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Friday, August 23, 1996 Iomega closed up $2 1/8 to $15 3/16 (+16.27%) yesterday. TODAY'S RECAP: Iomega shares scored a nice 16% rebound in Thursday's trading. Fools were cheered by the news, but most seemed reluctant to break out the champagne just yet. Hey -- a relentless, 13-week, 80% drop can make you a little bit wary of one-day price moves -- however welcome they may be.
There have been a few small tidbits of news:
>First, from the newswire: "LinkPro Inc., a leading publisher of Windows utility software, Thursday announced that PowerSync Versions 2.0 and 3.0 can be used with removable media drives such as the Zip Drive from Iomega." AOL members can access the complete story at Keyword: Quotes.
>Analysts at Emerald Research have issued an update on Iomega, reiterating their long term "buy" rating on the stock but lowering the near-term rating to "neutral." Details of the report are recounted below.
>Finally, there was quite a buzz going in the folder about an ad in Gateway Magazine which strongly features the Zip Drive. Parts of this thread have also been captured for you below.
Written and compiled by MF Numbers, MF Cheeze and MF Jeanie. Edited and mailed by MF Selena. Kudos? Gripes? Questions? Let us know.
And now, the Best of the Board... Started 3 a.m. 8/22/96. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Zip v DVD (and CDROMS) Date: 96-08-22 03:09:02 EDT From: TESullivan Posted on: America Online
Regarding the notion that writable CDROMS drives and writable DVD drives (when they become available) somehow are in direct competition with the Zip or Jaz drives:
Rewritable CDROM and DVD disks can only be written to one time and one time only.
Zip and Jaz disks can be written, erased and rewritten to for virtually an unlimited number of times.
This means the the only competition that comes into play is for: Original software product deliveries Permanent backups of data. (And I stress Permanent)
Most businesses and individuals cannot afford, and will not put up with having to buy non-reusable backup media.
My point is that DVD and CDROM do not compete directly with Zip, Jaz or Ditto.
TS ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Iomega's PEG Date: 96-08-22 05:24:04 EDT From: AJBoese Posted on: America Online
>>Well it seems like this info will get posted into a vacuum but what the...
Iomega's Fool Ratio (PEG):
Present price = $13 1/8 Trailing 12-month EPS = $0.29 Mean Analyst forecast Dec. 1997 = $0.87
PE = 45.3
Annualized Growth rate = ((.87/.29)^0.67-1)*100
= 108.8
Fool Ratio = PE/Growth = 0.42<<
Perhaps, given the current state of confusion on these boards, it is just speaking into a vacuum, but I thought I'd try to continue your analysis anyway:
You use a 1 1/2 year time span to calculate Iomega's PEG. I transposed that onto a 2 year time span (just because 1 1/2 is an awkward time span) by assuming that Iomega will make 0.44 cents in 1996, and then assuming that it will make $1.30 by 1998. I won't do the math here (if you're like me you just skip over the calculations anyway), but, trust me, you end up with the same buy and sell points that you arrived at:
buy at 15 3/4 or lower fair value at 31 sell at 44 or above
What you don't explicitly state (nor did the analysts) is that this assumes that Iomega will grow at a rate of 72% a year going forward, slowing down considerably from the 500% it's achieved in the past year.
But this is the crux of the matter: just what growth rate will Iomega now be able to achieve going forward?
I'm still hopeful that they can achieve 100% growth or better in the next few years. I base that hope on what I know about the product, the fact that OEM's are just ramping up, and the fact that the market which Iomega still can potentially tap into is huge.
If Iomega can sustain 100% growth and earn, say, $1.75 in 1998, then this would bring the current Fool ratio down to 0.29 (a strong buy). It would make $21 or less the target price $44 would be fair value and $61 would be the selling price.
Of course, the bears might be right. In this scenario, if Iomega's growth slows down to 40% a year, then it's current Fool's ratio would be 0.87 (a hold). The Buy price would be $9 or less, fair value would be $17.75, and the Sell price would be $25.
Will Iomega achieve 40%, 72%, or 100% growth going forward?
That's the $60,000 question.
One more thing:
If you put any faith in the Fool ratio at all (and it's obvious that a lot of people here couldn't care less about it), then to be a seller at this price you would have to believe that Iomega's annual growth rate will slow down to a snail's pace of about 20% (which wouldn't be bad for most companies, but to go from 500% growth to 20% the next year would be pretty atrocious).
For a 20% annual growth rate, the Fool ratio would place fair value at around $10, and only at $5 would it give a buy signal.
--alex ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Smart Money Date: 96-08-22 09:35:46 EDT From: JOHKGUN Posted on: America Online
On one of the article of the SEPTEMBER issue of Smart Money, 5 tech stocks were selected as bargains from thousands of tech stocks after recent correction; And one of them is usrx(US Robotics). The reason Smart Money think that usrx is a bargain now is it is selling at carryforward FY97 p/e of 16 and it is growing at 35% annually. That article continued to say that anytime when a company is growing at 35% annually and it is selling at p/e of 16 is a bargain! Then, how about iomega? What is its growth rate? From what I gather from this board, 50% growth rate annually seems reasonable. BUT then, what is its carryforward FY97 p/e? at current price of $13 a share, it is $13/$0.87=14.9! So, ask yourself a question: Is it a bargain when a company is growing at 50% annually and its carryforward p/e is 14.9?
regards, jo ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:EPS Date: 96-08-22 11:00:08 EDT From: MF CapnWil Posted on: America Online
Burt,
The second quarter earnings of 11c was a growth in revs of 28% and a 40% profit growth. So it seems to me that the 3q est of 11c represents a large drop in growth to in order to be flat.
I would hope that IO can at least maintain a flat 3rd quarter, but I would not expect any higher earnings than 11c.
The 4q 19c is a large percentage growth over the 3q est of 11c, however, it is during the peak season where 70% of the computers are sold, and the Jaz ramp up at Seagate and Penang should be farther along. So 19c may not be too optimistic. We should also be seeing some results of the OEM's during the fourth quarter. But, because there could be ramp up delays, I certainly would not want to consider any estimate above 19c at this time.
Bill ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Zip v DVD (and CDROMS) Date: 96-08-22 11:21:57 EDT From: MF Ben Posted on: America Online
<<<Regarding the notion that writable CDROMS drives and writable DVD drives (when they become available) somehow are in direct competition with the Zip or Jaz drives:
Rewritable CDROM and DVD disks can only be written to one time and one time only.
Zip and Jaz disks can be written, erased and rewritten to for virtually an unlimited number of times.>>>
TESullivan,
The definition of "rewritable" means it can be written to over and over and over and over. DVD will not be rewritable until 1988+ but it WILL be rewritable.
I agree that the idea that DVD is competition with Zip is crazy, especially since DVD will not truly be a re-recordable media for two plus more years. "DVD, Storage, and You," my three part diatribe written in April on the subject, can still be found by doing a Fool search for it.
Just wanted us to be clear what "rewritable DVD" actually meant. :-)
Cheers,
Benjamin ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: % problems Date: 96-08-22 11:54:55 EDT From: CayugaDan Posted on: America Online
Its seems to me that its not outside the laws of probability for Mr. McConathy to be experiencing a 3 to 3.5% failure rate (he said under 4%), and for the total return rate to still be under 2%.
Why would McConathy's rate be higher than others? (BTW, I am not saying that it is). There are lots of possibilities. 1. Luck, the way the cards were dealt. Whatever you call it it happens 2. McConathy's drives are older version. 3. Something on McConathy's end. For example, the way the drives are packed and shipped. 4. McConathy's users may be tougher on the drives in some way than the average user.
Please remember I am not saying that any of the above is true or that ProMax has a higher failure rate. I am only bringing up some possibilities for thought and discussion.
Dan Rapaport Cayuga Computers ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Gateway Magazine article Date: 96-08-22 13:47:19 EDT From: Lyn1360 Posted on: America Online
I'm looking at it now. Story re-iterates the serious problem of filling up even mega hard drives. "At this pace, today's jumbo super big boy hard drive, the 3GB, will probably be known as "Mr. Tiny" in a year". It then goes on to introduce the zip by saying "Relax, Iomega cometh to slay that multigigabyted dragon. The harshly practical Iomega zip 100 external, removable storage device offers a remedy for the data cesspool that has turned your C drive into something that's too scary for children." It continues to portray the Zip as truly awesome. Great ad. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Bundes Bank Helping IOMG? Date: 96-08-22 15:38:00 EDT From: ClaytonL Posted on: America Online
My guess is that the cut in interest rates by the Bundes Bank in Germany should help IOMG. When discussing the 2Q results, KE mentioned that the European weakness was particularly acute in Germany. This new move should give the German economy a shot in the arm and therefore help IOMG out. That's probably why the sharp price rise today. With a little luck, 3Q will not be as challenging in Europe after all. We'll see.
Jim ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Emerald Date: 96-08-22 15:43:58 EDT From: Ken1Marcus Posted on: America Online
>>* Estimates in italics ignore 1996, Emerald Research Internet: www.emeraldresearch.com * Estimates in italics Key Points
We remain bullish on Iomegas long term prospects
We see no catalysts that would strengthen the currently low price in the short term
It is especially important for Iomega to be positioned to develop and meet demand during the Christmas period Recommendation
Long term buy
Short term neutral Special Situations - Coverage Update Iomega Corporation IOMGNASDAQ August 20, 1996 Joseph E. Besecker Stan Corker Joseph W. Garner (717) 396-1116 Price (August 8, 1996) 13 7/8 52-week Range 2 3/4 - 55 1/8 Dividend none Yield nil Market Cap $1,837 MM Book Value $2.23 Trading Data Shares Outstanding 132.4 MM Avg. Daily Vol. 8,956,000 Earnings * FY95 FY96 FY97 Q1 March ($0.01) $0.08 Q2 June (0.02) 0.11 Q3 September 0.02 Q4 December 0.08 Full-Year EPS $0.07 *** *** Price/Earnings Ratio *** *** Revenue ($MM) $326.2 *** *** Pimples And Braces Emerald Opinion Like an adolescent going through puberty, Iomega is experiencing its own growing pains. The company is wrestling with weaker-than-planned European demand for its personal storage solutions and at the same time continues to deal with Jaz ramp-up issues. The companys recently introduced rebate program in the U.S. has the potential to help compensate for these issues. However, the results of this program will not be fully determined until the company reports its third quarter results in October.
While we remain bullish on Iomegas long term prospects and rate the stock as a long term buy,we see no catalysts that would strengthen the currently low price in the short term. Consequently, we are advocating caution for the next one to two months and are adding a short term neutral rating.
Iomegas Short Term Challenges As with all retail-oriented manufacturers in the computer industry, Iomega faces the summer doldrums. Following are our observations relating to Iomegas challenges during the next few months: valid European demand for Zip fell short of expectations during the June quarter. Because the September quarter is traditionally very weak, we do not believe Iomega will get Europe back on track before October. IOMG-082096 *** To be provided in upcoming report<< ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Just a couple of things... Date: 96-08-22 19:02:22 EDT From: MF Jeanie Posted on: America Online
First, the entire Rogue piece on Iomega and the SEC is fascinating reading.... I know C-guy excerpted a small bit here, but I urge you the read the entire report. It's on the main screen tonight, and afterwards can be found at Keyword: Rogue.
Second.... I agree wholeheartedly with the poster who said let's not get silly over the rise in stock price today. Remember that today's close is the same as Monday's close, just 3 days ago... and many longs were depressed about that price then.
I don't mean to be a wet blanket... the volume is most encouraging... and I'm still convinced of the long term story here.
But, as another poster said -- the Nasdaq was way up today, and it's only sensible to attribute some of IOMG's rise to that also.
Jeanie ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Just a couple of things... Date: 96-08-22 19:11:04 EDT From: MF DrJimbo Posted on: America Online
Ah but Jeanie-
Put yourself in the place of one of thousands of short sellers. What do you do now? Is this just a blip up? or the start of the reversal? Do you cover now, or wait for a return up? And how about all those who sold in one of the earlier panic selling bouts. Many are still in cash. When do they get back in?
The most fascinating thing to me is how positive feedback amplifies the volatility here. A sharp move up immediately sends everything into doubt. A further move up amplifies the move.
How about it, all of our shorts? On the record now, what are you doing? Did you cover today? Lets see how well you can predict the market. In the absence of dozens of posts, I assume you all still have your short positions. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Gateway Next OEM Date: 96-08-22 21:10:19 EDT From: Stockdoc Posted on: America Online
This is my first time posting to this board. Here is my opinion plain and simple.
Iomega is a great growth company (period). All the controversy and projections mean nothing. What is important is : Will Iomega continue to grow their business, product lines and market penetration over the next few years and without given up profit margins.? Answer : I believe the answer is YES on all points. Who cares if they earn 1 2 4 or 20 cent in the 3rd qtr. It is doesn't matter. Many growth companies trade at multiples of expected cash flows and don't even have any retained earnings.
I just received the fall edition of Gateway Magazine (GW2K) on page 23 there is a full page titled innovations. Gateway's definition "Innovations," a feature of GW2K Gateway Magazine, is your source for the hottest new products in the PC industry. We'll help you sort through the silicon slush pile by highlight products that we've reviewed, and offer them to at great values. End Quote
The rest of this article continues to explain the enormous benefits and features of the IOMEGA zip 100 as a remedy for the data cesspool that has turned your C drive into something that's too scary for children. They describe the Zip as sort of a jumbo-sized juiced up floppy drive. Gateway goes on to identify all the product awards an accolades give to Iomegas Zip 100 by PC Computing (Most valuable product award for Best Desktop Storage). Mac User gave it their Editors Choice award for Best New Storage Product.
part 2 same page A review of a summer article on Recordable CD (CD-R). Quote ( The catch is you only get one shot to write something to the disk. {It's called"burning a CD' because a laser places data on the disk by burning pits in -the disk}. No overwriting!!!! unlike Z I P S which you can erase and record lot of times.
Conclusions: I called Gateway to see if they have any Iomega products available. Gateway's response was that they were getting ready to role out the product line but had yet to stock an items. . mmmm ( maybe a new line of Gateway's this fall with IO inside) My guess. Gateway is putting out some hints on Zips as both add- ons and as strong OEM potential. I like the sound of # 10 to be used as OEM partner.
INMO Iomega will be substantially higher in the months and years to come. Be patient and dont let anyone convince you to sell your holdings to take losses or short term profits when the stock starts to rebound. Look at all the facts and make an informed rational investment decision.
Good Luck
Steve ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Zip drive REQUIRED at UF Date: 96-08-22 21:14:55 EDT From: WEMartin1 Posted on: America Online
Just a note of interest to Zip followers. Have a son at Univ of Fl Sr in Architecture. This summer while home he got letter from dean of school. Seems UF has initiated a policy REQUIRING all Architecture students to purchase a LAPTOP (he already had a desktop) Pentium for this coming year. All 2nd year students up. The letter outlined the specs...and lo and behold an IOMEGA Zipdrive was REQUIRED with 2 EXTRA disks! So it seems the portability of the product still is in great demand! Noticed a lot of you readers had said they are dropping off the planet so thought I'd throw this 2 cents in. Imagine...all Universities across US REQUIRING Zipdrives...Hummmmm.. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: GATE/IOMG Zip Date: 96-08-22 23:17:38 EDT From: EBJKY Posted on: America Online
Earlier in the chat room a fellow Fool sent me a file containing the GATE/Zip add...I was extremely excited by seeing this add. It means that Gateway has finally committed to the Zip...even if it is only as an external add-on at this point. Gateway is gonna be a huge contributor to Zip Revs...I would expect internal models for Xmas....for those who don't know, Gateway is huge in the mail order department like Dell....in my mind this is a huge break-thru. However, somehow when I tried to discuss its relevance in the chat room, the conversation didn't go very far...even with MFs....maybe I'm wrong, but somehow I don't think people understand how important this GATE add is to Zip...so I'm throwing this comment out for discussion. Someone mentioned this add earlier on this board. The contributor in the chat room was Proton777. I for one think this info is huge....have any of you noticed what has happened to the share price of GATE over the last few months?.....Gateway produces excellent products which are built according to your specs. You don't have to buy what is off the shelf. GATE has a cult following....much like the Zip. GATE took a long time to evaluate the Zip, and is just now giving it a glowing offering. Anyone check out the Gateway2000 adds in various computer mags?...They are truly cutting edge.....fits the Zip likeness to a T.....I won't go on about this....I think it is definitely huge....What do other Fools think?...(BTW...one Fool in chat room thought this was info that was put out previously.....was it?...I don't think so. I think this is brand new stuff...:)....and just in time for Xmas...:)....Thanks Proton...and whoever the previous poster was....BTW...this post is being typed on a Gateway Solo laptop....wish it had a Zip....:) ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Gateway 2000 Date: 96-08-22 23:44:00 EDT From: MF Jeanie Posted on: America Online
Saw Gateway's ad - with the Zip photo huge and dominating the entire center of the ad. Copy floats around the edges of the photo, and reads like it was written by an Iomega press agent!
This feature, which Gateway Magazine refers to as: *Innovations -- Your source for the hottest new products in the PC industry* ends up by saying: "The Iomega Zip 100 has won enough awards and positive press to fill one of its removable disks"....
This is great stuff. And it warms my heart to know that PC makers are paying more attention to the *positive press* for the product than *negative press* for the stock.
In the end.... which is more important?
Still "cautiously optimistic" about short term stock price.... but unabashedly bullish on the company's long term future.
Just my opinion :)
Jeanie ++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Visit to Glyph reassures me Date: 96-08-23 01:59:18 EDT From: CayugaDan Posted on: America Online
On Thursday I stopped by Glyph Technologies. Glyph Technologies markets digital audio storage solutions in really cool boxes. Like Promax, they are an iomega VAR. They have some real nice rack mounted Jaz products. They are located in Ithaca, NY about one and a half blocks from my computer store.
Or were. The first thing I noticed is that their entire production area is gone. Turns out Glyph Technologies is in the middle of moving to a bigger location (in Ithaca). Business is booming. They're selling lots of Jaz.
Their tech support staff is still there (they're moving soon). Between support calls (sounded mostly like Mac install issues) we discussed the reliability of Jaz drives. They seemed surprised I even asked about it. They had had problems early on that were tied to the media. However, they said, that's in the long ago past. Now its completely reliable. That's not to say that there are no returns, just nothing out of the ordinary.
I take this as strong anecdotal evidence that there is no problem with Jaz because these folks deal with the problems every day. If Glyph was having a problem with Jaz drives they would know. We discussed this for a few minutes. I'm sure they don't think there is a problem.
Still, I feel obliged to point out that these folks were not spokespeople for Glyph and that they did not provide actual percentage rates, nor did I ask for them. Nor do I think they would typically give those numbers out.
-Dan Rapaport
End Report. Posts covered through 3 a.m. 8/23/96. _______________________________
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