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Thursday, October 23, 1997 Wednesday, Iomega closed at $29 9/16, up $1 3/16 (+4.19%). TODAY'S RECAP: Yesterday, with another significant jump in the stock price, the Iomega message board continued discussing a number of issues already under debate: analysts' following the company, competition, and future earnings growth potential. Be sure to read the debate/discussion between ~JunkYard71~ and ~ComptrBob~ on Iomega's next ten years. 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++ RICORNFELD shares information on the new Zacks report.
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 10/21/97. 1+++++++++++++++++++++++++++
Subject: Zack's Report Zack's issued a new report today that shows some upgrades in analysts' recommendations since the earnings report. Six brokers supplied Zack's with information. Of those, three updated their recommendations with a Buy on October 17, 1997, the day after the earnings announcement. These are Hambrecht & Quist, Buckingham Research, and a company identified as "Major Broker," which I assume is JP Morgan since it is not otherwise listed. The other three analysts are Emerald (last update 9/27/97: Buy), Needham (8/29/97: Buy), and H.D. Brous (9/22/97: N/A [not available?]). Zack's does not include a breakdown by company between strong buy and moderate buy. However, it does indicate that two of the recommendations are strong buys (one institutional broker and one regional broker), and the rest moderate buys (one institutional broker and two regional brokers). Unfortunately, I did not save the previous report to verify this, but I believe there was previously only one strong buy recommendation. The average estimate of fourth quarter earnings is $0.31, an increase of $0.01 in the last month (it doesn't say when in the last month). The breakdown is one estimate of $0.30, two of $0.31, one of $0.32, and one of $0.33. There is one estimate for 1Q 1998; it is $0.24, an increase of one cent. The average of five estimates for all of 1998 is $1.19, unchanged in the last month, with a high of $1.32 and a low of $1.10. The five-year growth estimates are unchanged, with one at 40% and two each at 28%. 2+++++++++++++++++++++++++++
Subject: Subscriber Valuations I didn't get a chance to thank Ben for his insightful analysis. I can't add any facts to the picture but would like to offer a point for consideration: It appears to me that any long term analysis has to take into account the change in buyer habits after they obtain a Zip drive. What are people doing now that they didn't do before? One example appeared on this board recently - the use of Zip and Jazz files to meet the requirements of a court case. The deadline couldn't have been met with conventional paperwork. There must be loads of examples in the legal, medical, accounting, office, audio-visual and home environments of how the super floppies permit new activities. These developments have to have a large bearing on the tie ratios need to complete Ben's annuity concept. Any possibility that we could conduct a poll of Iomegans to find out what they are doing with the Zip and the impact on their need for disks? 3+++++++++++++++++++++++++++
Subject: Re: Come on J.P. Morgan! << JP made a recomendation to their clients that the value of Iomega stock was 35 and it showed promise of return matching the risk. They may be shown to be right long term. But considering the stock crashed to about 12, and has been as low as 14 this year, they have egg on their face. Even those fortunate enough to have sold at a profit have to wonder about JP's judgement and ability to call value. >> I think there are some points you are missing. For one, when a firm does a deal - face it - they are doing a deal. They are selling the deal, selling the story. And this is a story that everyone was buying. In fact, the growth in the company has continued to be phenomenal. So they sold a great story and it has continued to be a good story. Also, this deal was done mainly (entirely?) with institutions. They priced the deal at 35, SIX POINTS BELOW the market price! What a deal! AND, the stock did go to 55, if even for a short time, AFTER the offering. Any buyers had their chance to sell. Many of these institutions look to buy the hot deals and flip them. Similar to a momentum player, they will buy a deal just because there is demand for the deal that indicates they can get a "pop". And these institutions place a lot of the decision to buy or sell in their own hands - generally not just blindly buying an issue just because of a good sales pitch. Also, JPM cannot control market psychology. The psychology of the market towards Iomega turned on a dime. We were at 50x forward estimates with great optimism, then went down to about 16x forward estimates on great pessimism (started by news of production of the LS-120 "Zip-killer"). JPM cannot control those swings in sentiment. And all the while, KE & Co have been going about the business of running a great company. 4+++++++++++++++++++++++++++
Subject: Need A Reason? Do you need a reason to explain the recent IOM strong upward price action? One of the many answers: the quick run up may just be a swift upward P/E adjustment. IOM was trading around a P/E of about 40 with respect to the trailing 12 month earnings for quite some time now. Of course the Forward looking P/E or medium P/E are lower. Just meeting earnings expectation (which was higher than the actual year ago quarter earnings) and maintaining the Trailing P/E of 40 may have resulted in a quick upward price adjustment anyway because the trailing 12 month earnings would then be higher. But Iomega beat expectation. And the next quarter looks brighter and future quarters also look good. In addition to now having a even higher trailing 12 month earnings to start with, it may also be entirely appropriate for the market to award IOM a Trailing P/E higher than 40. A quick run up of price to achieve a trailing P/E of 45 or 50 may be possible. Meeting or beating earnings expectation and coupling that with a brighter outlook for future quarters would usually result in maintaining the P/E or achieving a higher P/E. Just a lay person's humble opinions. As "usaul", I may be wrong. 5+++++++++++++++++++++++++++
Subject: Re: Terastor << Tetrastor is supposed to market 20 GB fixed and removable hard drive sometime in 1998 with a price tag around $500. This may or may not be a direct threat to Jaz since Jaz price by then will be much cheaper. >> Let's be clear on this one thing: The rumor is 20GB carts for $100. 20 Jaz carts is like $1500, at the best price. Terastor will be much cheaper for anyone who is contemplating 5 or more Jaz carts over the drives lifespan. Also, I bet that the read speed is going to be comparable to Jaz simple due to the 20x increase in aereal density. I am less sure about write speeds and seek speeds. I agree it's vapor, but with almost $100 million in venture capital, I'm guessing it's going to be a shipping product rather than a Mitsumi UHC-130. 6+++++++++++++++++++++++++++
Subject: next 10 years? Comptrbob chides me (and rightfully so): << I remember with fondness your prediction of 100% growth for the next 10 years which you reluctantly had to retract when I pointed out that IOM revenues in 2005 would then be around 600 billion dollars and IOM would have $245 eps! Moral of the story: achieving sustained 100% growth is extremely hard for any company especially when that company is already doing revenues at $1.2B (and around $1.8B for 1997). >> Bob, I don't remember retracting that, but I was speaking mainly to eps growth. I am running on a "vision" of computer growth and change over the next decade, that is somewhat like the changes we've seen in the last 10 years only accelerated by a factor of "X", to compare lock in on 1984 (or so) before windows 1.0 (anyone remember it? you could not overlap windows, they tiled next to each other, and only ran in CGA which was the only color resolution there was 320x200(?) pixels) Anyway, what I see happening with PC's and storage doesn't even resemble what IDC sees. My track record for seeing the future cannot be verified here, you would have had to have been a part of my company in '84 when decisions were made on our focus in the emerging software & hardware markets. One recent (well 1994 or so) example of the misreading market watchers have been caught in was the wide spread belief that Pentium CPU's would be relegated to a niche in high-end file servers and that no one would ever need one at home. My business partner and I had a long running debates over how long the 496 would survive (he thought it would last for many years, I thought it would fade quickly due to the Pentium) Anyway..... seeing the future is not something I want to proclaim here (or anywhere, well outside of my business decisions that is, I have to "guess right" when I pick an emerging platform to learn and support or I will be out of business quickly). On floppy disks, I don't see the zip replacing the floppy at all, although I do see the zip taking over the slot the floppy has in the front of "all" desktop computers (yes I know there are a few floppy-less systems out there) The floppy, and uses for floppies is changing, no that's wrong it already has changed, now it is evolving into something different, something more. I think arguing capacity and saying 1 zip will replace 70 floppy disk sales is wrong. I think arguing that more then one removable standard is wrong. Remember GEO Works and other "windows" competitors from the not so distant past? I think zip disks will sell in the multibillion unit range a lot quicker then most think. Times have changed, the way PC's are used has changed, because what they are used for has changed. PC's will merge with TV, telephones, VCR's, and radio (if radio matters) and a dozen other technologies over the next "X" years, Why? mostly because they can, and mainly because of the digital revolution that has been building for 20 years. I think we are on the cusp of these changes now, mainly due to processor speeds. PC's will become so pervasive, so fast (powerful) and so cheap that if I ever dared to post my perceptions here I'd be flamed like no IOM bull has never been flamed before, so I won't go there, but it is important to realize that it's happening, and happening at an ever accelerating pace. What PC's will do in 2005 doesn't even compare to what they do in 1997. All this digital revolution stuff won't slow down, ever. In fact it will grow exponentially. Zip is not the first paradigm nor will it be the last, but it is the pin I use in my lynch for believing that the digital revolution will succeed with the masses. At 100Mb zip is not too big and not too small. Like everything in human life people need "manageable" or they can't cope, one thing I'm convinced of is that 2 and 4 and 9 GigaByte drives fill up so fast because they are too big and therefore unmanageable. Who here can say they manage their hard drive? And if you try how many hours do you spend on it? I am sure there are a few "anal-retentives" or "hackers" here who do try and maybe some even succeed. What is the definition of managing a software file system anyway? Regular people are clueless about sub-directories and such, let-alone being able to identify files that can be deleted or whatever, and it's those folk who will benefit from a system that lets you store "stuff" in manageable chunks. I don't buy into the theory of wireless everywhere, well actually I do but not for transmitting 10's of megabytes at breakneck speeds to anywhere and everywhere. Until computers get smart enough to be totally self-sufficient, and I believe they will someday, It's people that need to deal with this management of "stuff" but even then there's a personal nature to this stuff that will likely prohibit turning complete control over. I digress easily don't I? Anyway, my view and my reason for believing that IOM can grow EPS at 100% (or more) over the next decade is not based on today's world so much as it is focused on the world that is emerging. 5 billion zip disks per year? (well maybe not by 2000, but 2005? 2010?) 500 million zip drives per year? (twice that many? Will there be a zip in your car? In your stereo? Books on zip? There are dozens of possibilities.) I don't think these numbers are so "outrageous" A zip drive life-cycle of 10 years? 20 years? Even in this fast changing world it is likely, even in hi-tech there are basics that are not going to change much over huge periods of time. If I was forced to compare zips place in the basic technology life cycle I think I'd use the fiberglass circuit board that all these great technological developments are being mounted on so they can be connected together to work in the first place. I think zip is a stabilizing technology as much as an enabling one. I think zip and it's role in everyone's future is not understood at all, I think this is mainly because of comparisons to the floppy and old style floppy disk usage's. I could ramble on....and on....but to spare you all I won't (at least today) 7+++++++++++++++++++++++++++
Subject: Re: next 10 years? JunkYard71 posts: <<Bob, I don't remember retracting that, but I was speaking mainly to eps growth.>> Mark, Sorry, I thought you had retracted or changed that prediction. My mistake. BTW, hitting your numbers would mean a stock price of around $8000 to $10000 per share (given a P/E of around 40) ... maybe I'll build a mammoth house on Lake Washington like another guy I know..;-) <<I am running on a "vision" of computer growth and change over the next decade, that is somewhat like the changes we've seen in the last 10 years only accelerated by a factor of "X", to compare lock in on 1984 (or so) before windows 1.0 (anyone remember it? you could not overlap windows, they tiled next to each other, and only ran in CGA which was the only color resolution there was 320x200(?) pixels) Anyway, what I see happening with PC's and storage doesn't even resemble what IDC sees. My track record for seeing the future cannot be verified here, you would have had to have been a part of my company in '84 when decisions were made on our focus in the emerging software & hardware markets.>> I was a beta tester of Windows 1.0, geez, that seems like a dozen lifetimes ago...I agree that IDC certainly isn't gospel and we can certainly make the case for deviations from their estimates. <<All this digital revolution stuff won't slow down, ever. In fact it will grow exponentially. >> Someone once told me not to use the words "forever" and "exponential growth" in the same paragraph..Nothing in nature grows exponentially forever ..LOL << ... one thing I'm convinced of is that 2 and 4 and 9 GigaByte drives fill up so fast because they are too big and therefore unmanageable. Who here can say they manage their hard drive? And if you try how many hours do you spend on it? I am sure there are a few "anal-retentives" or "hackers" here who do try and maybe some even succeed. What is the definition of managing a software file system anyway? >> Come on Mark, get with it, aren't you upgrading to Seagate's new Barracuda 18 or their Elite 23GB hard drive? LOL..they only cost about 2 grand or so... But seriously, managing your data is a very real problem for most computer users, using Zips is very convenient for that purpose. <<5 billion zip disks per year? (well maybe not by 2000, but 2005? 2010?) 500 million zip drives per year? (twice that many? Will there be a zip in your car? In your stereo? Books on zip? There are dozens of possibilities.) I don't think these numbers are so "outrageous" >> Time will tell how "outrageous" these numbers are, but its fair to say that there will be lots of signs of Zip success along the way, well before we hit such numbers. Thanks for sharing your vision, its way more than I expect from Zip in the next 3 to 5 years, but I do expect IOM come close to the IDC numbers and have about 80% of the market. Even that level of optimism will fuel lots of earnings growth..:-) _______________________________ End Report. Posts covered through 9:00pm ET 10/22/97. _______________________________
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