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Friday, December 5 1997 Thursday, Iomega closed at $30 13/16, down $11/16 (-2.18%). TODAY'S RECAP: For a number of different reasons, the Iomega board might have been called the SyQuest board yesterday. Most of the substantive posts (and almost all of the "empty" ones) focused on SyQuest, the new SparQ drive, Zip and Jaz vulnerability and more. Some posters brought in Nomai and the LS-120 into the day's pot, but the emphasis remained on SyQuest and Iomega as competitors. 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++ Duuwhee on CNET's reviews of Zip and LS-120 drives.
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 12/3/97. 1+++++++++++++++++++++++++++
Subject: Re: "Dog Slow" Warren, The positive review of the LS-120 is quite old. You should know this because it was hashed about endlessly after you brought it to the forefront of our attention. The technological sleight of hand that inspired the raves was greeted with disdain by most of the board. The "Dog Slow" review is new, and as such, could be interpreted as superceding previous reviews; though, I expect that you will continue to cite the "throughput" review, as it serves your objective better. FYI The site maintains its <<Recommended>> status for ZIP and JAZ. No other options given. Considered in its entirety, the contents of the site are extremely and unequivocally favorable to Iomega products, and less than flattering to the LS-120... vacillating between the nebulous"high throughput" and the descriptive"Dog Slow". 2+++++++++++++++++++++++++++
Subject: US Patent 5,694,600 One of three patents issued to Iomega this week. My comments follow: << Methods and apparatus for booting a computer having a removable media disk drive Inventors: Khenson; Eugene, Stephens; Ronald J. Filed: February 9, 1996 Abstract: Method and apparatus are disclosed for booting a computer from a removable media disk drive. The method and apparatus are suited to an environment in which the removable media disk drive is configured as the first fixed drive in the computer. The removable media drive responds to testing during the power-up as if it contains media, whether or not media is present. Thus, the removable media drive is recognized by the BIOS. Additionally, a substitute master boot record is provided to the computer from a Read-Only Memory device contained on the removable media drive in response to a request for the master boot record of the media. Control of the boot sequence is thereby gained. The substitute master boot record loads a boot program that allows booting from any media or physical disk drive independent of the CMOS configuration. >> The full patent is not available yet at the IBM site. I think this patent is HUGE, not for what it gives Iomega, but for what it tells us about Iomega. I may be way off base here, but I read this abstract as saying that Iomega developed a way to "trick" a computer into recognizing and/or bypassing a Zip drive as the a: drive. Note that this application was submitted in early 1996, well before any of the BIOS manufacturers announced they were working on a Zip-aware BIOS. Now that the Zip-aware BIOS is reality, this patent doesn't offer as much. But it appears that Iomega was prepared to go it alone -- just add another chip if needed. A second (possible) application for this patent may be in conjunction with Norton Zip Rescue. I'm way outside of my expertise here, so comments from those knowledgable in how NZR works would be appreciated. 3+++++++++++++++++++++++++++
Subject: 50,000 SparQ's=Inferno? I think Iomega will weather this well. Call it pre-pubescent pique if you wish. 10 or so SYQT supporters show up and trumpet the projected sale of 50,000 drives and 90,000 disks this Quarter... telling us to be afraid, to sell yada, yada, ho hum, yada. (For some reason, only the responses by IOM bulls are deemed juvenile, I dunno how that works) This comes on the heels of the vaunted Vestax SyJet announcement or "Much ado about next to nothing" Rather than balance the over reaching exuberance, I see someone actually fanning the flames (hyping if you will) by comparing the situation at SYQT today with one of the greatest turn around stock stories of our era; IOM. PuhLeeez. Methinks someone went long SYQT.... One of the SYQT fans actually thought SyQuest was producing 50,000 SparQ drives WEEKLY.... good thing he didn't make that mistake as a IOM bull about JAZ. OK. How much does this hurt Jaz? I don't think this can be quantified yet. SparQ isn't aimed at the high end quality niche Jaz and SyJet compete in... by SyQuests own admission. If they are stealing sales from ZIP at a rate of 50,000 a Q.... why worry. What is the bottom line to SYQT? The SparQ price point of 1GB for $199 says "cheap drive" and/or "thin margins". The price point on the SyJet of $299 with two carts says competitive pressure. Iomega shareholders shouldn't worry until SYQT demonstrates they can stop losing money... and by that time IOM's lead in the marketplace will be even more insurmountable. Here is a scenario that would allow for SYQT to overtake IOM: Sony HiFD displaces ZIP overcoming IOM's momentum and installed base. clik! sucks and languishes as vaporware until flash prices lower and render it useless. Jaz is forced to compete against SyJet and SparQ without the marketing $$$ ZIP provides. Margins tighten. Cart failure causes mass defections and Jaz loses the "Quality Standard" niche. IOM is left with Ditto Max as its flagship product, and is decimated by Terastor. Stock price plunges to $1.0625 4+++++++++++++++++++++++++++
Subject: Nomai clues A little over one week ago, I posted the following: << Well the hearing in France will begin this Friday. So how is Nomai stock holding up? It dropped another 7% today alone. It was at 170 or so back in September when they were pumping out press releases about their XHD. Today they closed at 92. I hope the French stock market is a good indication of the outcome of the upcoming hearing. >> One week later (today) Nomai closed at 130. Thats up 40% in one week. My gut tells me that either Nomai has presented a very "good" defense in Paris (giving investors confidence) or they have already received a favorable ruling. Other posibilities obsviously exist. IMO even if Nomai were to "win" this round the battle is far from over. A major issue is the fact that this trail is not about the patents. That will be the trail that really counts. Furthermore, now that I have seen the Nomai product I do not believe they will sell very many. They appear cheap and therefore, dangerous. Thus, I have not reduced my IOM holdings in the least because of concern of the outcome of this first round. 5+++++++++++++++++++++++++++
Subject: Re: Syqt Production HYPE replying to RB61's post about obstacles to SyQuest increasing production made the analogy to Iomega in early 1995 as Zip was about to be launched. (Original posts copied below). I don't believe the comparison is at all valid. Looking at IOM(G)'s 1994 Annual Report I see the following: (as of 12/31/94 in thousands) Cash and cash equivalents 16861 Temporary investments 2932 Trade receivables (net) 18892 Inventories 17318 Deferred tax assets 477 Other current assets 4077 Total current assets 60557 Fixed assets less depr. 15276 Total assets 75833 Total current liabilities 25739 So, Iomega had plenty of cash on hand, and did not have any problems paying bills. Manpower was 886, down from 1077 a year earlier -- a significant drop but some was due to the sale of its thin film head development operations and discontinuance of its Floptical development operations. Granted, Iomega had been unprofitable for the preceding two years, but by no means was the company near bankruptcy. Quoting from the management discussion of liquidity and financial resources -- "The Company expects net cash flows from operating and investing activities in 1995 to be negative. The Company believes its current cash and temporary investments, together with funds expected to be generated from operations, will be sufficient to satisfy its cash needs through 1995. However, this will depend on the success of the new Zip product line, as well as on the actual level of expenditures incurred by the Company for capital equipment and working capital required to support unannounced new products that are planned to start shipping in the last half of 1995. If demand for the Company's new products exceed expectations, the Company may need to obtain working capital from financial institutions or other funding sources." No evidence of any significant concern by the management here. Perhaps, you were thinking of the situation at the end of 1995, when Iomega had but 1 million in cash and an overdraft line of credit after the launch of Jaz. << While many of the issues you point to above are legitimate, there is a very interesting aspect to this situation that you have overlooked, which is that the series of concerns you listed above, could have, just as appropriately, been applied to Iomega in the Spring of 1995, when it first introduced the Zip!! And, of course, at that time it was SyQuest that was the (compared with Iomega) financially healthy company, with the products end users preferred. And before various participants jump to any conclusions, I am not saying this necessarily means SyQuest will succeed in its effort to resurrect itself. But I am trying to make the point that because of Iomega's history, in this forum above all others, participants should recognize that the obstacles you cited are far from insurmountable. In addition, notwithstanding all the catcalls and derisive remarks (mostly from the "juvenile" gallery) about the 50,000 quantity of SparQs cited in the release, as I read it, this suggests that SyQuest's initial production capacity is not less than 300K units, and very likely near 400K units, annually. If that strikes anyone as inconsequential, consider the following. First, it probably exceeds Iomega's initial capacity when they introduced the Zip drive. And second, given that Iomega's products now account for 80%+ of the removable storage market, the sale of SparQs, SyJets and EZ Flyers, reduces the growth that Iomega would have otherwise experienced. While that effect is undoubtedly quite modest, at present, it is something that should not be cavalierly dismissed. Indeed, Iomega's own (recent) history serves as concrete evidence that it would be foolish to disregard the possibility of SyQuest restoring itself, and thereby, once again becoming a strong competitor. >> 6+++++++++++++++++++++++++++
Subject: Jaz pricing - what would you do? In the current PC World there is a full page Fujitsu ad that shows a Jaz cartridge at the top with a large $100 price tag and below reads: "Is this Jaz or the hustle?" They then state that once you get past the cute name and trendy packaging the only left for Jaz users is a thinner wallet. Similarly, Syquest has aggressively advertised the price difference between Jaz and SparQ and has reached, what used to be, the magic price point of $199 for the SparQ (and offered the $33 cartridge). If further success with this product follows this morning's release of brisk sales how would you suggest Iomega respond? It is possible that if this proves to be reasonably reliable product that computer users looking for easy, relatively fast back-up will be tempted (as cheap as tape they could say). Let's assume SYQT can obtain credit/funds to ramp to higher volume and they don't have 100 percent defective cartridges as has been suggested. What should Iomega do? 1. No response is needed. Stress quality, reliability, future compatibility. Rely on marketing, etc. 2. Lower price of Jaz1 drive. What would happen to SparQ sales if the price of the Jaz1 external were lowered to $199 or $249 or $299 with $50 rebate. Does it seem important for Iomega to succeed with Jaz1 to such a degree that the success would preclude a competitive product from providing substantial capital for that company that would facilitate further ramping of that product or others. In other words, would a preemptive strike ultimately be least costly, despite given up some margins .% at least temporarily. 3. Lower Jaz1 cartridge prices to better compete with competition. $49 anyone. 4. Do both 2 and 3. 5. Develop lower priced product. 6. Buy competitior. I would be disappointed if Iomega's management hasn't carefully tested the SparQ, estimated what it cost to build and sell, estimated level of ramp and, depending on their findings, determined whether or not a response is needed and if so, what it will be. I personally would prefer hard ball as soon as there is any indication a response may be needed. As in most sports as in physics, momentum is easiest to stop before it begins. And besides, if Jaz prices come down I can afford one. _______________________________ End Report. Posts covered through 9:00pm ET 12/4/97. _______________________________
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