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Wednesday, December 17, 1997 Tuesday, Iomega closed at $26 15/16, down $9/16 (-2.05%). TODAY'S RECAP: While topics such as the stock split, a trip the Penang plant, the future of the Internet and computer inclusion in households appeared on the Iomega messge board yesterday, the debate over Kim Edwards's selling of shares -- filed for in November -- was the most heavily discussed. Some questioned the impact, others the significance, while still others wondered about the reason for this becoming "news" in December. 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 Turk posts a Meeker quote about "two computers in every pot."
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 12/15/97. 1+++++++++++++++++++++++++++
Subject: Mary Meeker Mary Meeker is Morgan Stanley's PC and Internet analyst. In a Fortune interview, she had this to say about computer sales going forward. Extrapolate out, as you wish, its significance to Iomega. . . << Meeker: The Internet is driving the growth of the entire infotech industry. I have never felt more comfortable doing five-year financial models for the companies I cover. We used to be so worried about when the PC industry was going to saturate. The rate of growth may slow, but now with the Internet, why shouldn't we get households buying two PCs per year? >> 2+++++++++++++++++++++++++++
Subject: Re: split and shorts << IOM said they were splitting the shares in order for them to have more stock available to give employees in the form of options and payroll. By splitting the shares, they double the number of shares that are in the treasury coffers, and the number of shares that are authorized but yet unissued. >> If IOM is typical of fast-growing, high-tech companies in any regard at all, one of the company's biggest challenges is to recruit enough skilled and professional employees to keep up with the skyrocketing growth. The industry normally does this by maintaining competitive salary and benefit packages and by offering new employees a piece of the action in the form of Incentive Stock Options, usually granted on a vesting schedule over a period of four or five years. No slight-of-hand is intended by the division of shares allocated for this purpose; the point is to offer each new employee a "fixed" number of ISOs tailored to his or her salary grade or expected contribution to the company. Companies tend to be generous with these perks during their pre-public, formative phases, and less so after the shares have earned acknowledged market value and liquidity and when the expectations of public shareholders must also be weighed. Even then, the realities of the competitive recruiting market suggest that a newly minted engineer relocating her family to someplace in remotest Utah will require, say, a thousand shares in ISOs where an offer of 500 shares would not cut it. Rather than come back and ask us to approve a further dilution by issuing more shares for this purpose, management has chosen to double the number of shares available via the stock split. A non-dilutive means to attract and keep high-calibre employees who will fuel our further growth is a very Good Thing. 3+++++++++++++++++++++++++++
Subject: Lehman's SE Asia Plant Tours It appears that Lehman Bros visited IOM's Penang plant. No coverage yet, no comments on what was seen but at least some interest. More to come? http://www.lehman.com/Research/pdf/28/01/15.pdf 4+++++++++++++++++++++++++++
Subject: Re: Insider Selling << Obviously, this old and repeated news spooked some uninformed investors today. >> According to Dow Jones, this news is in accordance with an SEC filing yesterday.. While related to the intention to sell shares, which was disclosed last month, the actual selling of the shares is not old, but new. When the CEO sells 1/3 of his shares, it is news, like it or not. We did not know that Edwards was going to go through with his sale. I don't believe he had any obligation to sell merely because he announced he might do so (feel free to correct me if I am wrong on the interpretation of the "Intention to sell" filing). The more important issue, other than mindless press bashing, is to ask, "Is this relevant?" With that question in mind, one would then turn to the method of compensation that Iomega uses, which is heavy on the use of stock options, to see what it is that is coming down the pike to him. 5+++++++++++++++++++++++++++
Subject: Re: Insider Selling/Dunn/KE/trust info DrDuke: I don't know where you are getting your figures("32% of his holdings"). To my knowledge KE has only sold shares once in 4 years. His intentions were publically announced in November of this year. Without looking it up I believe he owns around 2,000,000 plus shares which includes options. Therefore his recent selling would be in the neighborhood of 15% or less. Futhermore, I am sure he his about to be annointed with many more shares not counting the upcoming split. We will probably see sales by Dunn (COB) on a regular basis-about every 3 months. This is due to the requirements of his various trusts. Typically Charitable Remainder trusts - Dunn has at least one - are valued once a year(in the beginning-first business day) and paid out quarterly( your choices are made at "set up" and they can be annual,semi-annual, or quarterly(this can be a fiscal year rather than calendar). The primary advantage is to avoid paying taxes in a lump sum. Example: If your cost basis on Iomega was say $1.00 per share, you owned 15,000,000 million shares -- all in a long term basis, and you desired to sell them all at $25, your Uncle Same tax would be $72,000,000. However, if you set up a Charitable Remainder Trust, and you elected a 7% return(your initial and only choices are 5%-10% which you cannot change once elected) your quarterly payments assuming first business day gross value is 15m*$25*.07/4=6,562,500. His quarterly net after Federal tax would be 5,250,000(Would actually be more because he has some cost basis.) His total tax paid for the entire year would be 5,250,000(Wouldn't be quite this much becuase he has some cost basis $1/share.) Of course Mr. Dunn a believer in IO is most likely only going to sell enough shares to meet his percentage payout needs. Regardless, once the stock is in the trust he can sell and buy all the shares in any company he wants(assuming he his the trustee) and his yearly tax obligation will always be based on 7%(my example) of the gross value at beginning of his trust year. Therefore a second advantage of the trust is the frequency of trading you can do without incurring huge tax payouts during the year. You still pay long or short term capital gains taxes on the payout (worst tax first). A third advantage of the trust is you get an immediate charitable contribution deduction on your current income taxes based on the total value of stock moved into the trust. (You don't have to sell anything to get this, becauses you have made the contribution once you physically moved the stock into the trust.) The amount of contribution you receive decreases with the amount of percentage payout you initially elect. In otherwords you would get the maximum amount of deductible contribution by electing the 5% payout and the least electing the 10%. If you and your spouse are the income recipients, upon the death of the last beneficiary the principal of the trust is paid to the named charitable organizations that you have elected. One flexiblity here is you can change your charitable designations as often as you wish. You cannot encumber this trust and the government frowns if you (trustee) would purchase stock on margin, short the stock, or play options. As trustee your goal is to build up the principle value of the stock thus increasing your payouts. I regret not posting this a long time ago, because Dunn has taken some flak on this board that I feel was not justified. In fact Dunn is the epitomy of holding long term. This man held a dog for 10 years because he had a vision. How many of us could do that. When you take your IO fortune you should thank him first and then KE. _______________________________ End Report. Posts covered through 9:00pm ET 12/16/97. _______________________________
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