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Thursday, March 26, 1998 Wednesday, Iomega closed at $7, down $3/8 (-5.08%). TODAY'S RECAP: Some *very* big news dropped today: the president and CEO of Iomega, Kim Edwards, resigned, and an interim president and CEO was named. Posters on the Iomega board were understandably talkative about the announcement. Some thought it was good for the company, others bad, but everyone had an opinion. Some used the occasion to post retrospectives of the company and Edwards himself. For informational purposes, the news release is being included in today's report. 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++ Waverunner gripes about Iomega (and others') ads and Iomega's handling
of its Radio Shack presence.
Recap written and posts compiled by TMF
Weekly. _______________________________ And now, the Best of the Board...Started 9:30pm ET 3/24/98. 1+++++++++++++++++++++++++++
Subject: Burnin, Burnin Who does the Apple ads? New one on tonight makes more fun of Intel. They show the G3 Tower with built-in Zip (as does NEC Direct in their new national TV ads). Unfortunately, neither ad mentions the Zip. Is a picture worth a thousand words? Anyhow, back to the Apple ad............when the Intel Space suit guy turns to dance away to the song "Burning, burning..........etc, with the space suit smoldering.........well, maybe it's just me, but I thought the ad was GREAT. On the other hand, my buddy does the national TV ad buying for Miller Beer. I keep criticizing the ads. His agency doesn't do the creative, but he defends the ads by saying the target audience responds. Guess I'm out of touch. So imagine my suprise when the 19 year old girl that works for me said how cool she thought the "Bermuda Triangle" ad was when we saw it on the Weather Channel the other day. She also told me that the person that runs thecomputer labs at the college she attends was singing the praises of the Zip drive. So many inconsistencies. I've been skipping most the posts of late. With perception what it is, and Iomega unconcerned, I'm not either. If Iomega was concerned they might have made a press release about the fact that 1/3rd of the PC SKU's going into Radio Shack are Zip equipped. Or that Radio Shack was the last of the top 30 electronics retailers to carry Zip, or that Radio Shack has over 5000 locations. None of this matters..............fools. 2+++++++++++++++++++++++++++
Wednesday March 25, 8:46 am Eastern Time James E. Sierk Named Acting CEO and President ROY, Utah--(BUSINESS WIRE)--March 25, 1998--Iomega Corporation announced today that Kim B. Edwards resigned as president and chief executive officer effective March 24, 1998. James E. Sierk, former senior vice president of Quality and Productivity of AlliedSignal Inc. [NYSE:ALD - news] and an Iomega board member, will assume the role of acting president and CEO. ``The board of directors very much regrets Mr. Edward's departure,'' said David J. Dunn, the chairman of Iomega's board of directors. ``He has been directly responsible for Iomega's success over the last four years. Under his leadership, Iomega grew from $141 million in annual sales to over $1.7 billion in 1997. Kim transformed a static, relatively small company with mature products that was suffering losses, into a dynamic growth company. The board is extremely grateful to Mr. Edwards for his invaluable contributions to the business.'' ``One of Iomega's core values has been to set and achieve unrealistic expectations,'' said Mr. Edwards. ``I believe that over the last few years our people have repeatedly demonstrated the ability to do just that. I leave Iomega confident that the management team and employees are equipped to continue this unique tradition in which I take a great deal of pride.'' Mr. Sierk, 59, who joined Iomega's board in October 1997, brings extensive international experience to Iomega in addition to his expertise in quality and productivity. During his 27 years with Xerox Corporation [NYSE:XRX - news], he served as vice president of Latin American and Canadian Operations, and vice president of Far Eastern Manufacturing Operations. ``At Iomega, we have a strong management team with substantial depth,'' said Mr. Sierk. ``Each of us is dedicated to capitalizing on Iomega's extraordinary opportunities while aggressively positioning our Zip, Jaz, Ditto and Clik! storage solutions as standards in their respective market segments. In pursuing these opportunities, our highest priorities will be setting and achieving new standards for quality and customer service in our industry.'' Mr. Sierk, by his own wishes, is not a candidate for the permanent position of Iomega's president and CEO. Iomega will begin a search for a new president immediately. The board of directors indicated that the ideal candidate would be a senior officer, possibly a president or general manager of a substantial division of a major company -- one that is preeminent in quality and customer service. Iomega wants each initial sale to a customer to be the start of a long-term, mutually rewarding experience. Iomega Corporation manufactures personal read/write storage solutions that help people manage their stuff -- anywhere. Iomega's products provide consumers with what they want, when they want it, at a reasonable price. The Company's industry storage solutions, designed for all types of computer users, include Zip(R) drives and genuine Zip 100 disks; Jaz(R) one- and two-gigabyte drives and disks; and Ditto(TM) tape backup drives and tape cartridges. Whether used in homes, business, government and education, or by creative professionals, all Iomega storage solutions ensure high levels of quality and reliability when using authorized Iomega media products. Iomega products are available through computer retail stores, resellers, major distributors and OEMs. Special Note: The statements in this release related to setting and achieving new standards of quality and customer service, and the positioning of Zip, Jaz, Ditto and Clik!, when introduced, products as the standards in their respective markets, are forward-looking statements. There are a number of important factors that could cause actual results to differ materially from those suggested or indicated by such forward-looking statements. These include, among others, the level of demand and acceptance for Iomega's drive and removable disk and tape products, the success of establishing those products as standards in their respective market segments, market responses to advertising campaigns, manufacturing issues, product shipment delays, competitive factors and pricing considerations, general economic conditions, and other factors identified in Iomega's 1997 Annual Report and Iomega's 1996 Annual Report as filed on Form 10-K, June 4, 1996 Prospectus and most recenti'' are registered trademarks of and Ditto is a trademark of, Iomega Corporation. All other product and brand names are the property of their respective companies 3+++++++++++++++++++++++++++
Subject: What leaves with KE? Ok, so he is gone. What has left with him? << "One of Iomega's core values has been to set and achieve unrealistic expectations," said Mr. Edwards. >> Vision. In order to share a vision you need a champion of your cause. Champions motivate people. Was KE a champion of some of the critical products? Issues that need a "champion:" - Clik! and its acceptance in the many industries it can potentially penetrate. * digital cameras * Microsoft Windows CE (who was working with Bill Gates?) - Buz... still a new, unproven product. - Other unannounced products? Qualities I look for in new CEO: - Vision, to reinvent Iomega - Passion, to infect and motivate the employees - Communication Skills, to work with Wall Street. With that in mind, anyone care to speculate on a new CEO and why? One last point. Apple Computer has more recently re-invented itself. This is shown in both the stock price (13-> 25+)and in Macintosh sales. This is direct effect of a new CEO ("interm" as he may be.) 4+++++++++++++++++++++++++++
Subject: The Good and The Bad
Friends, Utes, Iomegans, lend me your screens Kim Edwards reign over Iomega was marked my great success and we must not forget that. He helped grow the company's revenues 12 fold in just three years. He rescued a ship that had been wrecked on a sandy beach years before. He brought us hope and even some wealth (although it was a lot more wealth a couple years back). He did much good for Iomega and its shareholders. He also did much wrong. As we dissect and analyze that, let me say we have the benefit of hindsight, which is better than 20/20. But where we second guessed along the way, we have the write to gloat / to be angry / to criticize. We also must look ahead to the future and what the new CEO must do. KE should've buried SyQuest The company was down and all but out. It was on the ropes and bleeding from both eyes. KE should've punched it into history. He declined and the result is that SyQuest is alive and gaining strength. It may be losing money, but it's raising enough to stay alive. The result is a Jaz business in disarray, a Zip Plus business struggling against a much cheaper alternative media-wise, and perhaps even slowed Zip adoption at retail. Regardless, SyQuestcould've been erased and KE declined to flip the pencil over. A very bad legacy. Focus, focus, focus There is, in business, the notion of core competencies, i.e. What is this company good at doing? A successful business often focuses on its core competencies, especially as it tries to grow. Once it loses that focus, bad things tend to occur. Resources are wasted, attention is diverted, etc. Buz, Recordit and possibly even clik are examples of lost focus at Iomega. Zip is still it and when the company reorients itself in that direction, goodthings will flow forth. Operations This company is an operational backwater. That doesn't come as much of a surprise given the rapid growth. But please, can we get this thing figured out for a change. Product delays, product delays, product delays... Enough already. Tell us when you ship it, stop Microsoft-ing us with announcements well ahead of the fact. That way we can't be disappointed. Ego KE knew better. Too much better. He knew his pricing on Jaz was fair and right. He was totally and completely wrong and blind. When Jaz arrived, 10 cents/MB was fair for media. Today, it is insanely high. Jaz will never cross over at these prices. It is not big enough in base to be a cash cow, either. Nutty decision-making. This is but one example. Advertising The ad campaign sucks. And I'll tell you why. KE said that if people don't know why they need a Zip, price cuts wouldn't help. Well I don't know how the ad campaign is selling Zip drives... The Zip is good for:
1) backup of important files Tell us about those things -- specifically -- and explain how they are valuable. Or else don't bother wasting the money. I'm sure OEMs wouldn't mind the price cuts at all. Iomega could've taken $10 off the price of 10 million OEM drives in lieu of the increased advertising. I bet that would still sell a lot of drives to OEMs, don't you? Price Which get us to price. Which Iomega doesn't seem to understand anymore. Jaz and Jaz2 are ludicrous, especially the media. Zip Plus is comical. Zip is now expensive relative to the price of a sub-$1000 computer. Iomega needs to wring out costs like crazy. And it needs to sacrifice some margin now to lower prices. Real companies that go on to dominate their markets often have to do that. The Zip has been made like 15 million times by now... Itisn't complicated... Where is the single-chip circuit board? Price, price, price follows focus, focus, focus on the list of the top 10 most important things for Iomega to deal with. Microsoft raises prices over time because their is no choice for OEMs. In the beginning, they made it too cheap to say no, too cheap to select DR-DOS, or Geoworks, or MacOS for that matter. OEM Pry, lie, cheat, steal, maim, spindle, bend, fold, mutilate but do whatever it takes to get a real OEM deal that goes the distance. Dell will sell about 6-7 million computers this year and somewhat more next year. Get a Zip in every last one of them on the desktop (maybe 5 million or so). Pay the money to do it. Make it happen. Prove that people care. That is worth more than the ad campaign. Hell, offer the deal to Dell and Compaq and tell eachthat whoever signs up first gets the deal and sweeteners going forward, the other will have to pay their fare going forward. You want to win then play to win. Don't play the same prissy game of "Please, Compaq, give us one more SKU....." Make it happen, you did with Micron. It cost money today. So what. It was worth it. Now fry a much bigger fish or stop telling us your No. 1 priority is more OEM Zip sales. clik Spin it out of the company unless you intend to make a Zip caddy for it. If not, it's an annoying distraction. You're not gonna build it yourself anyway. If you're not willing to make it Zip compatible or spin it out then kill it. Zip is it, for crying out loud! 5+++++++++++++++++++++++++++
Subject: Besecker on Resignation Bloomberg interviewed Joe Besecker of Emerald Research regarding the resignation of Kim Edwards. Some highlights of the interview are as follows (my paraphasing and emphasis provided): -JB said he was completely surprised by the resignation - he stated that he learned that the Board and Edwards wanted to go in different directions. The Board wants to move away from running the company like an entrepreneurial, marketing driven company focused on goal of $3 Billion in sales to a company focused more on quality-control, manufacturing, and customer service with a goal of $10 to $20 billion in sales. -Bloomberg asked JB about competition being IOM's biggest problem. JB stated that he still does not see any competition that poses a truly serious threat to IOM at this point. Syquest- not enough production capabilities. LS-120- no significant impact and everyone acknowledges that it is a failure; Sony- no one has ever seen it, it remains vaporware, and does not appear to be a viable threat for the forseeable future. Besecker's opinion on IOM's biggest problems: 1. Nomai - the possibility of knocking off the bread'n'butter disks 2. Hard drives are getting larger and cheaper, and the need IOM products for primary storage at their price points is diminished 3. the trend towards sub $1000 computers. Hardware makers must keep costs (and thus, bells & whistles) down in order to make a profit. He said IOM must maintain their aggressive goals towards more prevalent OEM inclusion. 4. Leading to the last point -- IOM must get the pricing down on their products. JB would have prefered the $100mm cash set aside for the ad campaign to be put towards price reductions. While he was not against an ad campaign, he stated that $100 million was much to much off of the bottom line. He said Wall Street was surpised by the announcement of the $100 million ad campaign and "Wall Street does not like surprises." Current Ratings on Iomega: Short Term - Neutral Long Term- Buy He said current owners should hold. New buyers must have a long term perspective. He still believes that the long term potential is still there. 6+++++++++++++++++++++++++++
Subject: Re: 3b-10b << I'd rather have a profitable $3 billion company than a marginally profitable $10 billion one. I assume the Board may be hinting at an accelerated OEM pricing relationship to put the "standard" question to bed once and for all. KE was tring, quite successfully for awhile, to have both a strong growth and highly profitable company. >> Think small, be small. That is one of my many mottoes. Iomega isn't looking to be a marginally profitable $10 billion company, it's looking to be a $10 billion company -- let the rest take care of itself. Example: Zip drives.... Sell them to OEMs at $45, build them for $30. Get into maybe 25% of the market over five years... Nice, but not amazing. 30 million drives sold that year, etc. etc. Sell them to OEMs at $35, build them for $30... Get into maybe 65% of the market over five years... Use the volumes to drive costs down lower than the above scenario. By year 5, you are looking at $20 cost, $25 price... Above you have $25 cost, $35 price... The profit margin is lower, but the market is sooooo much bigger. Think small and you WILL BE SMALL. Think big and you have a chance to BE BIG. 7+++++++++++++++++++++++++++
Subject: Re: 3b-10b I remember when Creative Sound Blaster, Hayes, the list goes on used that bigger is better philosophy. I agree, the OEM market must be captured. The tie ratios stink, and they won't get much better. Volume will appear to make up for this, but not long term. Iomega's "risky" ad strategy wasn't any riskier than attemting to flood the PC world with cheap drives. Although IO appears to have the "standard" better than most, they are on shaky ground at best. The company needs to contniue to fight the battle on both fronts, retail as well as OEM. Retail got them to the dance with margins, OEM's will hopefully contniue the spread. So, Mark, I generally agree with your OEM argument on volume as it relates to the age old problem of becoming the standard device. But the company doesn't have the capital to make that dream a reality right now. Perhaps the licensee crowd is finally ready to step up to the plate in volume? That would take the lower margin production pressure off of Iomega right now. I see the OEM market becoming a little less enthusiastic right now towards the Zip. The drives need to be in all machines, not just certain higher-end models. To conquer that market with volume, Iomega will have to become primarily a disk maker, not a drive maker. Otherwise, the company begins a risky 12-18 month venture to live off of slim drive margins and their disk revenues. They need to achieve about 20 - 40 million drives per annum just to be in the ballpark of those goals. During that time, the tie ratios will not grow at a phenomenal rate. I suspect lower disk prices will ensue, lowering margins yet again. This all assumes no real great contribution from Clik or other products. I believe that the ad campaign might very well be viewed as a good try that could be shut down at any moment. The next step I think the Board will make cannot be shut off easily. It's a make or break it scenario. Just bouncing thoughts here, feedback appreciated. 8+++++++++++++++++++++++++++
Subject: Re: The Good and The Bad << There is, in business, the notion of core competencies, i.e. What is this company good at doing? A successful business often focuses on its core competencies, especially as it tries to grow. Once it loses that focus, bad things tend to occur. >> Mark, I admire your urge to hold the high ground in the aftermath of today's announcement, when all around you people who should lose their heads are being hanged. But don't lead these folk to conclude that a "core competency" is synonymous with "a product". Iomega's core competency (if Bullishness permits us to identify such things anymore) was never the Zip Drive. Rather, it was the ability to adapt consumer-lifestyle marketing to a pretty boring technology niche and create strong brand identities capable of driving explosive retail growth and extended shelflives. The formula worked spectacularly with Zip, exceeded expectations with Jaz, and is being employed to do it again in another market with clik! (Iomega's other products are companion pieces, designed to fill out the complete consumer storage experience ore than they are to stand alone. I don't think it's fair at all to confuse them with a misplaced focus, any more than it would be to deride MSFT for manufacturing keyboards.) Assuming the company learned anything during the KE years, that competency will survive any specific product bearing the Iomega name. _______________________________
End Report. Posts covered through 9:00pm ET 3/25/98.
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