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Thursday, March 12, 1998 Wednesday, Iomega closed at $8 1/4, down $3/16 (-2.22%). TODAY'S RECAP: The mythical 25MB Zip disk received more examination from a marketing viewpoint; skepticism was expressed over whether Jaz2 has actually shipped; and a new hypothesis was presented to enable a share buyback. 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++ ~Bsutton2~ expands on the marketing opportunities for a Zip 25MB
disk.
Recap written and posts compiled by TMF
Weekly. _______________________________ And now, the Best of the Board...Started 9:00pm ET 3/10/98. 1+++++++++++++++++++++++++++++
Subject: Re: 200MB ZIP KILLER RELEASED!!! <<I bet many would buy the six pack or ten pack of 25 mb disk over the three packs of the 100mb disk... [snip] ...and IOM probably would make close to the same money on either.>> Yep. And there's the distinct possiblity (albeit counter-intuitive to those of us who've been trained to think that "bigger is better") that a 25MB format could be sold at even higher margins than the current 100MB disks, making them more profitable per unit rather than less. If there's anything that frustrates me about IOM-the-stock, it's the realization that the company has so many opportunities to behave like a consumer goods marketing machine, yet investors (including most of us!) compulsively hold it up to standards of competition that are only remotely relevant in understanding its core business. High-tech companies routinely squander whatever brand equity they generate, because their SKUs have such pitiably short shelf-lives that they rarely get a chance to fiddle with pricing/packaging/promotional formulae before a more compelling technical contender comes along. (The original Jaz drive is a good example of this. When the Jaz2 ramps, the Jaz "classic" is, essentially, over, a victim to that old game of high-tech musical chairs where no feature sustains an advantage and no pricepoint defends it.) Whether or not Wall Street "gets it" yet, Iomega has a chance to build a different kind of franchise with its Zip products : one that leverages the Zip's brand equity in a whole bunch of line extensions that are cheap to build, premium priced, easy to sell, and that further augment the whole Zip ownership experience. A Genuine Iomega-Brand Zip25 media SKU would be a great example of this. Perversely for someone who makes his living selling high-tech dreams, I'd rather see Iomega tweaking their margins with Zip brand-extension innovations like the Gig-O-Color or test marketing 25MB media at convenience store points-of-sale than, say, hitting the first million milestone with Jaz2. Bigger, better, faster, cheaper gadgets are exciting, but there's no better aphrodesiac than expanding margins from a new "cash cow" monopoly. Bob Sutton 2+++++++++++++++++++++++++++++
Subject: Re: 200MB ZIP KILLER RELEASED!!! <<When the Jaz2 ramps, the Jaz "classic" is, essentially, over, a victim to that old game of high-tech musical chairs where no feature sustains an advantage and no pricepoint defends it. >> I disagree, due to the substantial price difference between the two items. Jaz1 will continue to sell...for a good analogy, perhaps look at the consumer desire for those sub-$1,000 boxes. Price matters, and should continue to drive Jaz1 drives, especially when they sit next to the substantially higher priced Jaz2 drives on the shelves. Eric Turkewitz a/k/a ETurkey 3+++++++++++++++++++++++++++++
Subject: Re: 200MB ZIP KILLER RELEASED!!! from BSutton2 <<And there's the distinct possiblity (albeit counter-intuitive to those of us who've been trained to think that "bigger is better") that a 25MB format could be sold at even higher margins than the current 100MB disks, making them more profitable per unit rather than less.>> There is a saying in marketing: When beans aren't selling for 33 cents a can, put them on sale 3 for $1. 3-packs of the 25mb disks WILL be more profitable than one, 100mb Zip disk. War- 4+++++++++++++++++++++++++++++
Subject: Re: jaz 2 ? <<<..jaz II was backordered.. ..so, one might presume that those backorders are being filled first, and, as the jaz II ramps, we'll start to see retail presence..>>> <<<... I know the drive is backordered at most mail-order places because I've asked... No one I've talked to believes, however, it has shipped at all. >>> I suppose this all goes back to the discussion Ben and TMF Keeler had last quarter about exactly what does it mean when the company says something has "shipped". Does that mean it's left the company's manufacturing plant and is en route to the packaging plant? To the retailers? I'm going to go with my Bro's definition: a product has shipped when it's on the store shelves or at the mail order houses and people can actually purchase them. And so far we haven't heard anyone say "I just bought a Jaz2 drive, it's sitting in front of me on my desk right now". So if you go by that definition, and I am, then Jaz2 hasn't shipped. The company can put out whatever press release they want-if nobody can actually buy the drive and get one in their hands, for practical purposes it hasn't shipped. Dan The Great Turkey Web Site 5+++++++++++++++++++++++++++++
Subject: Re: Jaz II... Jaz2 definitely shipped. The question is how many and how often. Certainly has not ramped up. Reports in other forums have people spotting a Jaz2 in California (a Fry's) and Iomega's Tyler Thatcher saying retail presence of Jaz2 will be in 2-3rd week of March. I think a clue to this can be found in that article about the Sony digital editing stations. How they have just starting filling their backorder with the Jaz2 capable units. How they had priority and were working closely with Iomega to assure top quality and performance in the units. That was a couple of weeks ago. Interesting that Jaz 1 demand is up at Ingram-Micro. Could it be related to the general release of Buz? I'd buy Buz for the SCSI card alone (its supposedly bus mastering), but I have concluded that I'd probably have to buy a Jaz drive to use it.
TMF Keeler A Fool and his money are soon partying 6+++++++++++++++++++++++++++++
Subject: Issue debt, buy the stock Let's toss this around for a hypothetical discussion. What would be the benefits and disadvantages to IOM if they: (1) Hired a big investment firm to issue about $200mm (2) Use the $200mm to buy back 2.5mm shares of stock at this cheap price. Show support and confidence in the co, and also probably get a good return (3) Issued the debt while interest rates are nice & low now (4) Got the big investment firm to pickup coverage on IOM since they were doing their investment banking with them. Thoughts, anyone? (Especially War- ) Burt 7+++++++++++++++++++++++++++++
Subject: Re: Issue debt, buy the stock A great subject: <<What would be the benefits and disadvantages to IOM if they: - Hired a big investment firm to issue about $200mm - Use the $200mm to buy back 2.5mm shares of stock at this cheap price. >> They would leverage the company the same way you and I leverage our own house...we take the mortgage money and put it to use elsewhere. The question is: Will IOM get a better return on the money they have borrowed if they put it to use inside the company (or buying back shares)? My guess is: Yes...based on the fact that the company is growing at a rate far in excess of whatever interest they may be paying. I think this is a great topic...despite my being of limited knowledge here and giving such a simplistic response...would love to see what our resident CPAs think. Eric Turkewitz a/k/a ETurkey _______________________________________
End Report. Posts covered through 9:00pm ET 3/11/98.
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