
Subject: Re: LS-120 Killer Some thoughts about the new Sony/Fuji 200MB drive: First, great posts already by Robert (RB61), MarkRogo and Ben. Second, to all those who during the Nomai debates said that Fuji wouldn't sell the media to Nomai because it might jeopardize its relationship with Iomega -- how come they're willing to sell to Sony? As always, a sale is a sale, unless you have sewn up exclusive rights. Thirdly, some thoughts about the technical aspects of the new Sony drive: We all knew that the media was capable of higher density recording basis KE's repeated statements that IOM had a 200MB drive working in the lab. Are there aspects of IOMs patent portfolio that would make a competing drive impossible/difficult? One issue is contact vs. floating heads. Had Sony used contact heads, most of IOM's patents would not be relevant; however, the press release indicates that a floating head is being used. This requires precise positioning between the heads and the rotating media to avoid damage to both. There are several patents which apply here: 5,530,607 - Wing attachment for head load/unload in a data storage device, 5,537,281 - Flexible disk cartridge having disk stabilization means, 5,636,085 - Magnetic read/write head assembly configured with bleed slots passing through rails to stabilize flexible medium while attaining low fly heights with respect thereto. I am not qualified to say whether there are other cost-effective ways to stabilize the media and the heads without infringing (in fact, I suspect this is central to the Iomega-Nomai suit). Other patents deal with cost reductions in assembly or components. Although they are not directly relevant to a non-compatible drive, Sony cannot incorporate any of the teachings without a license from Iomega. This should increase the cost to manufacture (how much is an unknown). Issues such as the retroreflective marker are moot unless Sony claims compatibility with Zip drives. If anyone has additional ideas about the technical issues, I'd love to hear them. 4+++++++++++++++++++++++++++
Subject: Sony threat Welcome back Mark Rogo and your most excellent posts!! The certainly did get me to thinking. I remain extremely bullish, however, on Zips ability to defeat Sony and all other new competition, even if their products cost a bit less and do a bit more. I feel that every Zip drive currently in circulation translate at least double that in future sales. That's because the recommendation of the current base of users will determine what their less computer savvy friends will purchase. I know that, as a graphics guy, I've been responsible for at least 20 zip drive purchases by friends and clients. It's going to take HECKUVA product for any of us to throw away that investment in a product we are very happy with. Those first few million sales of the Sony drive will be a very tough road indeed.... what OEM's will further complicate their SKU line by offering the Sony, and what consumers will flock en masse to a new removable that can't be used by any of their friends? I maintain that it will take something revolutionary rather than evolutionary to keep Zip from reaching 'standard' status. When it comes to Zip perhaps I do have rose colored glasses permaglued to my forehead. Only time will tell. But I've been wrong before (the understatement of the day), and that's why I really DO appreciate yours and Benjamin's eloquent attempts to keep all our feet on the ground. 5+++++++++++++++++++++++++++
Subject: The List Things To Do While Waiting For The Earnings Report 1. Click on "MARK ALL READ." Read entire board anyway. 2. Send resume to Nomai. Get hired. Take over company. Convert business plan from phony Zip disk manufacture to mass production of wax lips. 3. Dust off old anti-LS-120 arguments for use against Sony HiFD. 4. Trace source of mysterious "clicking death" rumors to www.bozo.com. 5. Blame 2Q chip shortages on the paparazzi. 6. Note to self: No cameras at Aruba's next pool party! 7. Buy up remaining inventory of $49 LS-120 drives for skeet shooting practice. 8. Purchase bushel of ripe tomatoes for critique of Sony display at Comdex. 9.Guess which will come first: n*hand release, or Chelsea's graduation. 10. Topic for research: which is being printed faster, SYQT shares, or Malaysian ringgits? 11. Wear same pair of "lucky socks" every day until Zip installed base reaches 10 million. 12. Download 45-minute version of "Truckin'" from Deadshow website. 13. Vist www.fool.com message boards. Muse fondly over spiffy "ignore user" feature. 14. Sell at 17. Buy back at 28. Hope nobody notices you're an insider. 15.Post same full-color "JP Morgan Maintains Buy!" message every 20 minutes until Federal agents arrive to confiscate your computer. 16. Demand that KE sue "Jet" magazine for copyright violation. 17. Buy shares of ATCT for relief of occasional irregularity. 18. Commence aerial spraying of Prozac mist over Iomega board on day of earnings release. 19. See doctor about recurring nightmare in which Iomega signs new n*hand spokesman, Pee Wee Herman. 20. Keep reminding yourself how much fun this is... 6+++++++++++++++++++++++++++
Subject: Sony/Fuji & the EZ-135 << The reason Cynicalguy gave is valid: the EZ-135 on paper looked better than the Zip or even the Sony drive. It was 4 months behind the Zip and lost. The Sony could be over 3 years behind the Zip. There were other reason(s) the EZ-135 did not beat the Zip. Maybe Zeke could let us know what those reasons are and why they don't apply now? >> I'll take this one. Patrick: Trying to lump the EZ-135 and proposed Sony/Fuji drive together in evaluating threats to the Zip is, in my opinion, an extrodinarily bad idea. For someone to say they're not worried about Sony and use the EZ-135 as an example of why not is, I think, a perfect example of sticking your head in the sand. Why? Because the difference between the EZ-135 and the proposed new drive could be as big as the difference between SyQuest and Sony. From the start Iomega has been shooting to make the Zip far more than the niche market item SyQuest's products were. They've tried to make the Zip into a consumer electronics item, and in doing so entered a field SyQuest simply wasn't prepared to compete in. When the EZ-135 came out it was obvious they were still the same old computer peripheral company. Their industrial design & marketing at the time showed they hadn't made the leap that Iomega had. In addition, they had a history that held them down like a lead anchor. Anyone who owned a SyQuest product knew of their reputation for selling fragile, overpriced, crappy products. Now compare this with Sony. They are consumer electronics. They have the design and marketing savy that SyQuest does not and few do. This is a company that has the capacity to design a killer looking product, manufacture it as cheaply as possible (and still make a profit), slap a company name on it known around the world, and advertise it with Superbowl ads. Sony has the capacity to correct most of the errors SyQuest made. Then there's the subject of Iomega's installed base. If and when Sony/Fuji comes out with their drive, it's true Iomega will have a very healthy head start. Of course we don't know when the drive might actually show up so we're just guessing, but there could be anywhere from 12-25 million Zips out there. And while this certainly dwarfs anything SyQuest sold, we've seen posts that discuss how few that really is in relation to the number of computers out there. Again just a guess, but the percentage of computers that will be sold next year without a Zip should top 90. And the percentage of computers in use without a Zip is greater still. The market is still there. Then there's the subject of Sony's own line of computers. People have posted, rightly so, the fact that since Sony is now a direct competitor folks like Dell, Gateway and IBM might not be so quick to adopt their product and help boost their bottom line. In that regard Sony will have the same problem Compaq had with the LS-a.Superdrive. Of course, the other side of that coin is they have their own line of desktop and laptop computers to help launch their own product. So what we have to hope is that Sony shows the same ambivilance, the same lack of determination Compaq showed in using their own line of computers to push their floppy replacement. Can we count on that? Can we count on Sony to give their drive virtually no exposure at their own booth at computer trade shows? To give the drive 3 different names? To keep the marketing to a minimum? Does that sound like Sony? So what the heck am I saying with all this? That the Zip is toast, and Sony's product will rule the world? No. What I'm saying is, I think folks are making a HUGE mistake if they simply compare the EZ-135 to the proposed Sony/Fuji drive as a way of determining the newcomers chances. The spec sheet only tells a small part of the story. What you need to compare is the EZ-135 & SyQuest to the new drive & Sony/Fuji. And there's no comparison. If Sony/Fuji can put out a product that has a 200MB capacity, has backwards compatibility with existing floppies, has the durability of a floppy based product, and has the name, design, marketing and financial muscle of Sony/Fuji behind it, then it is light years ahead of the EZ-135. 7+++++++++++++++++++++++++++
Subject: Re: Sony/Fuji & the EZ-135 << What I'm saying is, I think folks are making a HUGE mistake if they simply compare the EZ-135 to the proposed Sony/Fuji drive as a way of determining the newcomers chances. The spec sheet only tells a small part of the story. What you need to compare is the EZ-135 & SyQuest to the new drive & Sony/Fuji. >> I know its difficult on this board but please keep in mind where the thread started. 1. Clay Hagan tells us he thinks the Sony drive is faster and this worries him too much to not sell some IOM. The superior performance was the issue he sited the most. 2. Cynicalguy responds that the EZ-135 was faster and it did not matter. 3. Zeke attacks Cynicalguy with the notion he has his head buried in the sand 4. I ask Zeke why its such a bad comparison? Now you gave your thoughts on why its a bad comparison. I disagree with you on many things but I respect your opinion. Too many people around here do not respect the other posters to at least give them the courtesy of assuming they think about their opinions. I find that un-Foolish and rude. Sony has a great brand name but not in computers. Sony/Fuji should not alarm Iomega more than 3M/Panasonic/Compaq. Compaq certainly has more wherewithal to market a computer peripheral than Sony or Fuji. Iomega is the dominant brand name in removable storage. We only know what Sony has decided to tell us. But I'm confident that whatever they come out with is too late. 12-25 million Zip drives is a staggering installed base. With that many Zip drives in use don't you think it would be an extremely rare case of someone looking to buy a removable storage device that does not know someone who is using a Zip drive? This is why I think the EZ-135 analogy is completely relevant: The installed base was a huge factor in Zip's victory. An installed base counted in the hundreds of thousands. An installed base that, by the time this product could see the light of day, could be counted in the 10's of millions. I don't see anyone overcoming that. The first EZ-135s were internal only products just like the Sony product. This was also a leading factor in the mass market rejecting the EZ-135. By the time the PP EZ came out (at a much higher price) the Zip installed base was much higher and SyQuest's chance was over. Of course by then the mounting loses from selling the drives under costs swamped SyQuest and they had to abandon their effort. Of course the analogy is not perfect but it can't be dismissed out of hand. That was my point. Patrick Keeler 8+++++++++++++++++++++++++++
Subject: Conference Call
10/16/97 (Thursday) _______________________________ End Report. Posts covered through 9:00pm ET 10/15/97. _______________________________
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