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Thursday, February 26, 1998 Wednesday, Iomega closed at $9 1/16, down $3/16 (-2.03%). TODAY'S RECAP: A slightly off day yesterday for the stock price, but Iomega message board posters found a range of topics to discuss -- some old, some new. IBM Japan announced that the Zip would be a standard component in a new Aptiva model; other issues included Nomai, digital vs. disk, data storage, Matsushita ramp-up of Zip production and even a humorous Jaz anecdote for the enjoyment of the board. 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++ HMAletter talks about Internet data storage and Zip.
Recap written and posts compiled by TMF Weekly. _______________________________ And now, the Best of the Board...Started 9:00pm ET 2/24/98. 1+++++++++++++++++++++++++++
Subject: Re: Analysis of IOM - Bulls and Bears take note << the internet IS a threat to removable storage and hard drives. Data warehousing is a growing industry. I know for a fact that StorageTek is pursuing this market. One of the VPs gave a presentation in one of my classes last semester, and he spoke of this. >> Regardless of the virtues of that statement, hardly a threat to Iomega. Data warehousing is simply not a valid competitor to small, removeable storage devices such as Jaz or Zip. Portability is the key. 100MB simply is not worth storing online anywhere. Not worth the time. Archival storage of extremely large volumes of data would be the future of data warehouses such as the ones you speak of. That's provided it can be cost competitive with conventional storage technology. While I see the future of the internet expanding in all areas, I simply do not agree that it's all that great at doing many of them. As a library, great, but not a keeper. 2+++++++++++++++++++++++++++
Subject: Re: POP the BUBBLE Check yesterday's New York Times business section 2/23: Crowding Even More Data Into Even Smaller Spaces (which many here have already read as it was referenced yesterday) regarding developments in spinning disk memory. It looks as if flash memory may actually be left behind in price and performance. Note the reference to Iomega. Note the rapidly falling price of moving storage. It is falling faster than Moore's law would predict. Faster than the price of flash memory. Further, regarding digital cameras, the mass market goal is to produce cameras that amateurs and casual users will want and will able to afford. I'm sure virtually every manufacturer of cameras would like to see every film-based camera replaced by a digital one. Remember the LP? People used to buy turntables. They used to keep them for years. How nice for the interested OEMs that they were able to induce the masses to switch to compact discs. I'm sure camera makers see the same potential for a tsunami of replacement sales in digital, but the new cameras have to be cheap and produce great pictures, just as compact disc players are cheap and convenient and supposedly produce better sound than LPs. Clik! is far from a sure thing, but I don't think flash memory necessarily has the advantage many believe it has. Three quotes from the article referenced above: << So impressive are the storage gains and so audacious are the aspirations of disk drive engineers that they are now suggesting the previously unthinkable: actually replacing computer memory chips with tiny disk drives for devices like digital cameras and hand-held computer >> << the disk drive industry mounts a sustained price performance curve even steeper than that described by the legendary Moore's Law, which holds that the processing power of the integrated circuits etched into silicon chips will double every 18 months. >> << The concept may never take off, however, Porter said, noting that IBM will face stiff competition from the Iomega Corp.'s new Clik drive, which is designed to be built into small digital devices like cameras. Scheduled to be shipped to manufacturers in the second half of this year, the drive will use a 3.3-by-2.1-inch removable disk that will store 40 megabytes of data and is expected to sell for $10. >> 3+++++++++++++++++++++++++++
Subject: My thoughts on Nomai Upon reflection over the last 24 hours, I have come up with a few thoughts that I think are relevant as to whether or not to stay invested in Iomega. To simplify this into a single post is very difficult and I welcome any critical analysis. (Best read on full screen) First, I am not a 'teckie'. A year ago I had never heard of the Zip drive or any other removable drive other than the floppy. I have made my money and built my client base on things that I can understand (I am a stockbroker). I really never cared too much about tech stocks other than to stay long the large multi-billion dollar companies like IBM, MSFT, INTC, T, HWP, etc... My beliefs were simple, if the company was large and powerful they could dominate when they were right (of course I have to like the theme), and they could fix their problems when they were wrong. (IBM is one of my biggest winners). I try to buy on the dips or when it appeared that there was an overreaction to the 'current news'. I usually stick out a losing situation and almost always they have come back. Maybe I have been lucky, but I haven't been pounded over the years with too many 'dogs'. I was introduced to Iomega through research that I had received through Joe Beseker at Emerald. I usually find most story stocks to be worthless, so I discounted the information. After a few more reports, I finally got involved because I thought that Zip definitely had a shot. I soon realized that internet hype board called 'Motley Fool' and after a few months I was hooked. I found out not only what a Zip could do, but also about the many other products that IOM produced. You guys convinced me that IOM was a great company, had great vision, and was about to have the next great product to hit the mainstream. I spend many hours trying to figure out the 'whys' and 'how comes' and I believe that the cumulative effort of this board had painted a 'true picture' of the facts. My assessment of the current month's news is as follows (as usual, I would like your input): 1) Iomega is not a guaranteed investment (Many risks, but possibly big potential) a) Nomai- probably the biggest factor because they introduce the most uncertainty about the future of IOM's model and revenue stream. Two issues are short-term earnings stream and long-term viability stream. b) Sony- a very large factor since they are the only company left that can stop Zip from being standard (not counting IOM of course :-(). Big issues are whether they can price their drive at a level that can stop Zip momentum, and whether they can get OEM's to incorporate the system. c) Iomega- Even though IOM has grown from 100 million to 2 Billion (as Keeler posted the other day), can current management handle the future growth. This includes everything from production to investor relations, to Zip-clicking PR. Big issues are whether they are now out of their league. d) current earnings may be down to .07 to .09 for the quarter.- This is what the analysts are worried about and I am sure quite a few on this board as well. The issue is whether or not Zip and Zip disks are still moving at the same pace and whether the tie ratios are declining. After becoming almost glued to this board over the last 30 days trying to comb through every news release, analysis, promotional material, competitor information, etc..., I have concluded a few things.... #1 Nomai is the uncertain element that keeps everything else from being handled. Whether or not a company can steal the revenue stream from IOM is the central issue in every issue above. I am not talking about short term, I am talking about over the life of the product. If the Nomai disks (or larger companies) can be freely manufactored without paying IOM one penny, then all the other issues become relevant. If IOM can win partial victories that can keep pirate disks at bay, then this may suffice. However a complete loss would impare their ability to fight because disk profits are their greatest asset. What is the chance? I don't know. I would like to know the answer. I also would like to know the score of the Super Bowl before it is played. Unfortunately no one may be able to tell us what the odds are. We can guess and we can even make an educated guess. That is why IOM is not a guarantee. To those that get mad at IOM, Kim Edwards, the legal system, etc...(I was one of you last night), I would suggest that you come to terms with the fact that IOM is a risk and may or may not be worth it depending on your time frame. In fact I think that the stock would be between $15 and $20 right now if the Nomai situation didn't exist. Why does the uncertainty of the Nomai issue affect IOM so much right now? Look at all of the other issues and they are either handled by the excess earnings that the ever-increasing installed base of Zips can spit out or by short-sightedness of the market because it can't project five years out. Sony Almost every Sony issue that I have seen info on has mentioned that Sony isn't a factor because they will either be priced too high or IOM can sell Zip drives lower (because IOM gets 100% of disk sales vs. Sony 50%). The Nomai situation, if handled successfully, would give IOM many HUNDREDS OF MILLIONS OF $'s to finish the war. Even though there may be a fight, I believe that the installed base of IOM plus the annuity $'s to fight with would be enough to push ZIP through. Current Earnings What about current earnings you say? Wouldn't they suffer if IOM had to fight this battle? YES, but the stock price wouldn't suffer over the long term because the analysts could look out in time and figure the earnings stream IOM could produce. I will answer that thought with this question: How much would you pay for a company that has a 'lock' on the floppy replacement market and to the disks sales that result? When the analysts realize that ZIP has won, they WILL LOOK 5 YEARS OUT. As we near that magic point of inevitability, different analysts will realize at different times that Zip has won. This will render the current earnings useless when calculating the value of their franchise. In fact, I think the current price of IOM is caused by the fact that the normal believers in 'ZIP is standard camp', can't say with certainty that this means anything because a loss to Nomai would make this victory hollow. In conclusion, I think that many on this board may tend to over-analyze (I definitely do) and this creates a sense of understanding that can be detrimental to one's financial health. While I think this board is great and can inform us as to the facts, I think that also it gives us the feeling of 'knowing' the answers to all of the questions. This can be bad for both the overly excited good times (too long) and for the overly depressing bad times (not in). I am a firm believer that when you know the score the price will already reflect it. I don't think the market will let you in cheap after a big victory or after Zip has clearly reached 'the standard'. For this reason I would caution everyone to weigh the risks and make your bet, but don't change strategies on every piece of information. You all cumulatively educated me on this company and its products, and I would hate to see you locked out when the market sentiment changes. (As proof look at today's action...Nobody predicted that last night!) P.S. The reason for part of this story was that I had a client that told me today to "get him in under $10 as soon as IOM wins the Nomai lawsuit". I had to explain to him that the market may be $20 before this outcome was known. He said he didn't think about the stock being higher until that issue was resolved. Upon reflection he decided it was "worth it to be in now and not wait, because I don't want to take the chance of not getting in under $10" 4+++++++++++++++++++++++++++
Subject: Talked with Thatcher at IOM A few points I found out by speaking with him today, FWIW: Hearing on friday is just another attempt by IOM to win a current injunction against Nomai (this time based on patents and copyrights) until the ruling on the merits of the patents are final, probably months away. IOM has not lost anything other than preliminary battles yet. No issues regarding design or engineering patents, copyright, etc... have been final, in fact France won't decide until Sept at the earliest. Germany will probably go the way France goes. France cared about design patents, Germany probably more engineering patents.? This I really didn't understand implications. They believe they lost the preliminary compatible issue based on a 'procedural issue' because they were not allowed to submit 'new results that show Nomai disks cause damage'. This was explained that the judge wouldn't allow IOM's new evidence because he/she had to draw the line somewhere and if IOM could enter their new evidence then Nomai could then refute that, then IOM could enter new evidence....round and round we go. He said they felt that their Patents and Copyrights were strong...of course, what else could he say... ;-) Just some info to talk about. 5+++++++++++++++++++++++++++
Subject: The Zips Are Coming!! We now have evidence of Matsushita's ramp of Internal Zip Drives. A PC manufacturer named Cybermax has the "panasonic Zip 100 MB Internal Drive" available as an option on all of their systems. These folks really seem to be offering some extremely feature-rich systems for very low prices. They have apparently won several awards including a test run by Computer Shopper that put their system on the cover of the March 1998 CS issue. Their fully loaded 333 Mhz PCw/17 inch monitor and Zip Drive is $2353 (including shipping). To see for yourself, click on the link below, click on the 333 Mhz Internet special flashing on the left center of the page, click on "Create Custom Configuration" at the bottom of the page, then select the arrow adjacent to "Zip". CyberMax Online - (800)345-8939 P.S. Does anyone remember HYPE telling me that I was mistaken and that the Zip manufactured by Matsushita would NOT carry the Panasonic name? 6+++++++++++++++++++++++++++
Subject: Re: IBm Zip Standard Japan << It is the first time for IBM Japan to incorporate Zip Built-In(TM) into a select model of its desktop PC products. The Aptiva is expected to be available Feb. 28, 1998. >> Now this is the first good little piece of news I've seen in while. I'm betting that this deal is indicative of the fact that the Zip production partners in the far east (ie.- Matsushita?) are ramped up to near full production capacity. I've got to believe that IBM Japan wanted assurances from IOM and its production partners that there would be no supply problems in the far east prior to committing to this new Aptiva Zip SKU. 7+++++++++++++++++++++++++++
Subject: Re: Net vs IOM (Was Analysis of IOM- Bulls and Bears take
note) I have cable modem service through the Cox and @Home partnership. So let me address backing up your HD to a remote server. 1. The service I receive allows me 5MB of space for each of my 3 user names. Not enough to back up a HD. I use that 5MB to back up my vital data, such as Quicken data, schedule+ file, and spreadsheets. 2. I am very hesitant to just put those files on the server, where anybody can get them. Instead, I have to create a Zip file with a password so that somebody could download the Zip file, but would be nearly impossible to extract the individual files. In order to be successful, a backup service would require a high speed connection on both ends, a large block of storage space, and client software that will password protect or encrypt the backup files. Additionally, the service would need to ensure that they do not lose the data because of a bad tape or HD. Therefore, a RAID will need to be utilized. Why hasn't anybody done this yet? First, it would be not be expensive to create and manage a tape drive RAID (HDs would be way too expensive and the speed is not needed), but would most likely cost enough to make in unviable. Remember, you have the cost of the tape drives, tapes, RAID card, servers, network administrators, and tech support. Second, very few people have the high speed connection that would make this service feasable. Imagine sending all 2 gigs on a 28.8 modem (it would take almost an entire week). Even on my cable line (about 1.5Mbit/s), it would take about 3 hours (slower than the Ditto). I don't know if remote backup will ever be feasable. By the time we all have fast enough connections, we will all have HDs storing 18 gigs (they already make these HDs and they are not too expensive). That leaves us with four backup choices. Backup onto a second HD. Backup onto tape (Ditto). Backup onto disks (Zip/Jaz). Last, either a mirrored RAID or a striped RAID with parity (the best solution, but too expensive for individuals). Which method would you choose? 8+++++++++++++++++++++++++++
Subject: another anecdote.... I just got this in an e-mail from a colleague at work....another IOM anecdote: Larry, Here's one to post to your buddies: As you know, several Jaz drives were stolen from our group. The cartridges were left behind and later seized by the authorities for fingerprints. We had no chance to copy all of work files - so we were most anxious to get them back. When we did, we were horrified to learn how they make fingerprints these days. They sprayed the entire cartridge with superglue vapor - then viewed the surface in UV light. I was afraid to even try to open the cartridge for fear it would ruin the brand new drive - but we had to try because there was 3 months of work stored there. Lo, and behold, the drive cranked away and we copied all of the files off the "superglued" cartridge. DON'T TRY THIS AT HOME! _______________________________ End Report. Posts covered through 9:00pm ET 2/25/98. _______________________________
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