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Tuesday, February 10, 1998 Monday, Iomega closed at $10 1/16, down $1/8. TODAY'S RECAP: The Iomega message board continued to work with the Floppy Replacement model proposed by ~Janovsky1~ yesterday, but it also dealt with a few important news releases (one late in the day). These included legal rulings against Boeder, a company involved with selling Nomai disks, as well as a class-action lawsuit against Iomega and "certain directors and officers" for misleading stock purchasers between 22 September 1997 and 22 January 1998. 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++ NovW address the question of Iomega's competition.
Recap written and posts compiled by TMF Weekly. _______________________________ And now, the Best of the Board...Started 9:00pm ET 2/8/98. 1+++++++++++++++++++++++++++
Subject: Ad Axiom (Was Re: Value Line) Holloway3 wisely stated: << ... If the competition had a significant fraction of the market, then a comparison ad might make sense for Iomega. But I think it is an old axiom in advertising that you should not mention the competition's name in most cases, unless you are the underdog and trying to catch up. ... >> But, but, but, .... NOWADAYS, almost everyone says Iomega got competitions. Even my mother-in-law may tell me that. The waiters in the restaurant have told me that. Real competition? Probably not. Perceived competitions? Maybe yes. So, it may not be wise for Iomega NOW to continue not to address the issue of competition, since almost everyone else thinks there is. Not mentioning anything about competition by Iomega NOW would make the public think that Iomega products underperform competition's. Almost everyone perceives Iomega got competitions. But at the same time, they may not know what those competitions are by NAMES. True, Iomega would give competitions free advertising if mentioning them by NAMES. So, Iomega shouldn't do that. However, Iomega should and could address why and how Iomega products are superior than any competitions (not just the old 1.44MB floppies) without addressing any competitions by NAMES. And this could be easily done. If Iomega continues not to address why and how Iomega products are superior than competitions, image the following. After seeing an Iomega ad about how wonderful Zip is on CAPACITY, a consumer is convinced that s/he needs a high capacity removable medium drive like a Zip. So, s/he runs down to CompUSA. But since almost everyone nowadays says Iomega got competitions, back in her/his mind, s/he may remember someone said somewhere that Iomega got competitions. So, when s/he gets to CompUSA, s/he finds the Zips but may look around to check out competitions just because of curiosity. Not everyone will. But a few may. Let's see. On the Zip box, it says 70 times the capcity of a 1.44MB floppy. That is, or was, good. But wait, that big box there, it says 83 times the floppy. 83 times is more than 70 times the floppy, that big box must be even bigger and better? Hold it ... this high flyer here says 2X the capacity of the Zip (that is 140 times the floppy ... 140 times is bigger than 83 times) !!! Wait, this thing that jumps out of the water to bite says 2.5X the capacity of the Zip !!! Gee, what should I buy now? Sadly, no one has told this consumer about the advantage of the more than 12 million Zip drive installed base for the very likely event that s/he will need to exchange data with other computers later. Taking data in and out and moving them around computers on a disk is one of the main reasons why a consumer wants a high capacity removable medium drive to start with. And no one has told this consumer about the Performance issue --- the fair comparative test resutls, the Reliability issue, the Zip disks being widely available issue, ...., and I can go on, but please check the past thousands of posts. There are no stickers on the Zip boxes, or any newly designed Zip boxes, or posters or flyers around the Zip shelf, at retail stores to tell consumers updated information (such as the latest Zip installed base, fair comparative performance test results, some drop test results on disks, some durability /reliability test results, awards won by Zip, list of Zip OEMs, recommendations from computer "gurus" and establishments ...... ) about "Why Zip (but not competitions)". It would be very impressive. But no. The Iomega TV ads so far have touted the general virtue of any high capacity removable medium drive, and not emphasized anything particularly about "Why Zip". I hate to see an Iomega TV ad convinces a consumer going down to CompUSA only to have this consumer picking up a "BigBox", a "HighFlyer" or a "BigFlyingWhatever" because of the lack of particular information about "Why Zips" in store, or elsewhere from Iomega's little month (Not that I wish Iomega got a big month. But when it comes to selling products, you just can't be modest and act high class all the time.). Even only very few cases like this may happen, when and if they happen, it would be exactly like Iomega spending TV ad money to send consumers to retail stores only to end up buying competitions' products. Don't you hate to see that happen too? 2+++++++++++++++++++++++++++
Subject: Re: P = ? In FRP (Was Re: FRP- IOM's fair value) First of all, thank you for all the kind and constructive comments I have received. I put many hours into writing that and I'm happy to see everyone tear it apart and tell me how to improve it. I'm going to be posting it on the www.fool.com boards soon, and hopefully get some of the people who used to hang out on this board to participate also. I want to reiterate that the FRP is rather unscientific and in no way an absolute measure of value. If discussion continues as well as it has so far, I'll end up putting some major revisions into the model and hopefully starting a new series of posts (actually I'm considering a couple already). Anyway, here goes a few of my responses to comments I've received: << What are the chances of zip replacing the floppy? ....how the hell do I know.. how the hell do you know... how the hell does ANYBODY know! >> I agree with you that this is certainly not an absolute number. It is a guess, and each person's guess depends on their perception of how likely it is to happen. I believe (hope) that Zip will replace the floppy, but that's just the bet I'm placing by owning IOM stock. I'm playing the odds just like Vegas, but the difference is that I can analyze the odds and figure out what will have to happen for me to win, unlike Vegas. All stocks are always valued on guesses- earnings estimates, growth projections, margins and market share, and then multiples of guesses upon guesses. Some think it's more likely than 40%, and some less than 40%- that's what makes an inefficient market. Changes in guesses are why stocks go up and down on down/upgrades by brokers. << My only real disagreement with Rob is the light consideration he seemingly gives to the Laptop Zip, a market which he apparently cedes to Sony if their disk really ever materializes. >> I probably wasn't real clear in the original post, so here's what I meant to say- if it does end up being a fragmented market, it is very possible that Sony would grab the laptop market because of the demand for bays. Or the laptops would be a further example of fragmenting, with some having laptop Zips and some having laptop Hi-FDs. Furthermore, if Hi-FD is 6 months out, laptop Hi-FD has to be even further, which continues to reduce the chance of Hi-FD taking the laptop market. In the "Zip standard" scenario, it would be standard on all machines, not just desktops. 3+++++++++++++++++++++++++++
Subject: Ruling against Boeder In Germany I am not a lawyer. The following are just my personal thoughts or opinions as a lay person. << Frankfurt Court Grants Iomega's Request for New Ex Parte Preliminary Injunction Against Boeder In Germany >> Boeder is not Nomai. Boeder is a private labeler of the XHD disk manufactured by Nomai S.A.. Boeder, in other words, seems to be a distributor of XHD disks, or a customer of Nomai. But I wonder if Nomai may be picking up the legal tab for Boeder? << ... According to Iomega, not only did Boeder's misleading statement provide grounds for a new preliminary injunction, it also violated Boeder's binding agreement given in German court just one day earlier to refrain from making such statements. ... >> I thought Boeder's violation of this OLD binding agreement given in German court just one day earlier could also result in a fine against Boeder. No? Why is there no fine? << ... Violation of the new preliminary injunction issued on Feb. 6 is subject to a fine of up to DM500,000 or imprisonment of the managing directors of Boeder for up to six months. ... >> If and when it happens, I wonder if Nomia will pay for the fine? About the "imprisonment of the managing directors of Boeder for up to six months", if it happens, can Nomai directors be surrogates for Boeder? ;-) Or, do you think Boeder may be a regular customer of Nomai, and that Boeder may have an Account Payable (A/P) to Nomai for Nomai's other products (SyQuest compatible products)? Do you think Boeder may stop paying its A/P to Nomai to offset the legal bills and other possible future liabilities? Some OLD Preliminary injunctions /TROs may get lifted here and there from time to time, some NEW Preliminary injunctions /TROs may get granted here and there from time to time, and some more Preliminary injunctions /TROs may get lifted ..... I said that before. So, such may be life of the legal battles between Iomega and Nomai until final trials. Maybe we should get used to it. Even after this latest Iomega victory, I personally don't have too much confidence (just my feeling as a lay person) in the effectiveness of Iomega's present legal team at the current stage of these IPR cases (maybe keeping my expectation low so that I can be pleasantly surprised) but I think there may still be a very good chance that Iomega can finally win. Until trial (not hearings) results, when something happens, maybe we shouldn't be too happy or too sad. Only the big ones count. Maybe we don't want to let the preliminary and more "trivial" legal matters swing our mood or the stock price up and down. 4+++++++++++++++++++++++++++
Subject: IT'S TIME TO BUY THE STOCK & SELL THE COMPANY Please read this and comment. Thanks. IT'S TIME TO BUY THE STOCK & SELL THE COMPANY and here's why........ Bad press from the same old names (Herb, Eric Savitz of Barron's, etc., etc., etc.) about "so-called" Zip killers (though many have tried and failed, and especially about Sony's HYPERWARE and other products that have not yet (maybe never will), or have only slightly dented IOM's sales), analyst downgrades (mostly because of missing estimates by 1 CENT ( 2 CENTS diluted) and the new $100 million advertising campaign), the good press releases without positive stock movement (eg: German ruling, new SKUs almost daily, etc.), IOM's constantly growing revenues and earnings (especially when compared to other tech companies who's stock is trading much higher than IOM's stock price), and mostly bad press from writers who seem to be ON A MISSION to create BAD SENTIMENT toward Iomega (and seem to have succeeded). Some writers constantly bash Iomega whenever they can (we know who they are). This is a major problem for IOM shareholders. A recent article called clik vaporware but it's amazing that you don't hear these same writers refer to Sony's so-called "Zip killer" as the VAPORWARE IT IS!!! The BAD PRESS that Iomega has received over the years (and will continue to receive), is killing IOM's stock price and has created a BAD MARKET SENTIMENT TOWARDS IOMEGA. Here's a chart of IOM's revenues since 1994 (Some figures from Zack's). 1997 1996 1995 1994 Net Sales $1.7 Billion $1.213 Billion $326 Million $141Million Earnings $115 Million $67.33 Million $8.5 Million -$1.88 Million In recent report IOM reported a DOUBLE in net income (though Zack's shows $67.33 Million earnings in 1996/vs/IOM's report of $57 Million), whatever. Look at the GROWTH IOM has shown over the past few years. IOMEGA IS WORTH $10/SHARE????? GIVE ME A BREAK!!!! Analysts' and writers are fearful of IOM's future earnings (mostly because of the $100 Million ad campaign). At the end of 1994, did ANY of these same analysts or writers project that IOM would report 1997 revenues of $1.7 Billion and profits of $115 Million? I DON'T THINK SO!!! Here's the bottom line. I don't think Iomega will ever get any respect from Wall Street when some members of the press bash Iomega whenever they can. Potential investors will always have a fear of investing their hard earned money in IOM stock. IOM's stock price will never grow as it should no matter how much the company grows revenues and earnings year after year. Iomega IS THE PREMIER COMPANY IN REMOVABLE STORAGE (without question), but Iomega and it's stock are treated like garbage. I feel the ONLY way Iomega will get ANY respect, is to be merged with or bought out by a company that already has the respect of Wall Street. Let's face it, IOM is a great company and it's stock is undervalued considering it's P/E to growth rate (trading at almost a historically low P/E). Look at NSCP. Nobody would ever consider buying it when it was $50/share. Last Monday, NSCP was 16 1/16. It hit a high of $24/share last Thursday and closed at $20.75 today because they are looking for a buyer for the company (still well overvalued considering their losses). I believe when NSCP reported earnings recently, they reported a loss of about $.96/share. Iomega earned much more than NSCP has, and ever will, and IOM is trading at less than half/share. I know Iomega has many more outstanding shares, but what Wall Street worries about is earnings per share (especially when you miss by a penny or 2, irregardless if it's up 77% year-over-year). What makes a company like NSCP stock worth more than Iomega per share? NOTHING!!! I don't want to starting take-over rumors here, I want that understood (as many posters take what I write out of context), but I strongly feel Iomega will never get the respect it deserves as long as the company's name is Iomega. Maybe it's time for Iomega to look for a buyer for the company, or maybe some "SMART" company out there will see that Iomega is UNDERVALUED (considering P/E, GROWTH RATE and POTENTIAL) and merge with or buy the company. Any serious comments? Does anyone else agree that IOM will never get the respect it deserves? Is this microphone on? _______________________________ End Report. Posts covered through 9:00pm ET 2/9/98. _______________________________
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