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Thursday, April 02, 1998 Wednesday, Iomega closed at $6 15/16, unchanged. TODAY'S RECAP: Iomega message board posters began discussing the potential of the last quarter and what news might (and might not) appear at the upcoming conference call. Jaz2 shipment and availibilty was a serious point of contention, while other issues debated included the newly-released 10-K, other Zip drive products and Iomega sales and earnings. 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.
1++ ETurkey responds to reports of Jaz2 shipping and availability.
Recap written and posts compiled by TMF
Weekly. _______________________________ And now, the Best of the Board...Started 9:00pm ET 3/31/98. 1+++++++++++++++++++++++++++
Subject: Re: Jaz2 - MIA GMoney0214 responded to my missing-in-action Jaz2 (from one of the biggest computer stores in NYC) with this piece from the SI boards: << Update: Ingram is showing a few hundred jaz2 internal and ext. at different locations and then they are sold out....then an hour later a few hundred more show up and then they disappear. >> I am aware of the Ingram information that has been posted here on a few occassions, and I know that CayugaDan confirmed that he had received some Jaz2 drives, and I think at least one person (LarryChief?) said they had received a drive from Dan, so I don't think there is any doubt that there are some drives out there. The questions are "How many" and Why did Iomega announce (and then re-announce) a product that clearly was not available to the mass market? J&R is a big place. Just a few weeks ago I reported that an Iomega rep was in the store doing a demo for the Buz (running it off a Jaz2 that the rep had, but not the store). The rep would not be there if J&R was not a significant customer of Iomega. The rep said that Jaz2 would not be in the store any time soon (you'd have to go back to my original post to find the exact words). My first point about J&R not having the drive, was that if it was not available there (and that they still had no ETA), then it was most likely not available in any kind of volume to make an impact on Q1 earnings, and that investors should be prepared for that eventuality when the conference call comes in a couple weeks. My second point, about managment blowing this sky high, may be a moot point as we await the shakeout that results from the Edwards resignation. That issue depends on who stays, who goes, and who made the strategic blunders. 2+++++++++++++++++++++++++++
Subject: 10-K Info I read the 10-K earlier today and found the following info that may be of interest: 1) KE has not resigned as a Director of Iomega (yet). Although Sierk's signature appears as Acting CEO and President, Kim Edwards did sign off on the 10-K as a director. I don't know what this means short/medium/long term. Is he going to remain as a director? Will he resign his directorship before/after the Annual Meeting? 2) Lots of new Nomai (related) suits in Europe and Australia. The lawyers are certainly being kept busy. The 10-K can be found at Free Edgar (www.freeedgar.com). 3+++++++++++++++++++++++++++
Subject: Addonics Zip Drive/ Random Thoughts I was unable to locate a web page for Addonics Zip drive but I did find a web page for Microtech International that makes a MicroZip. Here is the address and link: http://www.microtech-pc.com/english/products_microzip.html MicroZip They claim to have the worlds Smallest Zip drive. Length Width Depth Weight MicroZip 148mm 140mm 17mm 250g Pocket Zip 178mm 112mm 23mm 369g Another product some maybe interested in is the ZipXpress. http://www.microtech-pc.com/english/products_zipxpress.html ZipXpress <<The ZipXpress is a PC Card to Zip Drive solution equipped with a Micro Power Management System(tm). This highly innovative system efficiently utilizes power consumption, allowing the user to power the drive through the notebook's PC Card slot and finally leave those cumbersome AC adapters behind. >> <<Available in SCSI and Parallel version for the SCSI Zip Drive and Parallel Zip Drive, respectively. >> I did not know this product was being made for PP Zip drives. I still do not feel that any of these products will add significantly to IOM's EPS. These are Niche products. I believe as many here do that Zip, Plain old Zip100 is it. They need to push and pull Zip100 at the OEM and retail level. Someone here once mentioned here that IOM should use some type of OEM promotion. I agree. They should give a sales bonus to every sales person that sales a Zip drive with a new system. $5-$10 for every OEM drive sold to the sales person? Maybe that would have all the sales people at Micron, Gateway, Dell, CPQ asking customers "Would you like a Zip drive with that order?". Has anyone thought IOM might release a higher capacity Zip drive to spur revenue? I have given this some thought and feel that it might be in the works. Not that I believe this is the right course but it is a possibility. I feel that if revenues do not start to pick up we will see a higher capacity Zip drive in the very near future. They've got to get revenues up enough to cover cost or they will continue to lose money. How do they increase revenues? 1) Advertising? 2) Lower Pricing? 3) New Products? I have yet to see the benifit of the current advertising program but it may yet produce the desired results. I personally don't think lower retail pricing will increase revenue and may even lower revenue. I think the same can be said for OEM also. I have no idea what Zip OEM pricing is but $50 is close enough for discussion. At $50 anyone that wants a Zip built-in will get it. A $10 reduction in price IMHO will not produce any or very few additional Built-In Zip sales. When someone has to ask for the drive to be included they already have a need forthe device and $10 is not going to infulence their purchasing decision on a $50 product that they already view as necessary. I'll be the first to agree that OEM pricing is one of the Keys to the "Standard". If OEM pricing were $25 would OEM's put it in every box? I personally don't think they will unless there is enough demand from consumers. I see the fight as first getting enough PC buyers asking for Zip drives that the OEM's actually consider making the drive a Standard and then IOM would need to come forward with some Great OEM pricing. Currently I see very little need for "Great" OEM pricing. New Products...........Well IOM just has not done anything spectacular in this area in the past concerning non-core products so I don't get too excited about this going forward. As usual I could be completely wrong. As many know this subject matter is way out of my normal line of work. 4+++++++++++++++++++++++++++
Subject: 16 days Sixteen days until earnings are released and the subsequent conference call. The first time since the warning and KE's resignation that anyone at Iomega might have to answer a question live. Probably sixteen days of continuing banter between people here about SyQuest products. I believe that is a waste of time. Syquest is at most a gnat buzzing about Iomega. Sixteen more days of Jaz2 channel checks, which is probably the only concrete information us small investors can get. The checks lately show that Jaz2 continues to ramp up. Hard to tell what is happening to Jaz1; I'm sure that Iomega has already cut back on production there to what they think are the forward sustainable sales. The shipment of these micro-Zip drives would signal to me that laptop Zip components are available in sufficient quantities (unlike 4Q). This is going to be a terrible quarter. The question all Iomega longs (and shorts I suppose) should be pondering is whether this is a plateau or a peak. I just don't think there is enough information to decide either way for another sixteen days. Unless you've determined that this is a peak than $6-7 seems just too low to sell. I believe that Iomega is the leader in the removable storage industry and that this industry grows with bandwidth. Bandwidth (using internet connections as a proxy) is doubling every 3-6 months. Until I hear the call in sixteen days its hard to figure out if Iomega is where Creative Labs was not too long ago (traded down to $6 as SoundBlaster transistioned from retail to OEM dominant sales). Creative Labs had a tough time but has proven, for the umpteenth time, that any company with a strong consumer brand name, large market share, and a dominant distribution system can usually work things out and emerge stronger. Creative Labs troubles came right when the SoundBlaster actually became a must have add-on. I don't think the same can be said for Zip; but as long as they keep selling, the installed base continues higher. In fact, maybe the most important info is that info which used to be freely given. Those milestone announcements. What if Iomega comes on the conference call and announced 16 million Zips shipped worldwide? I would be stunned bullish. What if they said 13 million Zips shipped worldwide? I would be stunned bearish. Ouch. I suspect something near 14 million. If Iomega had not stopped milestone agreements we would probably know much better where this number is and the overall health of the product. For 1999, imo, the most important fundamental fact is the size of the Zip installed base exiting 1st half 1998. 5+++++++++++++++++++++++++++
Subject: Re: Who is J&R? << ""The Jaz, which unlike SparQ offers SCSI, continues to be an unusually Mac-centric product in an increasingly PC world." ..I'm not too sure what this means/implies...could you flesh this thought out Mark??.. ..thanks.. >> Flesh here.... Mac users cannot use SparQ at all. Mac users in graphics need big removable drives. A highly disproportionate number (vs. PC sales) of Jaz drives are sold to Mac users. Ergo, the Jaz2 will likely do well among Mac users. J&R is a major Macintosh dealer (very seriously major according to people I've spoken with at Apple and J&R). That a major Macintosh dealer doesn't yet have Jaz2 just shows how small the supply is at this point. While J&R is small compared to MacWarehouse (who isn't besides MacConnection?), it is important / big / visible in the scheme of things. I'm sure they'd love to have Jaz2 and the requisite sales it'd bring. But they can't yet because the supply remains small. By the way, Fry's Palo Alto has its first Jaz2 in stock -- internal only, no disks. First I've seen them at retail in the S.F. Bay Area -- also a Mac stronghold. 6+++++++++++++++++++++++++++
Subject: Re: Jaz 2-orders arrived Newbunch: << I would have to go with number 3. Iomega does not record sales until the end user purchases the product. As long as Insight has the Jaz drives and disks in inventory, they will not be included in the sales figure. They will be included in IOM's inventory figures. >> Michael, your reading of how Iomega books sales is slightly errant. Iomega books sales not when an end-user actually purchases product (a fact they can't really know accurately), but when channel inventories are at or below certain prescribed levels. When certain numbers of drives back up at distributors and key retailers, the channel is overstuffed and the product beyond a certain number of projected days' sales is not counted as revenue. Jaz2, on the other hand, has no channel inventory and an order backlog of what is doubtless thousands of units. Iomega could recognize all Jaz2 revenues as soon as the product ships (save for the standard allowances for returns, defective product, etc.) and almost certainly will do so for whatever shipped by 3/31. This would *not* be a change in policies for revenue recognition. To give you an idea of why this is important, consider a scenario in which Iomega shipped 20,000 drives and 20,000 disks on the last two days of the quarter. The drives would be worth $8 million in revenues (roughly) and the disks would be worth about $2 million. The gross margin on the drives might add $3 million to earnings while the gross margin on the disks might add another $1.5 million. All the gross margin would drop straight to the bottomline because all other costs -- save a trivial amount for shipping -- were already fixed for the quarter regardless of whether those shipments occured. Those additional margin dollars would total about $4.5 million and would contribute close to 2 cents to earnings for the quarter. Those 2 cents could go a long, long way toward determining the perception of Iomega's results after the pre-announcement. The question is: How many drives and disks made their way out of manufacturing and off the loading docks in the quarter's final days. And it's a big question. _______________________________
End Report. Posts covered through 9:00pm ET 4/1/98.
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