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Tuesday, December 16, 1997 Monday, Iomega closed at $27 1/2, up $1 1/16 (+4.02%). TODAY'S RECAP: Two rumors regarding Iomega products held sway over the Iomega message board yesterday -- the 200MB Zip2 drive and the availability of IOM's new clik! drive and disks. Other topics that posters debated include Jaz vs. SparQ disks, advertisements featuring Iomega and Iomega's current status and 4Q earnings potential. 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++ MarkRogo briefly argues for his theory that Jaz carts costs less to make
than SparQ carts.
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 12/14/97. 1+++++++++++++++++++++++++++
Subject: Re: ORB Competetion? << "Jaz carts cost less than SparQ carts to make." Mark, can you elaborate on this? >> Yes, I can elaborate... Let me start with this: If SparQ cartridges use only one platter then *I am wrong*. I was thinking (sort of), that because Iomega buys in such greater volume than SyQuest, that it buys its platters for much less, therefore allowing Jaz carts to be cheaper than SparQ carts. The assembly of these things is so trivial that, if anything, Iomega has an advantage -- but it's irrelevant. However, if SparQ only uses one platter to Jaz's two, then Jaz carts may cost more to make. In fact, it makes sense (almost) for Iomega to sell single-platter 1GB carts for Jaz2, at lower prices than Jaz1 carts. The reason we won't see this is that it would create massive confusion. So, I dunno, is SparQ a single or dual platter? 2+++++++++++++++++++++++++++
Subject: Re: Cutting Edge Computer <<.anyway, I look forward to the day that these small mom and pop places can get as many Zips as they need to serve their customers. >> A look throught the computer shopper will ease your concerns I think. Almost every no-name clone maker now offers zip as an option. All of them put together should add up to a significant amount of drives. As KE stated it is also very encouraging from the standpoint of acceptance. This was not the case 6 months ago. Hopefully in another year those options will become standards. 3+++++++++++++++++++++++++++
Subject: Zip2 Rumor From O'Grady's PowerBook Page: http://www.ogrady.com/default.stm Apple PowerBook News and More! << Hot off the heals of the debut of the 2 GB Iomega Jaz 2 drive, rumors are flying that Zip 2 isn't far behind. The new drive is rumored to hold up to 200 MB of data and have 25-30% faster read and write times. MacWarehouse is blowing out 100 MB Zip1 Drives for only US$119.95 in their Online Advantage eNewsletter. You must ask for item SH1419. >> 4+++++++++++++++++++++++++++
Subject: Re: Zip2 Rumor Why would the company release Zip2 so soon after they release Zip Plus?? Dunno about Zip2 rel. to ZipPlus, but a lot has changed since the last time (a year ago?) that Zip2 rumors surfaced, first and foremost the price dropping dramatically on the Zip100 to around $100. This leaves some breathing space in pricing for a ``premium'' Zip drive of some sort. If Zip200 (which I figure is the more likely name for it) sells for, say, $250 and accepts Zip100 disks it would represent a step up for the consumer, who would still have the option of buying a widely accepted smaller drive for much less. 5+++++++++++++++++++++++++++
Subject: The rally today... For what it's worth: The rally occurred very late in the day. Iomega broke into positive territory sometime in the last hour. It then traded sideways for awhile before breaking out in the closing minutes to gain a point and a fraction. It was, all in all, still not a great day for tech stocks... Some were up (Intel, Jabil), others were down (Compaq, Dell). It was, by relative measure, a great day for Iomega. I have no idea if this is a harbinger of good things to come. I have no idea if we will see a split rally, a Santa Claus rally, a January Effect rally, or a Rally X (tee hee). I do know that Iomega appears to be shipping and selling huge quantities of product this quarter at retail. I do know that OEM shipments are up again but that getting new SKUs retains an eneven performance record. I do know that Jaz sales are strong, but would be stronger without the presence of SyQuest's SyJet and SparQ products. I do know that tape drive sales are insignifcant in the storage market right now and will increasingly mean little to Iomega's ever-growing top line. I do know that Zip drives are selling as low as $79 (or so) refurbished and $99 (or so) new and that, for some reason, at least some people are shelling out $199 for the overpriced Zip Plus (let them do so if they wish). I suspect, given the track record to date, that Iomega is on pace to meet or beat earnings estimates again this quarter (Iomega Corp. earnings estimate lik). Those estimates call for .30. So I'll "boldly" predict .33. This is what Ben has called the "candy quarter" and, for computer retailing, it's that and more. It's also the quarter in which the consumer market has been forever transformed to a predominantly $1000 or so market, from the previous $2000 or so level. Sure, the high-end boxes are still selling, but the average Joe and Jane are realizing that a box that costs $1000 and will be obsolete in 2 years is better than one than costs $2000 and will be obsolete in 2 1/2 years. Two interesting phenomena here affect Iomega: 1) Will the lower "box costs" result in more free $$$ to spend on peripherals? If so, that bodes well for the Zip. I suspect we'll see retail Zips as low as $69 by this time next year. 2) Will those low-end boxes find it in their hearts (and drive bays) to include Zip drives. When price is king, that's hard to do. The much-ballyhooed (here at least) Compaq 4814 with Zip is a model that sits above the low end. It adds additional price and a couple of features. It also brings Compaq higher margins than the 4805. Compaq, for its own part, can't or won't price add-on internal Zips at cost + a fixed margin percentage -- they grow the margin percentage instead. Dell, which doesn't play in the $1000 PC space, can price at a fixed margin. Aside: What I mean is this... Say Compaq makes a 10% margin on the 4805. When they sell the 4814, they want a 12% margin. When they add a Zip, for $45 internal cost (made up number), they add more than $45+10% to the price. They even add more than $45+12%. They are using the Zip and whatever other features as an excuse to boost margins. That's business, but it means the consumer ends up paying more like $100 for the Zip, rather than $50. Dell often uses a different model where add-ons bring a fixed margin percentage. Today, on Zips, they appear to be charging far in excess of what is needed, but that may not always be true. If and when Dell lowers the Zip's price as an add-on, we'll know Iomega gave them a reason to or Dell decided to effectively make the Zip a standard option. Pricing pressure is going to be critical in 1998 for Iomega for a lot of reasons. One of those is to continue slaughtering the present and future pretenders to the throne. Another is the need to keep growing the base at ever faster rates and making those pretenders that much less relevant. Is the rally on? I don't know. Are the fundamentals in place at Iomega? It sure seems that way. 6+++++++++++++++++++++++++++
Subject: Thatcher Tyler I spoke with this nice person today -- (801)778-3585. Apparently we are in Quiet period regarding earnings etc. I asked about stock buy back and he said I will have to wait until conf. call. Then, I asked about ZIP 200MB He confirmed again they DO have a working model in the shop but "why introduce it?" , Sony is not a threat they do not even have a product yet. Primary goal $99 Retail Zip in as many boxes as possible. Also stated to me the Clik is still on sched. for late 2nd early 3rd qtr. ship. He bragged about the doubling of institutional ownership. He stated also "People always call when the stock goes down not when it goes up." Oh yeah, there has been no bad news on their side, he suspected the drop in IOM was from Asia, the weak tech sector, especially the storage component, and IOM's high Beta. _______________________________ End Report. Posts covered through 9:00pm ET 12/15/97. _______________________________
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