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Tuesday, October 28, 1997 Monday, Iomega closed at 24 5/8, down $3 7/8 (-13.60%). TODAY'S RECAP: Yesterday was a rough one for the market in general, and no less so for Iomega's stock; however, the mood on the message board remained positive for the most part, as posters devoted their energies to discussing Zip inclusion in various OEMs, marketing strategies, Value Line, and a potential competitor -- DVD drives. 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++ NovW takes a stab at guessing the Zip's inclusion numbers.
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 10/26/97. 1+++++++++++++++++++++++++++
Subject: 3Q Zip/PC Numbers Thanks to IAmErgoSum's "3rd Q PC Shipments" post. We now know that the worldwide PC shipement number for 3Q97 is about 20 millions, and for 3Q96 was about 17 millions. My estimate for Zip shipment number for 3Q97 is about 2 millions or slightly less, and for 3Q96 was about 0.94 million. So we have this picture: Worldwide...... 3Q97.................. 3Q96 PC ............ 20 millions ........... 17 millions Zip .. ......... 2 millions ........... 0.94 million Zip/PC % ...... 10% .................. 5.5% ------------->>> Very impressive Zip OEM .... 0.7 million ........... 0.09 million or less OEM/PC ...... 3.5% ................ 0.5% -------------->>> My estimated Attach Rates 1. In 3Q97, for every 10 new PCs shipped, approximately 1 new Zip drive was also shipped. 10% !!! If this is true, it is indeed very impressive. Please note, however, it doesn't mean the new Zip drive was necessarily sold with one out of every 10 new PCs. Some of the new Zip drives were probably sold to be attached to previously installed PCs. But the approximately 10% number is very significant. 2. My estimated Attach Rate (OEM Zip drives sold installed in new computers) for 3Q97 is about 3.5%. But please note that I don't know how those research companies define PCs. They may have included those totally diskless "smart" terminals as PCs. If that was the case, then for only all those "real" PCs, the attached rate would have been higher. Anyway you look at it, that leaves a lot of room for Iomega to grow the Zip market either by increasing the future attach rate or selling more retail Zip drives in the aftermarket. Mike "Rappoport" asked in the 3Q97 conference call: ... Is it 2%, 3% (about the OEM Zip drive attach rate to new PC shipped)? KE answered: We just don't provide that information. Just a lay person's humble opinions and estimates. As "usaul", I may be wrong. 2+++++++++++++++++++++++++++
Subject: Re: IOM board at 30,000 bobbutne@aol.com offers the following quote and opinion: <<"By the end of 1998, the majority of PCs will be shipped with DVD drives capable of reading discs that can hold up to 18+ GB of data. Once the majority of PCs shipped can read DVD discs, more software developers will take advantage of this innovation." IOM, RIP........>> Did you skip the word "reading"? Those DVD's will be non-rewritable, particularly in the beginning. Also, the cost of a DVD (read-only) drive, let alone a re-writable one, will not be in the $150 or less ballpark for quite awhile. Also, the "standards" for writable DVD remain as a major uncleared hurdle. Ask yourself, "why didn't writable CD's kill the floppy?" - Slow, expensive, one-time burn-in. You might change that conclusion to "IOM, RIP .....someday, when the cost of DVD drives get REAL cheap, if and when a re-writable standard is arrived at." Before DVD clears all those hurdles, you might want to check into ENER (energy conversion devices), they hold the patent(s?) on the phase change, amorphous film technology that re-writable DVD's will use (amongst many other valuable patents). Happy Trails! 3+++++++++++++++++++++++++++
Subject: Re: Value Line New Iomega Numbers << Heck, just a few months ago Value Line didn't consider Iomega to be a stock worth mentioning. Now it's rated #1 on their timeliness scale. That's why I bought it. >> A #1 ranking in timeliness by Value Line is great for IOM. In an article by Fischer Black (more on him in a sec) called "Yes Virginia, There is Hope: Tests of the Value Line Ranking System," he discusses the use of the Value Line timeliness as a predictor for "extra return." What he did was to construct portfolios of stocks (using historical prices... 1984 to 1991 I think) based on VL's timeliness scale. He adjusted them on a monthly basis, adding newley ranked stocks, and removing "demoted" stocks. In doing this he found that the extra return on Rank I stocks was 10% and for Rank V stocks, -10%. (The extra return is above and beyond the risk adjusted return.) These values were highly statisticly significant: "The possibiliity that this could have occured by chance is one in 10,000." Of course, the standard disclaimer stands: past performance is not a guarantee of future returns. I also want to point out that there were no transaction costs or taxes. Fisher Black was recently honored with a Nobel prize for his work on the Sholes(sp?)/Black options pricing model... which basically started options trading. He is a staunch believer in Strong Form Efficient Markets, which says that you can't beat the market (when adjusted for risk) even with inside information. In summary, A Value Line timeliness ranking of 1 is great for IOM on several levels. It ranks us in a prominent and public postion that has been shown to perform well when compared to the market. I think it may also put us in Value Line's Century Fund, which is composed of #1 timeliness ranked stocks. PS I couldn't find where the article was published. Sorry... It was a handed out in class. 4+++++++++++++++++++++++++++
Subject: loss leader: staple or standard? << I must say that I am not too thrilled anymore with the Iomega display that features the ZIP, JAZ & Ditto models sitting on top with a computer and monitor and some advertising. I think I would prefer to have these shelves just stocked to the hilt with Zip drives with a special price sign or some other come on. By the way this CompUSA was selling Zips for $129, ($149-$20 store instant rebate). Watching people in the store, more were attracted to the full shelf of EZ230's and the Super Flops. Mind you their endcaps were closer to the front of the store, but neverthless I think this is a more effective presentation than a few Zips on lower shelves. I would like to see CompUSA more aggressively showcasing Iomega products. >> Ain't it the truth! Supermarkets know the value of end caps stacked to the max with product. It's attractive to shoppers and somehow influences them to buy what they think everyone else is buying. Herd instinct or something. Supermarkets also know the value of "loss leaders." Anytime you have a product (usually a staple) that is in great demand it can be used to attract shoppers into your store where, of course, they can buy other products having normal margins. We are now seeing computer stores discounting Zips on their own and not as a part of Iomega's promotions and accompanying rebates. The other day I was driving down El Camino Real in Menlo Park, CA where I spotted a very large poster in the window of a prosperous looking independent computer store. The words, "FREE ZIP DRIVE" lept out at me. Seems that this store is offering a freebie when you buy a computer. Now that's a loss leader! And has the hallmarks of a standard. 5+++++++++++++++++++++++++++
Subject: OEM report card The following shows global OEMs with worldwide shipments in Q3 1997, Q3 1996 and world market share last quarter. <<Compaq 2,773 1,778 13.7>> One shipping Zip SKU, in the consumer line. Popular model, but how many of the 2.7 million machines Compaq shipped were 4874s (or whatever they are called)? Grade: C+ <<IBM 1,655 1,491 8.2>> Hello, IBM, is anyone home? Zero shipping Zip SKUs. Rumors about laptop Zip pulls grade up from F-. Grade: F <<Dell 1,215 758 6.0>> Best Zip OEM in terms of volume and offerings. Includes Zip often in "standard" configs. Builtd-to-order model sells a bunch more Zips. Penetration across 1.2 million machines may be as high as 20%, almost certainly at 10-15%. Thanks, Mike. [Note: Of last quarter's 2 million Zip drives sold, 700K went to OEMs. Dell, Micron, Gateway, Apple, Compaq were, I believe, the top 5. Figure Dell is overrepresented due to build-to-order model and market share. I'm guessing they did at least 150K drives last quarter.] Grade: B <<HP 1,175 700 5.8>> One consumer SKU. Optional across business line known as Vectra. Overall? Good, bad or ugly.... Hard to say. Nice white paper, though. For that we'll pull the grade up. Grade: C <<Packard Bell 940 1,017 4.6>> Hard to tell if any shipping SKUs of Packard Bell or NEC include the Zip. None do in any of the computer stores in the Bay Area, nor any of the small sample of stores I took in New York. Hard to tell. NEC Direct does sell Zips. Grade: D These five are less than 40% of the global market. <<Gateway 533 399 6.3 (U.S. totals only, but Gateway is pretty small globally, anyway; Note: U.S. accounts for 40% of global demand in Q3, but we know from the report that Gateway was below PBs 940K in Q3 global total, backing up the claim about their relatively weaker global position) Like Dell, offers a lot of Zip drives in standard configs. Not as big a company, but price leadership makes them a consumer fave. Grade: B <<Micron -- no numbers available>> First Zip OEM, so we like them here. Small total number of drives, but strong penetration across the product line. Grade: A- <<Apple -- no numbers available>> Dying a slow death, but with a bunch of Zip drives. Hard to find the Zipped products in stores. Grade: B- That's all for now. I'd say Iomega is doing fine, but the above shows just how far Iomega has to go before the world's largest OEMs considered the Zip a "standard" piece of the PC. _______________________________ End Report. Posts covered through 9:00pm ET 10/27/97. _______________________________
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