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Tuesday, December 02, 1997 Monday, Iomega closed at $32 7/8, down $1/8 (-0.38%). TODAY'S RECAP: Most of the board occupied itself discussing an old issue: the Zip drive. Debate addressed many different aspects of the topic -- competition, sales growth, OEM inclusion, and even the age-old question of "What makes a standard?" 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++ TMF Keeler on what is worthwhile Iomega news and what is not.
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 11/30/97. 1+++++++++++++++++++++++++++
Subject: Re: Barron's << According to Computer World, if Sony wants to replace ZIP, it has to sell it below $50. That's impossible. >> JSun, Is Computer World saying its impossible for Sony to sell its drive under $50 or is that your editorial comment? I agree that the Sony product must be priced below $50 to replace the Zip/Floppy combo. It would have to be priced around $15-$20 to replace the floppy in cheap machines. The OEM Zip drive was being priced to Gateway in June/July at $47. KE said at that time that he thought the present price to OEMs could be halved in 2 years. A simple progression would put the cost these days around $40. In another 6 months (when the HiFD is suppose to start selling), the OEM Zip price might be around $35. The simplistic-bearish view on Iomega always includes future competition not on the market. Rarely is a bearish view published that mentions any present competitor. The EZ-135 was the Zip killer until the day it started selling side by side (or should I say sitting?). The PD/CD was the next until it too wasn't (now Pinnacle, QW001's favorite, is bankrupt). Then it was the LS-120, until it too finally went on sale and few bought. Now its the Sony HiFD. How many times did the little boy cry wolf before he was eaten? Now that the Sony drive has been mentioned in Barron's is the LS-120 officially dead? I mean, it was DOA basically, but is it now officially dead? LOL I'm not saying anyone should ignore Sony or Swan or Calebra or Mitsumi. But have we not learned to at least wait a few months into the retail introduction of these products? For those that think this will be too late; remember this: SYQT hit, arguably, 3 all time highs well after the Zip drive was introduced and obviously selling in huge numbers. We had two sitings this weekend. One was an article in Barrons about some guy's thoughts about Comdex. The other were laptop Zip drives on sale at retail. Which is a more important fundamental development (latter)? Which got the overwhelming number of posts (former)? The laptop Zip drive at retail. Now that is great news that far outweighs anything else I read here this weekend. 2+++++++++++++++++++++++++++
Subject: HiFD Running 1.44 Yet? Has anyone, who went to Las Vegas Comdex show or was in any other occasion, ever seen a working Sony HiFD drive reading and writing on all different brands of 1.44mb floppy disks yet? Thanks to RICORNFELD for the following excerpt from the Savitz piece: << Iomega, which still likes to claim the ZIP drive will replace the floppy drive, now faces the prospect that the floppy will, in fact, be replaced by a super-duper floppy with backwards compatibility. Just why you'll need a ZIP drive when that happens isn't clear.>> The paragraph was about this FUTURE Sony HiFD drive's likelihood of challenging Zip according to Savitz in a Barrons article. First, just like RICORNFELD, I couldn't help but notice the words "prospect" and "when that happens". Obviously, Savitz was touting HiFD's backward compatibility "virtue" with 1.44mb as the main reason for HiFD's possibility of success. My reaction? None at the beginning. I didn't think that article was worthy of any response. I wish none of us would have graced it with any comments. It deserves none and should have just been left as being irrelevant. Unfortunately, the article right now receives much more attention than it ever deserves. Since many of us have responded, and I don't blame anyone, I might as well add. The discussions of Sony HiFD could indeed help some of us assess the threat from competition in general. 1. Is Savitz even aware of the existence of LS-120? If you read the above excerpt paragraph one more time without remembering what I told you what it was about, and since it didn't mention "Sony HiFD" there, you could have thought that someone was touting LS-120. That super-duper floppy with backwards compatibility description could be for the drive we all know so well --- LS-120. Well that LS-120 happens (which satisfies Savitz's "when that happens" condition), but instead of consumers doubting why they need a Zip, it may be the LS-120 that is facing the prospect of getting killed by the Zip !!! Or perhaps, is it probably already in the process of being killed by Zip? It may not be uncommon to see Zip killers getting killed by Zip. LS-120's case may have been the proof in actual market place the irrelevance of backward compatibility with 1.44mb. Of course, there have been many theoretical reasons stated on this board long before about the possible pitfall of a single slot 1.44mb backwards compatible high capacity drive. 2. I remember reading some posts about Sony HiFD drive running some multimedia and video at the Comdex show, presumably using their 200mb disk. The 200mb may have been the easy part. I don't remember reading one single post about that HiFD drive reading and writing a single 1.44mb disk. The 1.44mb compatibility is their main feature they want to tout, isn't it? Why wasn't that demonstrated at the show in a highly noticeable manner? Running 200mb alone may be no big deal at all to Iomega. Iomega has claimed to have a 200mb drive running in their lab for over a year now. Any person who has seen a Sony HiFD drive reading and writing a 1.44mb disk, please post or e-mail to let me know. Oh, I will have a follow-up question for you: was it a particular 1.44mb disk or just any brand of 1.44mb disk? If I remembered or read it correctly, a friend of mine told me that he didn't get to see a HiFD drive running 1.44mb disk at the Sony booth. When he pulled out his own (off brand?) 1.44mb disk (yes, he brought with him a 1.44mb disk to the show) and wanted to try it on the Sony drive, he was then asked to go away. LS-120 uses contact reading and writing technology on 1.44mb and higher capacity disks at slow spinning speed (about or less than 700 or 800 RPM). In my opinion, CONTACT reading and writing at slow spinning speed may be more forgiving on the compliance (or the non-compliance) of spec by any off brand 1.44mb disks. But contact recording may have other draw backs as far as reliability and durability are concerned. Sony claims to use a dual gap discrete head and claims the head will fly (float) over the spinning media. First of all, I have to admit I knew nothing about a dual gap discrete head, where else would you use one besides on the Sony drive? I learned a tiny bit using my common sense and from what I read. I am pretty sure the head flies over their 200mb disks which will spin at high speed (over 3,000 RPM). But I am not sure what it does over the 1.44mb disk by reading the Sony spec. Will the head fly, hang or be in contact with those off brand 1.44mb disks? Unless they come up with something really clever (and they could, but I have to see it to believe it), I think Sony may have a hard time trying to come up with an inexpensive solution for the 200mb flying head either to fly, hang or be in contact with 1.44mb disks and then read and write on the 1.44mb disks reliably. For example, if flying over 1.44mb disk is the way to do it, can any off brand 1.44mb disk be spun at over 3,000 RPM to float the Sony head, and were those off brand 1.44mb disks designed years ago to spin that fast? Let me emphasize that these are entirely my speculations or quesitons based on my limited knowledge or common sense. Sony may run into difficulties or delays trying to implement this 1.44mb compatibility feature either cost or technology wise. Again, this is purely my guess as a lay person. As it stands now, if 1.44mb compatibility is of any great value, Iomega can do it right now by slapping a thin Zip together with a thin floppy and get the added advantage of being a dual slot device (which can SIMULTANEOUSLY accommodate both media, a task which LS-120 and the other single slot backwards compatible drives like the Sony HiFD can't do). Iomega can do it Right Now. And Iomega would be way ahead of Sony. A Zip/floppy combo dual slot device may satisfy a NICHE market better than LS-120 or Sony HiFD will. But Iomega so far doesn't seem to believe that niche is big enough to worth a trial and Iomega may be right about that. Right now, Iomega is concentrating on the MAIN STREAM floppy replacement market with Zip. 3. If One: 1.44mb backward compatibility may have been proven not to be a selling point at all; Two: To have a flying head work on 1.44mb disks may be difficult or expensive and may cause delays, are not enough, there may be a third strike against Sony. Sony has gone into the business of selling computer boxes since last year or so in a big way. It may be virtually impossible for a box maker to push to other box makers a piece of its own proprietary peripheral as a standard. Compaq tried as a partner with OR Tech, Imation (3M then) ... to push the LS-120 drive hard at the beginning .... and the rest was history. I don't even think I need to get into the details here. Just a lay person's humble opinions, questions and speculations. As "usaul", I may be wrong. 3+++++++++++++++++++++++++++
Subject: More Zips in the real world... On the road to a standard, from my Thanksgiving with the families (yes, plural)... 1) My cousin is in a camera club, has been for well over a decade. They are recently learning about digital, what with the proliferation of digital cameras. They got a computer and are doing Photoshop stuff for the first time. The only way to store your projects? Zip disks, big enough for any single project, apparently. 2) My wife's brother works for a product-design firm. Every project is stored on Zip disks, big enough for any single one, apparently. Those who need the Zip are standardizing on it or have already done so, across all professions and across this great land (and others). There are almost as many (within a fraction of an order of magntidue) Zip drives in use today as there were 5.25-inch floppies when the 3.5-inch floppy began to replace it (remember, there were tons fewer PCs out there seven years ago). Ben's post was great stuff, by the way, but he made one boo-boo. He used U.S. PC sales totals and global Zip shipments. Global PC shipments this quarter will be, I'd guess, 18-20 million. Even at 15 million, 1 million OEM Zips represents <7% inclusion. 4+++++++++++++++++++++++++++
Subject: The Desktop Zip A few weeks ago I pointed out that Apple's new G3 Desktops (non-tower) would feature an internal Zip...the first ever desktop to be featured that way. There was little commentary at that time (maybe if I had gratuitously flamed someone I could have generated a couple hundred posts?) This Mac is now appearing in catalogues, as seen in the Mac Zone catalogue I received today. That slim desktop appearance with not two, but three slots being used...floppy, CD and Zip. The copy states "Available built-in 100MB Iomega Zip Drive" leaving it ambigious as to whether it is standard or an option, but the photo is with the Zip, and this nevertheless represents another milestone of sorts in the acceptance of this drive. 5+++++++++++++++++++++++++++
Subject: Millions, Installed Base and More << How can you tell from the announcement dates? Seems fuzzy to me. -Benjamin P.S. You are right about the USA IDC numbers. Used the wrong line in the spreadsheet. My apologies. Will re-run with correct lookup later. >> 9/16/97 -- 8 millionth Zip release 10/16/97 -- 9 millionth Zip release 11/12/97 -- 10 millionth Zip release Given the newfound consistentcy with this releases, I have assumed -- and yes folks this is an educated guess -- that the releases are coming when Iomega recognizes the sales (using their somewhat conservative model). If my assumption is correct, I'd say we see a pattern, at least through early November, showing >1 million Zip sales per month. Given that this is the "candy quarter", as you like to call it, I'd imagine that retail sales will be that much stronger from Nov. 12-Dec. 31. If I am right at all, then we can reasonably conclude that sales will be that much more than >1 million per month. Of course, if sales drop like a rock in January, the pace could slow. But my strong suspicion is that Zip drive prices are falling at the wholesale level. We are seeing many offers of $99 and below new drives and refurb drives (which count as sales folks, with pretty good margins to Iomega I'd guess). I think Iomega is planning to avoid a post-Xmas sales collapse by continuing to ease up on wholesale pricing... The unambiguous $99 external Zip that Kim Edwards talked about way back when will probably have taken over by the middle of 1998... He never did talk about the $79 external Zip, but I'd say we see that coming too at this point. Ben makes some really good points about the battle to become a standard and Kim and Co. are almost surely aware of all those and more. There is a narrow window into which Iomega can operate from here before the market becomes increasingly crowded (with the Sony product, the laptop LS-120, etc. etc.). Iomega is no longer the upstart, but instead the entrenched leader in hi-cap floppy drives. I'd say these milestones like 10 million Zips and 3 of the top 10 OEMs mean little, but they tell us something. In the meantime, Iomega is involved with, what, 10 of the top 10 OEMs? Compaq, Dell, IBM, Gateway, HP, Apple, Packard Bell/NEC are all top 10ers I believe. Micron is a meaningful player as is Sony... Iomega has shipped probably close to 11 million Zip drives! The milestones are nice, but as we saw from Ben's analysis (which may even be corrected by the time I post this), OEM inclusion is running <10%. If you want another nifty milestone to shoot for, how about 20% OEM inclusion? That would entail 16 million+ OEM drives next year. It would require Iomega to run flat out and require the licensees to get their collective butts in high gear -- and fast. It might well require Iomega to buy another production facility to make drives (from one of the struggling HD makers? from a suffering company like SyQuest or Nomai? who knows?). The installed base is becoming a powerful deterrent to later entrants, making Sony's announcement of the HiFD all that much more bizarre. Any one of these Zip competitors needs to get some segment of early adopters and then needs to move to another level of buying before crossing the chasm (as Geoffrey Moore puts it). SyQuest has shown with the EZFlyer, the EZ135, and probably with the SparQ, that there exists a small cadre of early adopters for just about anything that offers an interesting price-performance ratio. But in order to reach Stage 2 (not yet at the chasm), you need to get some new segment -- or at least have some compatibility benefit. SyQuest, on this measure, has blown it my making the SparQ compatible with neither the Flyer nor the SyJet. None of these drives could ever become a wide-area sneakernet platform because there has never been a critical mass established. Sony has a bigger problem in that it will be facing installed bases for the Zip, some of SyQuest's products and even the LS-120, which probably has the most accidental installed base and therefore is less formidable (i.e. few people demanded the LS-120 -- other than Warren :-) -- it more often just showed up on their machine; they are less likely to have started moving disks amongst themselves). Sony has a dilemma on many fronts: * the product isn't here -- Iomega will have 15-20 million Zips before Sony gets a product out * the external will likely be expensive and have no demand pull -- if they even offer it, selling backward compatibility in an external is a non-starter; at $200, it's not going to steal many sales from a $99 Zip, especially when $200 could buy you a 1GB SparQ * the internal will likely be met with the chicken-and-egg problem -- where are the users? the OEMs will say... look at LS-120, promising OEM deals and producing nearly none. only when the cost is irrelevant -- high end laptops and desktops -- can the additional expense of the nearly useless 120MB compatibility be sold, so far * the internal will likely be met with the "why help Sony problem" -- see LS-120 and Compaq * the internal will likely be met at Sony with "Compaq/LS-120 syndrome" -- why didn't the world's No. 1 PC maker use its might to establish the LS-120, a drive it had "owneship in", by making it standard. how will Sony, a relative bit player compared to Compaq fare any better? In sum, I'd love to hear the 11 millionth Zip announcement in early December and the 12 millionth in late December, but I'm not overwhelmingly concerned right now. Without competitors, with prices falling on Zip drives, with marketing dollars encouraging purchases of externals and demand for internals, with Dell and Gateway obviously knowing how strong demand for Zip is (at least in Dell's Dimension line, not the corporate Optiplex yet), things are looking very positive. Nomai must be made to disappear. Sony must release its product and have it fail to seize the day. Iomega must keeping getting more OEM penetration, more production and lower pricing. These are some of the key roadblocks on Zip's quest for standardization (whether that means 50% OEM penetration or 90%). _______________________________ End Report. Posts covered through 9:00pm ET 12/1/97. _______________________________
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