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Tuesday, March 10, 1998 Monday, Iomega closed at $8 1/2, down $5/16 (-3.55%). TODAY'S RECAP: Amazingly, some Fools proved that they do occasionally get outdoors since we had reports of Iomega bus sightings. The weekend's clik! discussions continued into Monday as some Fools questioned the product's future contribution to revenues, while others debated the need for Iomega to introduce 200MB and 25MB Zip disks in order to give consumers more choice. 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++ ~RunngMoose~ recalls the history of automatic film as an add-on
device.
Recap written and posts compiled by TMF
Weekly. _______________________________ And now, the Best of the Board...Started 9:00pm ET 3/8/98. 1+++++++++++++++++++++++++++
Subject: Re: wacky screw on.... >>>>>>>> Then I told him I about the tripod hole attachment thingy and he exclaimed, "Now that shows someone at Iomega is really thinking! I like that idea alot!" Pretty much everyone at the show who I discussed the attachment with at the show thought it was a brilliant idea.... As a graphics professional, that wacky attachment thingy makes me much more comfortable buying a digital camera today, as I know that I won't ever be forced to pay exhorbitant prices for digital film.... <<<<<<<<<<<<<<<<<<<<<<<<<<<< Automatic film advance/rewind mechanisms also started out this way many years ago. You bought an add-on unit that screwed into the tripod hole. Today this whole mechanism has been integrated into the body of many(most ?) cameras. Dave 2+++++++++++++++++++++++++++++
Subject: Re: IMHO, clik=light bulb IMO, it is helpful to judge the potential for digital cameras, clik type devices, and their interaction with pc's and web pages by the interest level of the group that is now in their teens (and younger). They are quicker to take up the technology than some of us investors. If my 12 and 15 year old kids and their buddies are a representative sample, there is a big interest in personal publishing and picture swapping. They already have zip. Digital cameras are on top of their "gotta have it" list. clik! should fall neatly into the role of data exchange facilitator between the camera and the pc, if iomega plays it right. Brian 3++++++++++++++++++++++++++
Subject: Cyberian Outpost 10 hottest products Number 1 is.............. The Zip drive Cyberian Outpost PC Top 10 GARY 4+++++++++++++++++++++++++
Subject: Re: IOM Bus in NYC >>on't know if I missed something or what but today I saw an Iomega bus, which was completely covered with Iomega advertising, driving around in NYC this morning. Is there a trade show or something else going on in NYC for IOM ?<< The buses are in Chicago too. I am trying to get a picture for your viewing pleasure. Dave 5+++++++++++++++++++++++++
Subject: Is There a Case for Polaroid? <<But if the darn thing works, it is just too strong of a paradigm for the digital camera makers to ignore. To beleive that not one OEM will make one model strike me as naive.>> Agreed, and wouldn't Polaroid be a great fit as the first company to embrace and extend the concept of digital film by adopting clik! technology in a major consumer product? Polaroid, that go-go company of the sixties... The company whose market model required strong patents, but built a "razor-and-blades" profit model second only to Gillette's... A company that required consumers to re-think their relationship to snapshot photography by giving them a way to record their "stuff" and see it instantly, without another trip to the drugstore or an anxious wait for developments... When I think of Polaroid, I think of a company that had the gall to name its camera "Swinger" when Bob and Carol and Ted and Alice B. Consumer knew exactly what that meant. A company whose products brought consumer photography into the Psychedelic Age, but whose film packages were displayed at cash registers in every supermarket and convenience store in America for more than a decade, tempting us to loosen up and record our times... A chemical company that somehow became synonymous with "spontaneity" and "fun"... With a legacy like that, does anyone really expect Polaroid to join the electronic photography era with another "me too" camera? No way. Say "Polaroid Instant Digital Film" and imagine the possibilities. I'll wager that Polaroid's management understands more than anyone what Iomega is up to and what the rewards of that strategy can be, in the hands of a great marketing company. Of course they'll probably want exclusive access to several years' production... Any takers? Bob Sutton 6+++++++++++++++++++++++++
Subject: Re: Clik Stuff Let's take a ridiculously optimistic view of the world and have Iomega get clik into 10% of digital cameras by 2000. That would be 1.5 million clik drives sold for cameras at perhaps $80 ASP, or $120 million. Add in some external sales of 500,000 * $150 and we have $75 million. I'll give you some disks... Maybe 5 million, at $5 or $25 million. All totaled, we have $220 million in 2000. Now, my own forecast for Iomega has revenues at about $4.5 billion in 2000 (35% top-line growth from this year through 2000). $220 million represents 5% of that... [Aside: It represents less than 25% of Josephy's bizarre, unattainable number... What is Iomega gonna do, sell 10 million clik drives into 15 million cameras in 2000 when that number will be 0/4 million in 1998? Yeah, right!] What about the EPS effect? Well, we can guess that the gross margin on this $220 million will be about 25% (below the overall business because new products cost money to ramp up and don't get easy to make for a few years, with production at or near 0 this year, by 2000 it's still a new product)... Of course, if Iomega only licenses the drives and doesn't make them, even this number, $55 million in gross margin, will be way, way, way too big. Let's just say for argument sake that running the clik business is about as expensive as running Iomega's other businesses. That will take the $220 million and bring it to <$15 million at the bottom line. With 260 million shares, we are talking about 5 cents per share. This scenario, in my mind is optimistic for a number of reasons... Regardless we are talking about 8% of total earnings in year 3, 2000. So perhaps I mis-spoke: It could add to earnings (it could also subtract from them, as it will do this year). It just isn't gonna add enough to earnings to make a whit of difference. Good points. I have no idea what $ Clik will contibute 2-3 years out. However, come 1st qtr 2001 (given we see a drive this year) if Clik isn't contributing to earnings I expect IOM would have droped the drive, or sold it to Syquest, they love selling a product at break even or worse.LOL I really cant see IOM keeping a loser that long. BTW both Zip and Jaz apear to have been profitable within two years of introduction. IMO, It's not KEs style to hold a loser. I have to agree that even with success the relative contribution to gross revenues in this time frame will be minimal. But I see EPS in high margin (dangerous assumption) disks via a much higher tie ratio than your 3.3/1, see below. <<<Clik drives are to expensive for OEMs? Compared to what, $300 flash cards? OEM's pay about $25 for a 4MB flash card, about $125 for a 20MB flash card. Somewhere around $6/MB in quantity.>>> OK, take your $250 40MB flash card and I'll take my $100-$200 Clik drive and ten $10 disks. One vacation later I have 400MB of photos already backed up on Clik disks, you have either 40MB of photos (maybe ten quality pictures? huibs?), or ten 40MB flash cards ($2,500), or you took your computer along on vacation. LOL And you still need to back these up, four zip disks - add $40. Even if flash cards come down to $50 for 40MB, you still need $500 worth of flash cards to match $100 in Clik disks and your pictures still aren't backed up. Even at $50 you're still not going to use flash cards for long term storage, or your hard drive for that matter. I'll take ten Cliks, shoot up a storm and toss them in a drawer. IMHO you can't beat that utility, it's what people are already used to. Right now high cost per MB has a choke-hold on quality of pictures, the number of pictures shot, and likely affects digital camera sales. Lower cost/MB = more pictures, higher quality, more need for out of box/camera storage. Of course Iomega dominates this area. IBMs 500MB drive sounds awesome, but it's just going to enchourage more of the above and eventualy it has to be backed up. The trend bodes well for IO. IOM is in a great position to capitalize on the digital revolution, thats why I'm holding long.FWIW <<<Yes n-hand had to be redesighned and it cost IO alot of time, but NO ONE except dreamers expected a Clik drive OEM deal by now. Really? No one? Why don't you re-read these boards... If you are counting clik as a separate product from n-hand then you are kidding yourself. If you re-read these boards, you'll see most people here expected an OEM deal at the clik coming-out party. >>> Come on, why don't you re-read my sentence. "NO ONE except dreamers" Many people including myself hoped for an OEM deal at that time. Anyone who seriously expected a deal is, IMO, a dreamer. BTW I have read nearly all the posts on this board since 4/95. I Know, your happy for me. Before you comment, note the word "nearly":) <<<They also believe every quarter's conference call will bring such deals.>>> Now you're back to predicting the future and mind reading. Kidding :) Kevin Credibility is earned, not assumed. 7++++++++++++++++++++++
Subject: Re: 200MB ZIP KILLER RELEASED!!! One 200mb disk would make sense and a 25mb disk would be senseless, and here's why (IMFO). All three disk sizes (25, 100 & 200mb) would probably cost close to the same amount of money to manufacture & ship. Margins would be much higher on a 200mb disk as compared to the 25mb disk (figuring what you could sell each for). You are missing a couple of big points. First, a 25 mb disk would probably sell a lot more units (more than 8X 200mb disk). This would lead to more total revenues at a slightly reduced margin, but still a good margin. Using your example we shouldn't make ATAPI Zip, we should just make Zip Plus, because the margins are better. There is room for more than one level, I just think that the 25 mb would generate more sales and profits. Second, a 25 mb disk would be the introduction for the normal retail consumer. Once they know what a Zip can do, then they may go for larger size. I personally would like to have many $5 25-mb disks over a few $12 100-mb disks.(I would probably never buy a 200 mb disk, don't really need it). I think a 25 mb disk would be like a drug dealer selling cheap or giving away drugs to new buyers so that they can introduce the concept. After the user is hooked then they try the better stuff. The consumer (not business) market isn't demanding a 100 mb drive yet, they just want something better than the 1.44 mb floppy. Last, a 25 mb disk will make size less important. I think that if a 25 mb disk works for now, then why would everyone but a power user care about 200 mb or more. Most people want to spend as little as possible to get something that works, the 25 mb disk would fill that need and 'kill any drive at a higher cost than Zip'. A 200 mb disk will legitamize the need for a 200 mb drive, and Sony may be able to compete if we open the door! Slam the door, kill the competition, introduce the 25 mb disk! Dave 8+++++++++++++++++++++++++++++
Subject: Price to Sales KE and the Wise have dampened my expectations for IOM going forward. I expect them to grow faster than the S&P 500 in both revenue and earnings growth. Since they have a PE ratio inline with the S&P I think IOM is a great investment going forward. But like I said, my sights are lower. Lowering my sights I can finally see an industry peer to compare IOM to (since USRX was swallowed). CREAF has a great brand name with PC buyers, especially the type that shop at Dell, Micron, etc. CREAF also has a good amount of business in the retail channel as well as the OEM channel. I don't think CREAF has any product with gross margins approaching a Zip or Jaz disk. However, overall gross margins are very similar: 30-35%. Iomega has and is expected to grow much faster than CREAF. CREAF has a PE ratio of 10 and IOM of 20. Two companies with similar customers and similar gross margins might be expected to have similar PSRs. IOM has been growing faster and should continue to grow faster so one would maybe expect IOM to have a higher PSR. However, running the numbers CREAF is higher. CREAF has a market cap of $1.95 billion on sales of $1.23 billion. The PSR is 1.56 IOM has a market cap of $2.41 billion on sales of $1.74 billion. The PSR is 1.38. Any IOM bull should expect at least the valuation off sales that CREAF gets. Just another sign that IOM is misunderstood at best. TMF Keeler Patrick Keeler A Fool and his money are soon partying _______________________________________
End Report. Posts covered through 9:00pm ET
3/9/98.
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