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Tuesday, April 21, 1998 Monday, Iomega closed at $7 1/2, up $7/16 (+6.19%) TODAY'S RECAP: Some posters wondered why the stock price moved as much as it did yesterday -- surely not the $99 ATAPI Zip drive announcement or the appointment of William M. Hake as vice president, worldwide OEM (original equipment manufacturer) sales -- while others focused on issues such as measuring growth and strength of a company (oh, Iomega for example) and even who the new contact person might be for analysts and other media folks. 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++ NovW comments on the Zip ATAPI drive and customer complaint
preparation
Recap written and posts compiled by TMF
Weekly. _______________________________ And now, the Best of the Board...Started 9:00pm ET 4/19/98. 1+++++++++++++++++++++++++++
Subject: The Right Track? (Re: ATAPI Zip Press Release) From Iomega press release: << ... The drive comes with an intuitive user's guide and installation video with step-by-step instructions for easy installation. Consumers can install the internal ATAPI Zip drive into their PCs or they can have it installed at any major computer retail service center or local value added reseller. The Internal ATAPI Zip drive features an ATAPI/IDE interface that is compatible with most PCs. ... >> Tgizip commented: <<< ... I hope that Iomega has beefed up their customer support department in anticipation of the flood of support calls that this campaign is apt to generate. Novice computer users buying sub 1000 pc's opening up the cabinet and attempting to install an internal zip is pretty frightening. ... >>> I have previously addressed some of the related issues in my earlier post: "Previously Offered Insiders (Re: Atapi Zip News Item)" The old Iomega management team might think that Customer Support and Retail were MUNDANE or might think Customer Support would be costly and might not want to deal with each and every little customer, particularly if open box installation was concerned. They might also think those little things may slow down Iomega's fast growing plan. But Iomega has been offering products that require the opening of the cabinets and installation by customers themselves, namely: SCSI Insider Zip, internal Jaz1 and Jaz2, internal Ditto, Buz, ZipZoom, JazJet, ... etc. Particularly SCSI insider Zips, they were offered but not made very much available until recently. So the idea might have been to offer them but wish them not very successful by the old Iomega management team? If true, it would have been irrational and ironic. Besides Iomega products, lots of other internal devices have routinely been sold at RETAIL that require customers to open the computer cabinets and do their own installation: namely: adding more RAMs; adding or upgrading aftermarket internal CD & DVD ROMs & Sound Cards, internal MODEMs, aftermarket Hard Drives, Graphic Cards, .... etc., just to name a few popular ones. Lots and lots of them are being routinely sold at RETAIL. They don't seem to incur unsurmountable Customer Support problems and why should we think that Iomega can't handle the New RETAIL version of Internal ATAPI Zips? ... because we may sell too many of them? It so, then it will be a VERY NICE PROBLEM to have and to solve. Particularly now we have an interim and new CEO, Sierk, Mr. Quality and Customer Support(?) at the helm who wants to strengthen up Iomega' s Customer Support. So, no fear there. This may be a good first test for Mr. Quality and Customer Support. My guess is perhaps he may be very confident or otherwise the New RETAIL version of Internal ATAPI Zips would not have been so prominently announced. I can see that Tgizip may have focused on the point of "Novice computer users buying sub 1000 pc's opening up the cabinet and attempting to install an internal zip". Tgizip may have a point there. Looking back at the press release, the New RETAIL version of Internal ATAPI Zips targeting Sub-$1000 PC Users did seem to have been overly emphasized by Iomega: From the title: << Iomega Launches Internal ATAPI Zip Drive for $99; Internal ATAPI Zip Drive Gives Existing and Sub-$1000 PC Users the Speed and Convenience of Zip Built-In>>, to its contents: << ... With the growing popularity of sub-$1000 PCs, the Internal ATAPI Zip drive providevalue-conscious consumers a way to add unlimited storage to PCs using genuine 100MB Zip disks. ... >> The Sub-$1000 PC did seem to have been mentioned repeatedly. Perhaps CEO Sierk likes the increased challenge of serving the RETAIL ATAPI Zip customers who are Sub-$1000 PC Users by offering them good Customer Support and making them happy without incurring huge costs that may render this venture unprofitable in itself to Iomega? Could be done if Sierk is that good. I think and I hope that not all Sub-$1000 PC Users are Novice users and that even most of the Novice users may find it easy enough to install the New RETAIL version of Internal ATAPI Zips without help from anyone. One very important thing though: Iomega has to make it very clear that the New RETAIL version of Internal ATAPI Zip can only be installed in a Sub-$1000 PC that has an OPEN BAY with outside ACCESS (for removable media), not just an OPEN BAY. I have seen those Sub-$1000 systems that claim to have an OPEN BAY but it was only internal open bay (only good for installing something like an additional hard disk inside). Without an OPEN BAY THAT ALLOWS THE INSTALLED DEVICE EXTERNAL ACCESSIBILITY, it will definitely be a little bit hard for a Novice computer user to install the New RETAIL version of Internal ATAPI Zip successfully. I am more confident, however, that the New RETAIL version of Internal ATAPI Zips may be purchased by lots more Computer savvy customers who use or buy either Sub-$1000 PCs or Above $1000 PCs. They should like those internal ATAPI Zips and may buy more of them now that those drives are more widely and easily available in RETAIL version at mass merchandise stores. Coming back to the question of "would more RETAIL and Customer Support slow down Iomega's fast growing plan?", I am just thinking the opposite. RETAIL and Customer Support could be the "necessary Evils" (because they are not easy to do, hard to do well, so that some hard charging, big picture oriented and detail skipping entrepreneurs may hate to do them) which may be required to make Iomega's fast growing plan successful, even when, or particularly when, OEM Zip getting inside Boxes is the ultimate goal. Sorry, hard work may be required. And no one should have said becoming the standard would be easy. The continuous Consumer-Pull generated from RETAIL may be absolutely necessary and shouldn't be let up until .... well, maybe there is no end. It would be or was definitely a mistake to let up (or simply haven't put as much emphases on) RETAIL way before the OEM inclusion rate of Zip drives reaches above 30%, 40% or so. I have expressed some similar thoughts in another earlier post Pull Inside Boxes . "Pull" there means the great Consumer-Pull strategy. I am glad that overall Iomega seems to be getting back on the right track again, in my own humble opinion of course. The right track to the fast track? Or the right track may be the fast track because the right track may be the only track to standard? Just a lay person's humble opinions. As "usaul", I may be wrong. 2+++++++++++++++++++++++++++
Subject: Re: OEM % of BUSINESS Increasing << Sorry Mark; Comparing unit shipments from one quarter to the next in the Computer business is an incorrect method of calculating whether business is growing or slowing. The fourth quarter is typically the highest sales quarters for computer manufacturers and retail sales(Christmas and End of Year purchases by corporations is the reasons). Almost all companies experience a sales decline from fourth Q to first Q. The summer time generally is a slow time in Europe. An increase or a same level of sales from Q4 to Q1 is an increase in shipments and sales from the prior year. This is the only proper analysis measurement. >> Actually, it is an almost+ completely incorrect method. For mature products on slow growth curves -- like the PC -- it's perfectly OK for there to be seasonality. PC sales grow 15% a year or so, so it should be expected that a given quarter might be below the prior quarter. Still -- and we'll see for sure when IDC and Dataquest release their first quarter numbers -- that PC sales are not nearly so seasonal as some would believe here. Take these figures for proof: Quarter end date Quarterly sales 2/97 $2.412 Billion 5/97 $2.888 Billion 8/97 $2.814 Billion 11/97 $3.188 Billion 2/98 $3.737 Billion The name of this fast-growing company? Dell Computer. The effects of seasonality? Almost completely masked by growth. Now all of you bulls claim Iomega is growing really fast and will continue to do so. In fact, it is growing slowly, in no small part due to slow growth of the mighty Zip. The first quarter was up only 13% year over year, hardly go-go, and was down nearly 30% from the fourth quarter. If Zip, which sold far less than 4 million OEM units last year, was on its way toward replacing the floppy anytime soon, its OEM penetration would rise every quarter. Given that the attach rate is below 5% at the OEM level and given that Iomega's installed base is less than 5% of the installed base of the PC every quarter should show sales improvement -- in units and percentage of PCs -- at the OEM level and the retail level. Instead, the OEM shipment total was flat vs. the prior quarter. Even if PC sales fell 15% due to seasonality, that merely meant the attach rate went from slightly below 5% to slightly above 5%. Now, I don't believe PC unit sales were down 15%, but even if they were this is not an exciting trend. Now, compared to where things were in Q1 of 1997, when the attach rate was <1%, it's good. But look at the attach rate growth curve. It goes like this(rough, rough estimates) over the last five quarters: 0.5% 2.0% 3.5% 4.75% 5.25% Anyone disturbed by that for the "new standard?" And looking at retail sales isn't getting my blood boiling either. Greenberg may be wacko, but he is right about one thing: Apparently, most people who think they need an aftermarket Zip already have one -- at least at these prices. Retail sales were down a shocking 1/3 from Q4 to Q1 -- in # of Zips sold. I'm not sure how much they were up over Q1 a year ago, but again the number is not overwhelmingly excited -- as evidenced by the smallrevenue growth overall. When we are left arguing that Q1 was OK because the Zip has moved to seasonal, I think we have left the realm where we should consider the Zip an incipient standard and most industry experts would doubtless agree. Now, I for one think Q1 was instead a disaster, but a correctable one. If I'm right, ironically, the Zip could still become the standard. If you're right -- and the seasonality we've seen is just that -- then the Zip is forever a nicheproduct and the Iomega story is probably written. 3+++++++++++++++++++++++++++
Subject: Re: NEWS Anyone else notice something different on today's press release? << CONTACT: Iomega Corp., Roy Danielle Killian, 801/778-4484 killian@iomega.com Tyler Thatcher, 801/778-4362 (Analysts/Investors) thatcher@iomega.com >> What happened to our friend, Ms. Stillings? I find this encouraging, if only for the reason that Thatcher is just for Analysts/Investors. Maybe they are learning to cater to the people who can make everyone at Iomega rich....with a little help from some future EPS. _______________________________
End Report. Posts covered through 9:00pm ET 4/20/98
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