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Tuesday, January 20, 1998 Friday, Iomega closed at $12 1/16, down $1/16 (-0.52%). THIS WEEKEND''S AND HOLIDAY RECAP: An extended weekend brought no shortage of posts. A market monitor's approval of IOM stock caused some stir on the board as did Circuit City and the "retiring" of the Zip. Other posters wondered about the market's ability to "self-reference," but the subject which swept interest on Monday was the news that Iomega will be advertising during the Superbowl this Sunday. Speculation on cost, reasoning and strategy ran rampant (as did biased cheering for either Denver or Green Bay). 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++ DaleVelk on a new tech support service from Iomega -- via the Web.
Recap written and posts compiled by TMF Weekly. _______________________________ And now, the Best of the Board...Started 9:01pm ET 1/15/98. 1+++++++++++++++++++++++++++
Subject: Surf & Call Web Tech Support Coming to Iomega Very cool technical support web-application coming at Iomega. It appears that in the near future Iomega will have "surf & call" technical support available for some customers (probably on a trial basis at first). The way this works is that you use your microphone and sound card and some form of I-phone software (this may simply run as a Java applet) you hit a button on the Iomega Web page and you are talking with an Iomega technical support person. 2+++++++++++++++++++++++++++
Subject: CC Questios for KE << So, my feeling is, is that KE is eager and willing to answer many of the questions we would like to see answered. >> So, let's get a thread started for questions we'd like answered. PLEASE let's keep this rational and ask questions that we have a chance of getting answered. They are not going to give away their business plan and it only worsens our reputation to expect them to. My Q's 1) What is the status of the Zip drive licensees? Production ramp occuring yet? Size? 2) When will laptop Zip ramp and be available in large quantities at retail? 3) Is Jaz 2 shipping yet? 4) What is the status of clik!? Has there been anything significant in terms of delays since COMDEX, or are the time frames for availability given at COMDEX still reasonable? 5) I, for one, would like to know how well Ditto Max Pro (the 7 and 10Gig versions) has been accepted. They give Zip/Jaz totals, and Ditto numbers, but previously have not given much detail into Ditto. I know it's a small portion of rev's, but it would be nice to see them totally own another market. 6) Nintendo still interests me. There are a lot of other much more important questions, but the Nintendo issue would be a nice one to lay to rest either way. 7) Anything more they are able to say on the status of Nomai? I know there are more and better questions out there amongst you all. Let's give it a shot. 3+++++++++++++++++++++++++++
Subject: Recordit Story Hey, Folks! I sharing this story, because as IOM shareholders, I think this tells a lot. Background: A while back, I was finally able to get my hands on a Recordit CD from one of the mailorder houses. I was anxious to have this, as I liked the idea of recording a mix of my favorite tunes onto a Zip disk. Unfortunately, no matter what I tried, there was just no way I could get it to work. A stroke of luck lead me to contact with the engineer at Iomega who developed the software, and he was very concerned that it wasn't working. He sent me an updated version of the software to try, but that didn't work either. The problem was the software simply didn't recognize the CD drive in my PowerTower. Doug, the engineer, called me soon after with an idea. He asked me if I would be willing to trade the CD drive in my computer for a new one. It was his contention that the drives in PowerTowers had some kind of flukey code, and they were unable to get their hands on one to test. I told them that sounded fine with me. I liked the idea that they would go that far, and while I would end up being able to use the software, I'd also be doing a part to help Iomega. I liked that. Conclusion: The drive came a few days ago, and I made the switch. Recordit is a flawless program that is as cool as it sounds. It records the tracks you select in about 20 seconds each. You can arrange them in any order, and the sound! Incredible. I've got 14 of my favorite songs on a Zip, and it's recorded in perfect digital quality. Doug will now use my drive to make a patch so that other PowerTower users will be able to use the software without a hitch. I think it's important to share this story, as it shows volumes about Iomega's tech support. It's funny, they kept thanking me for helping them, but I feel I'm the one who's grateful for their help. Again, I also need to point out, for those skeptics, that at no time did I ever discuss this board, my involvement with The Motley Fool. Athough, we did have a fun conversation (after discussing the swap of the drives) about being shareholders in the company. Doug told me that while they have several options in the company, he's selected to have all of his retirement monies going into IOM stock. Cool! And that's the story. : ) 4+++++++++++++++++++++++++++
Subject: Re: Iomega shrugs off challange DaleVelk pasted: << said Mr Domengeaux. "We have become the de facto standard in major industries like video, audio, graphics and software development. This makes the market what we call 'highly self-referencing', meaning a buyer is likely to purchase a unit compatible with the majority of other users to facilitate interchange of data." >>< I'm so glad Mr. Domengeaux finally put a phrase on this concept. It is too hard to keep trying to explain LOL. "Highly self-referencing" is a bit obscure but what can we do? The idea is that someone looking to buy a removable drive will see a large (overwhelming?) benefit to owning a drive like his colleagues/friends/family own. In the industries that use the Jaz drive (and before it the larger SyQuest drives), the Jaz is so ubiquitous that it would make little sense to buy another type of drive. If your publishing house has 10 Jaz drives and your clients use Jaz drives (because you do), and you need another drive do you buy a SyJet? The Jaz drive did replace the larger SyQuest drives in this market, so obviously it can be done. However, SyQuest had fractured its market by not making its drives backward compatible with each other. Some places were using SQ270s, some 210s, some 88s, etc. So if you were looking to replace your SyQuest 88 MB drive there was no natural progression to the 270 MB drive as they were not compatible. Further, the Jaz drive was a class above these drives and carried with it a better brand name. For a drive to now unseat the Jaz it would have to be a class above. It can't be about the same except a little bigger, or a little faster. I would also believe that software will have to catch up and move ahead. In other words, file sizes will have to outsize the Jaz. If file sizes make the Jaz 1 GB too small then that would push people to upgrade to the Jaz 2GB. ;-) 5+++++++++++++++++++++++++++
Subject: Re: Iomega shrugs off challange Patrick, The phrase "Highly self-referencing" really speaks to the depth of penetration Iomega feels it has gained into its target market. Geoffrey Moore in both of his books, constantly refers to the difficulty of penetrating the high tech marketplace beyond the relatively small groups of early adopters and innovators.. One of the reasons stated is the sort of "Catch 22" effect where conservatives and pragmatists (who make up the vast bulk of the marketplace) will not buy products that are not already market leaders or standards in their industry.... but until these people buy the technology, it has no hope of being the standard. These large market segments love to buy products that their peers have had success with. That is why Boeing, Nike, Microsoft, Chevron etc. are so important. There is your reference. It is why AKAI and Roland were coups. The service bureaus. On and on. Lowest price isn't so much of an issue with these groups. Service, support, bug-free, easiness of use and interface, all are more important. Let me put it this way; by getting Boeing to use Jaz, you get leverage into Airlines, engine builders, parts suppliers etc. You get an in at Lockheed, JPL, and Hughes. You also get the wild card effect of people getting together at meetings and seminars and hearing what other industries are using to be more productive. I guess the Professional Products Division doesn't waste a lot of $$ on adds at Fry's, but spends alot out in the field trying to leverage open different niches and servicing the heck out of the existing users. I still like the hot site tech support people for Jaz. That was a fine idea. Make high tech as easy and painless as possible and you can keep margins high. This also puts the issue of reliabilty to rest, as this group that is "highly self referencing" will not buy unreliable products for long.. if ever. IMO, SparQ never gets much past the propellerheads. SyJet is just overmatched by the competition and had to leverage into the Asian Banking niche; (a niche that appears to be struggling by the way.) I remember when IOMG took Jaz away from guys like MCCONATHY and ProMax, and decided to push and explore the beachheads into the corporate market. I thought IOMG was crazy and was going mass market with the Jaz. Now I see the strategy with hindsight. What an execution. Couple of stumbles, but WOW. 6+++++++++++++++++++++++++++
Subject: Re: Plug On Nightly Business Report We just got the NBR broadcast here on the West Coast at 6:55pm. The "Market Monitor" guest was Jim Dines , author of the Dines Newsletter. He was much ballyhooed for his call on the bull market last year and his early warning of a currency crisis in Asia. He has recommend that his clients get out of the market and is recommending a defensive posture including gold. He said there were three internet related stocks he liked AOL, Iomega (and one other I missed). Don't know what kind of following he has or how important NBR is to the investing public, but given the pessimism I detect at the moment, it sounded good to me. One further point, while I am at it. I bought IOM in late March ~$15. At the time of my purchase this board read much like it does today-- pessimism and frustration. The predictions of the stock dropping to $10 or $9 were even more frequent then than now, and many were calling for as low as $6. I have a profit in this stock since I first bought it so I have some difficulty accepting the bear argument. The zip was just beginning to have market impact at the time of mu purchase and I considered that old news. My reason for buying was the next product (unknown at the time, but now we know it to be Clik!). I remain confident in IOM's future and have the patience to stay with it. Patience comes easy when my investment is growing at more than 50% per annum. I have other investments that require more attention. I will let this one sit quietly and mature. 7+++++++++++++++++++++++++++
Subject: Circuit City: No Zips? Just visited my local Circuit City in Denver. Computer clerk said "we do not sell zip drives anymore. They have been replaced by the Zip+ and are $199." I said "huh?" He then repeated it to me and said he thought Iomega was going to discontinue the drive, period. No Zip drives on the shelves (No competitors either) but there were a few internals...SONY, Apple. Qustions: (1) Is this guy on crack?; (2) Was this a bad dream?;(3)Is this for this individual store or is it chain wide?;(4) Did IOM change their mind and decide to put Zips internally and Zip+ externally;(5)Am I on crack? For you skeptics the store is on S. Colorado Blvd., Denver, CO...try (303) 555-1212. Please no hate-mail. 8+++++++++++++++++++++++++++
Subject: Re: Licensee Support jobs coming online!!! (Job 7) << I think we got your point the first three times you posted. Nice post(sssss), but do we really need such an excessive amount on one single issue? >> Unfortunately the title for the posts were cut short in the message listing box. While the first part, "Licensee Support jobs coming", is identical on the subject title each of the posts contained a unique job opening. Once someone decided to read the series of posts they would have found the full title included a job number from 1 to 7. Anyway, I apologize if you thought I was posting the same information 7 times. If however you have already grown tried of the licensee issue then you will likely be hitting the "Subject ->>" key alot in the future. iomega produced approximately 8 million Zip drives in 1997. If Zip had already replaced the 1.44 floppy then 120+ million new Zip drives (internal and external) would be needed next year. That represents a growth of 15x. Furthermore, the 120+ million/year target number is growing at between 15 and 20% each year. Thus, if it takes iomega 4 more years to accomplish this feat, it would require 210 - 250 million drives per year. That represents a 26x growth from 1997. iomega has stated that they have a production capacity going into 1998 of 14 million drives. Yet the 1998 market for Zip type drives is estimated by DataQuest to be 21.4 million drives. Using the CD-ROM market acceptence model would also project over 20 million drives in 1998. Thus, to meet the 1998 projections and to stay on path for a 20x growth, iomega must be successful in ramping the licensee's Zip drive production. P.S. I have alot of questions concerning the information in the 7 job opening (like: What does "Maintain MPI's and MMI's" mean?). Hopefully others can disect the information in the job opening and explain the terms. 9++++++++++++++++++++++++++
Subject: Re: Circuit City: No Zips? Manilla confused and dazed, slumping at the keyboard with tears swelling up pounds out: <<Just visited my local Circuit City in Denver. Computer clerk said "we do not sell zip drives anymore. They have been replaced by the Zip+ and are $199." I said "huh?" He then repeated it to me and said he thought Iomega was going to discontinue the drive, period. No Zip drives on the shelves (No competitors either) but there were a few internals...SONY, Apple. Qustions: (1) Is this guy on crack?; (2) Was this a bad dream?;(3)Is this for this individual store or is it chain wide?;(4) Did IOM change their mind and decide to put Zips internally and Zip+ externally;(5)Am I on crack?>> None of your options (2)-(4) are correct. Hopefully neither (1) nor (5) is correct. It does appear based on several other Circuit City posts on various forums that the removal of the plain vanilla external Zip drives is a chain wide decision on the part of Circuit City. However, this is not bad news at all. Have you ever seen the Circuit City commerical with the little boy who bought a Walkman and then within a month finds it advertised for less at another store? The sharp young lad showes the Ad to a store clerk who promptly refunds the difference to the boy. For the average consumer who does not understand the use of MAP (Minimum Advertised Price) by retailers this sounds like a can't lose policy. MAP prevents anyone from running an advertisement for a lower price. Once you get in the store they can sell it for less than the MAP but they can't advertise the lower price. Therefore, if a product is on MAP then the only time Circuit City would have to refund money would be when the manufacturer (for example: iomega) lowered the MAP. In this case, the manufacturer would be billed by Circuit City for those refunds under the channel protection provisions of the MAP policy. Thus, Circuit City is safe. Since iomega took the plain vanilla Zips off MAP, we have seen reports of lots of stores offering Zip drives for $99 or less. Therefore, every plain vanilla Zip drive sold by Circuit City over the last 3 months could have received a refund for the difference between the sales price and the best advertised price. Once you pull your product off MAP Circuit City will dump it. The fact that Circuit City believes the Zip is so popular to continue to carry the Zip Plus (which is on MAP) is very good news. It is also very good business to not even carry the "commodity" priced version (plain Zip) if your main goal is to sell the upscale version (Zip Plus). The FUD statement by the clerk was most likely his creative spin to keep you from going to another store to purchase what he would like you to believe is a "soon to be obsolete" plain Zip. I hope this explaination keeps you from pursueing option (5) ;-) 10++++++++++++++++++++++++++
Subject: Zip and Jaz in Allentown, PA As some of you old-time IOMG followers know, my wife works for a company that does computerized composition of books. They typeset( by computer) many of the best seller novels, and do all kinds of books including cookbooks. Their customers are the major NYC publishing firms. They used to receive digital manuscripts on zipped(PC) or stuffed(Mac) floppies or syquest platters(mostly 44meg). Lately, however, more and more work is coming in on Zips to the point where her company is now Zip'ed in every department. They see no old Syquest platters(44, 88, 200meg) coming in at all anymore, and several big customers now specify that completed work to be sent back to them *only* on Zip disks. That's right, Zip disks only for delivery to several major NYC publishing houses. They have not had any requests for work to be submitted on Syjets, Sparqs, etc. Also, for huge jobs like Tax guides, Jaz plattters are now showing up, so her department is Jazed as well. :) The department buys zip disks in 10packs all the time, and also buys multi-packs of Jaz platters, although not as frequently as Zip disks. To her knowledge, all the Zip and Jaz drives and every disk have performed flawlessly. :) 11++++++++++++++++++++++++++
Subject: IOM & Super Bowl Iomega will be among the 3 dozen advertisers in Super Bowl XXXII. They will be running a :30 spot in the late 3rd or early 4th quarter of the game. source: Ad Age Jan. 19, 1998 12++++++++++++++++++++++++++
Subject: Re: Deflation in the late 90s. << Iomega WILL HAVE TO CUT prices. Look around you. Your cars, computers, homes, furniture, and food will be cut back. >> There is a potential for defaltion here in the states, but you are being much to broad in choosing the deflating categories. The main reason for a forced price cut is foreign competition. With a strong dollar, foreign goods become relatively less expensive than American goods. Automobiles could be subject to this pricing pressure, but from where? Japan has been in its recession for several years, and the Yen has held fairly stable to the dollar, so I don't see pressure from there. Home sales, a very regional market, are not subject to the deflation you are referring to. I Just heard a report last week that said home sales are booming. Prices usually do not fall during such a boom. Computers are subject to this pricing pressure because they are basically transparent to the consumer. Functionally speaking, a Sony works like a Dell; a Sony is a perfect substitute for a Dell. Fortunatley, Dell is enjoying lower component costs, so they can lower their prices and still keep a decent margin. Iomega does face a threat from competitors, but not as much as Dell from Sony. An LS-120 is not a perfect substitute for a Zip because even though it serves the same purpose, an LS-120 is not Zip compatitble. In order to prevent the competition from taking Zip sales, Iomega needs to ensure that consumers understand the importance of Zip compatibility. They can do this through advertising. An uninformed consumer is more easily swayed by price alone, than one that is shopping for a "Zip." Bottom line wise, Iomega should see lower component cost and be able to price their products competitively. On the other hand, Iomega's competition has been lowering their prices for quite some time, but Zip sales have not been dented. So, it does not nescessarily follow that "Iomega WILL HAVE TO CUT prices." << Look at the price of gold. >> Gold is not the hot, safe haven that is was in the 70s. The US Dollar has replaced it as such, which is in part, why the dollar has strengthened versus some foreign currencies. 13++++++++++++++++++++++++++
Subject: Re: IOM & Super Bowl TMF Jeanie wrote: << Now for the cost of airtime -- could one of our accounting Fools address the liklihood (or allowability) of Iomega expensing a January charge in December? My guess is since it gets incurred in Fiscal 98 they probably have to expense it in Q1, but I don't know for sure >> They could probably put it in either the 1Q or the 4Q or split it up. My guess is that KE will use the cost to cut down the big 4Q, rather than hurt the seasonally slower 1Q. All will be expensed in the 4Q. $0.18 for the 4Q then $0.14 for the 1Q doesn't look as good as $0.16 then $0.16 to the Wise. RICORNFELD wrote: << In figuring how much of earnings the Super Bowl spot represents, don't forget to figure in taxes. If the dollar amount is $1.3 million, it will come to about a third of a cent per share after taxes. >> True, good point. However, the $1.3 MM is just the cost of the time. I'm sure Iomega will be spending maybe 1-3X that to produce the spot! The payoff for Super Bowl adds are to make the papers the next day. Re-running the cargo plane spot is not an option. If anyone knows what it costs to produce a top of the line 30 second spot I'd love to hear it; I personally have no idea other than the previous guess ;-) What if the spot is not one 30 sec. spot but a combo; 15 sec for Zip inside and 15 sec for Clik!? I would think that type of commercial would cost more than just a one topic 30 sec. spot. _______________________________ End Report. Posts covered through 9:00pm ET 1/19/98. _______________________________
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