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Friday, April 03, 1998 Thursday, Iomega closed at $7, up $1/16 (+0.90%). TODAY'S RECAP: For no apparent reason, the whole issue of SyQuest -- as competition or as dismissable company -- took over the Iomega message board yesterday. Posters shares ideas on the depth, importance and effect of the SparQ drive, specifically on sales and earnings. Also, some posters provided news about clik! drive shipping dates (August, according to a Citizen press release) and Iomega product advertising. 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++ Doc Jimbo briefly compares Iomega to Creative Labs -- before and after
the fall.
Recap written and posts compiled by TMF
Weekly. _______________________________ And now, the Best of the Board...Started 9:00pm ET 4/1/98. 1+++++++++++++++++++++++++++
Subject: Re: 16 days Pat- I'm glad to see you recalling Creative Lab's problems. << 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). >> You may recall that I've been fond of bringing up Creative's story in connection with IOM from the very beginning. But you have to remember that what hurt Creative was that there were Soundblaster imitations that forced Creative's margins down to nothing. Even though they dominated the volume, the gross margins were poor. Let's see how Iomega's margins look once earnings are out. Without major price movements in Zip drives, I don't see margin pressure there for Iomega. Just slower sales. Ultimately, I was convinced at the last go-round that the floppy will be replaced since 1.44 MB is ultimately too small to be useful in an age of digital media. Personal removable storage will be a permanant fixture of PCs and I see no reason to believe that Iomega will be displaced as market leader. I'm afraid you'll have to wait longer than just this quarter to see how it all turns out. But history suggests there will be many bumps in the road to further market dominance. I agree that, given the potential, current price levels are cheap. They emphasize short term earnings fears. 2+++++++++++++++++++++++++++
Subject: ..clik! this.. Nikkei BP AsiaBizTech - 31-Mar-98
http://www.nikkeibp.asiabiztech.com/Database/ << Citizen Watch, Iomega to Develop Removal Drive Tech March 31, 1998 (TOKYO) -- Citizen Watch Co., Ltd. said it signed an OEM contract with Iomega Corp. of the United States for manufacturing Iomega's compact removal disk drive called Clik!? and joint development of products based on that drive. Under the agreement, Citizen Watch will manufacture the Clik! Drive, distribute it globally and supply it on an OEM basis to Japanese and overseas manufacturers. The announcement was made at the CeBIT trade show in Hannover, Germany. Citizen will start distributing the device in August. "Clik! Drive" is used as an insert in a Type II PC card slot. Data is read and written on a 40MB removal disk called Clik!? Disk. >> << Matsushita Communication Industrial Co., Ltd. also is interested in an OEM licensing agreement for "Clik!." According to Iomega Japan Corp., a similar contract will be made with Matsushita Communication Industrial. >> 3+++++++++++++++++++++++++++
Subject: Re: ..clik! this.. Nice find, huibs! Looks like clik! is pulling ahead of the Sony Hi-FD in the race to end its vaporware status. Let's see, on the clik! side, we have a confirmed manufacturing licensee, endorsement from several industry leaders, many demonstrations of working models (at comdex, PDA, etc), a leaked commitment to OEM the drive (Polaroid, thanks to HeyKerry), a bunch of marketing, and a device that already has the drive built in (Hitachi camera at clik!'s debut in the Rainbow Room). On Sony's side, we have......? I'm not going to compare announced shipping dates, because both products have had delays, and we all know IOM's reputation for shipping dates anyway... But I'd say (from my of course biased shareholder perspective), that it's looking more likely that clik! is going to be a hit than it is that HiFD is going to be one. MHO, of course. 4+++++++++++++++++++++++++++
Subject: Re: Keeler's Return << In Fry's today, I saw 50 SyJets and 20 SparQs go on the shelf from a new shipment. Disks too. These things are moving, at rates that are absolutely, positively eating into Iomega's sales. When Netscape had 90% of the browser market, it could blithely ignore Internet Explorer -- but only at its own peril. I am sure SyQuest is no longer being ignored by Iomega, and with very good reason. >> This is absolutely true and I believe that anybody who tries to deny it is just lying to themself. Jaz is NOT strictly a high end, educated market where compatibility is essential. This is a major segment of Jaz users, true (ie, the graphics and ad professionals whom www.fourinchsquare.com is aimed at), and a very important segment. They are the segment that was in mind when the Jaz was developed. But they are absolutely, positively, NOT the only people who buy Jazes. Jaz has sold what, nearly 2 million now? Are there really that many people in that segment? What are people buying SparQ for? I'll tell you why. The same reason that they are buying Zips and Jazes. Backup, storage of internet files, running apps, storing video, archiving, college professors holding a semester's worth of PowerPoint lectures, people carrying huge data files to and from work... the list goes on and on. They have the same use for their SparQ as Zip and Jaz owners have for their drives. There is not some new segment (save the "I need the latest toy" crowd) or niche which only buys SparQ. SparQ didn't create any niche. They lowered the price point of Iomega's niche and are stealing IOM sales. Period. People either develop the need for a high capacity removable storage device, go to the store, and see SparQ as a much lower cost alternative, OR, they already have the need and have been holding off until a lower cost alternative (either a cheaper Zip/Jaz or a new product) is available. Either way, it's money that IOM would be getting if they had lowered prices and killed SYQT. I immensely respect your viewpoints and postings, Patrick, but I don't see how anybody can deny this. 5+++++++++++++++++++++++++++
Subject: Re: 16 days Nice to hear from you, Doc. However, I would have to disagree that current price levels are cheap. Remember, the board split the hell out of the stock, there are tons of shares outstanding, this Q will be a loss and the rest of the yr doesn't look so hot vs last year. The PE based on 1998 ests of .23 is about 30, very high for a no-growth company (for now). There is no CEO, but still there is the infantile board with their terrible communications skills. Mgt has made some major missteps that have hurt. I think the stock is worth about 5 now. My opinion & enthusiasm will turn around 180 degrees if: - This Q is not as bad as thought - IOM quits being so arrogant on their pricing of Jaz/2/carts for both...they are leaving the door wide open! - There is some evidence that international sales have improved. This is a major blunder. At this point Europe should be skyrocketing the way the US was 1 1/2 years ago - IOM gets off the Zip Plus thing so much. Drive Zip into evry computer is the US (a goal, of course). All I see advertised is Zip Plus for $199. Not very appetizing. - Clik actually appears AND there is evidence that it is taking root. 6+++++++++++++++++++++++++++
Subject: Re: No syqt threat I hate to continue this thread but people seem stubborn. Syquest has zero impact on Iomega in my opinion. Maybe Iomega management does want every single sale as the local CompUSA has a huge number of refurbished Zip drives and some refurb Jaz drives very cheap ;-) Further, please don't say myriad SYQT neophyte posts is a proxy to measuring market "mindshare." I'd bet 9 of 10 removable storage buyers have never heard of Syquest and 8 of 10 would not even think of buying anything but a company they knew. Iomega is going to be profitless this quarter because Zip drive sales slowed and the company just started a huge advertising campaign. To suggest Zip drive sales slowed because of SparQ is illogical since even SparQ sales at the most lofty hyped up numbers are a drop in the bucket compared to Zip sales in the 4Q. Zip drive sales slowed most likely because OEM demand dropped from 4Q levels. Iomega is not missing the quarter because of Jaz sales slowdown. There is a slowdown true but not because of SparQ. I would think anyone who wants to buy a Jaz would wait for Jaz2 to be an option. The SparQ is 18X slower than the Jaz...so the serious user (the target market for Jaz) would not equate the two. It is not necessary for any company to have 100% market share and the return on the extra few points of market share for Iomega would not be worth it. Jaz should be positioned as the top of the pyramid; not dumbed down and cheapened to try and get every non-Zip sale. Further, selling Jaz to people dumb enough to equate it with SparQ would cause lots of added tech support costs. No company has made any money in the extremely small niche between Zip and Jaz. What makes anyone think Iomega can? Would it be heretical to suggest that Iomega does not move Zip and Jaz price points to address this market because you can't make money there? That maybe the only place to make money in removable storage is the floppy slot (or its very popular substitute) and the very high end? Nah...better to continue with the fantasy and ignore the last 10 years of removable storage industry history. A history that shows money made at the top end and the floppy end and not between. Remember the Bernoulli? A middle product between floppy and high end (SQ 270)? We should have kept that product to compete with M-O, SparQ, et al. Must have been some reason why Iomega discontinued Bernoulli. BTW, why is M-O is dead now, PD gone, EZ-Flyer, SQ200, SQ270 all gone...its a dead end between low and high end. One look at SYQT's Income Statement shows there is no return on investment competiting between Zip and Jaz. 7+++++++++++++++++++++++++++
Subject: 12 page spread in CRN There is a big 12 paage iomega spread in this week's Computer Reseller News, Storage Solutions Zip Jaz Ditto Clik! Big, clear pictures of Clik! drive. Actual size Clik! disk Very impressive Clik! is obviously very advanced in its development. I'm beginning to beleive we will see this year _______________________________
End Report. Posts covered through 9:30pm ET 4/1/98.
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