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Friday, October 31, 1997 Thursday, Iomega closed at $25 13/16, down $5/8 (-2.36%). TODAY'S RECAP: Message board posters returned to discussing the recently announced Sony/Fuji 200MB drive to be released sometime in 1998 -- with a small twist; instead of viewing it as a Zip competitor, ~HeyKerry~ began a debate on whether or not the new drive might not instead compete against Iomega's as-yet unreleased n.hand drive. Other posters looked at the stock's overall earnings potential, the company's management, and ~Zildjian01~ gave the board some idea of what a typical college student might use the Zip drive for. 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++ RB61 discusses Iomega's management.
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 10/29/97. 1+++++++++++++++++++++++++++
Subject: Re: Management At work today, I was asked to review a credit application for a new dealer. The financials, while not spectacular, were acceptable. However, on the Interac report (kind of like a Dun & Bradstreet credit report) was a couple of items that needed to be investigated. A major manufacturer had brought a lawsuit against the dealer. Seems the dealer had sold "B" stock (refurbished goods) and represented to his customers that they were buying "A" stock (brand new goods). Also, two other manufacturer's had placed this dealer for collections. Seems he paid who he needed product from and wouldn't pay who he didn't need for replenishing product. What the heck does this have to do with IOM? Plenty. I'll only bring up two items, though more important pieces of information could be gleaned from the above story. Notice from IOM's conference call that KE talked about how IOM had bettered their DSO (days sales outstanding) to 55 days from 57 days during the 3rd qtr. DSO is a measurement that is used to estimate the quality of accounts receivable. In simplistic terms, A/R is being turned over or collected in 55 days time from the date of sale. They are able to bring this about through a number of factors: 1) Good collection efforts. 2) Quality of customers. 3) Demand of product IOM sells. Let's look at number 3. Each dealer works within the confines of a credit limitation IOM has established. Let's say dealer A has a credit limit of $60k. Dealer A also has terms of net 60 (we will disregard the cash discount terms for this example). Dealer A places an order with IOM for $35k worth of product on day 1. On day 25, dealer A places another order for $25k worth of product (using up all $60k of the credit limitation). On day 52, Dealer A wants to place another order (dang products sell out as soon as they arrive), but he needs to pay down his balance in order to place an order. So, dealer A sends IOM a check for $35k and a couple of days later, places that new order. In my earlier example at work, it was clear that the dealer only paid those companies whose product sold well. Those that had slower selling products, would see a very slow payment of their A/R. Whereas the companies with fast moving products, were being paid on time, even a little early. All this, so the dealer could turn cash as quickly as possible. IOM is clearly a beneficiary of this action. Dealers want IOM products because they move so rapidly. Dealers are able to turn inventory into cash very quickly, which enables them to churn out higher profits (more sales, more profit). On to management. It was clear from the information gathered in this credit application that management was shady. How trustworthy was the information in the financials if management was not to be trusted on their past business dealings. (TMF Turk, does Eddie Anton come to mind :-) ). I compared this example to KE. We can take with some assurance that KE is not hyping the company. He has built up a tremendous amount of credibility in his past actions. He has not been afraid of telling the bad and dealing with the pain associated. When he says something, he can be taken at his word, at least in my humble opinion. 2+++++++++++++++++++++++++++
Subject: How many formulas are any good? Sheesh! Fair value at $25....gimme a break! EPS growing this year over last at 100%+/- with an outlook for 35-50% growth in 1998......IMHO questimate....which would bring 1998 EPS up to $1.30/$1.40 next year....times what kind of multiple??? The multiple is the hard part guys....in good weeks it may hit 30 to 35 times estimated 1998 earnings by the time 1998 earnings become more apparent...ie mid 1998. But holding a multiple that high is difficult...so maybe we better have more confidence in aPE of 25 or so.....I can look forward and give this stock a multiple of 25 to 30 times next years earnings and get a fair value of $32 to $35 and by next summer could see it at around $40, IF IF IF the earnings materialize and the market in general is generous with multiples. On the more optimistic side, if the market were to give all stocks more generous PE's (ie lower interest rates) and this company looks like it might grow by 50% next year...we could conceivably see a multiple of 40 times expected (theoretically guys) $1.40 EPS and a stock price of $56....whew! Don't bet on it, by it could happen....Again, the multiple is the tough part to guess at...the earnings much easier. But if you model says $25 is "fair" ....I'd say you better start over again.... 3+++++++++++++++++++++++++++
Subject: Nhand killer? I was just reading an ad for the Sony Mavica and something scary just occured to me..... we all know what a dog the Mavica is.....saving lo-res images to a regular ol' floppy.... What IS amazing, however, is how Sony figured out a way to put a functioning floppy drive inside such a tiny camera.... If they can do it with a floppy, why can't they put their new 200 mb hifd inside a digital camera too? We Fools have been pooh-poohing the new 200 mb Sony floppy drive cuz as serious Zip competition cuz the Zip is too far ahead in the desktop arena. Well, what if Sony's MAIN intention with HiFd is to go after the enormous digital imaging market? Could their 200 mb disk not blow our tiny 20 mb nhand out of the water before it can get its feet wet? If Sony could corner the digital camera market it could then possibly move to the desktop OEM market with considerable consumer pullthrough behind it.... Looking forward to everyone's Foolish thoughts on the matter.... 4+++++++++++++++++++++++++++
Subject: Re: Nhand killer? << What IS amazing, however, is how Sony figured out a way to put a functioning floppy drive inside such a tiny camera... >> If I recall, the Mavica is not small. << If they can do it with a floppy, why can't they put their new 200 mb hifd inside a digital camera too? >> Even the n-hand seems too big according to many flash-ram proponents. Sony's HiFD is even bigger. On Sony's HiFD: does everyone really believe that they will ship in the Spring of 1998? They only started on the drive in 1997 and are biting off 200 meg capacity and backward compatability in one big bite, too big. From what I hear, if the drive comes out it will be late 1998 or early 1999.The drive is expected to have cost problems just like the LS120 did; is this the type of device that could make it into a camera? Don't think so. Another note As far as competing with zip the strikes against it are: 1. Cost, both inherent and "behind the curve" type costs. 2. So late to market that by the time it comes out there will be over 20 million zips out there. With zips being half the cost of where they were last quarter in the next 21 to 33 months, why do we even need floppies? Iomega is already selling OEM zips for less that $50; can they sell them for $25 in mid 1999? At that price it's almost as cheap as a 1.44 floppy. The disks, they will be cheaper too. Either the disks will cost a lot and Iomega will have a medium sized but lucrative market. Or, the disks will cost a lesser amount and Iomega will reap the benefits of controlling the very large market of the replacement floppy. My point on the Sony HiFD: Sony may be able to solve the technical barriers and get the HiFD to market in early 1999. But, by the time Sony tries to ramp to real volume, the zip will be so inexpensive and well entrenched that Sony's effort will be futile. I compare it to coming out with a drive today that can read both 3 1/2 flopppies and 5 1/4 floppies: why do it, the 5 1/4 is gone. It's hard to look ahead and see the storage needs and norms of the future. But one thing I know, needs change fast. I bought a game today: 250 megs on the hard drive and my 150 mhz pentium without MMX was too slow to play it. 5+++++++++++++++++++++++++++
Subject: Re: It's the Disks << What if college students are using more of these disks than we imagine?. I'd like to hear from college students out there and their use of Zip disks. >> Well I am attending Northern Illinois and have been invested in Iomega for a couple of years now. Anyway in regards to your question... I have about a gig in Zip disks( wish they were colorful).. not including the one that came with the drive and I am only a finance major. I use 5 disks to back up my Power Mac since it came with a 700MB hard drive. I also use 1 disk each for Games, Multimedia (sounds, pictures, other cool stuff), and an Application disk basically because my hard drive isn't big enough to keep programs that I don't use a lot but don't really want to throw them away yet. I have one disk devoted to downloading stuff from the internet so that after I install the program or whatever on my hard drive I still can still keep the install program on my Zip just in case. And finally I have one disk that I use to share stuff with my friends around campus. This disk has gotten a lot of abuse (dropped, even stepped on) from my friends but it always has performed just like new. I hope this helps..... _______________________________
End Report. Posts covered through 9:00pm ET 10/30/97.
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