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Monday, September 23, 1996 Iomega was unchanged in trading Friday, closing at $17 7/8. TODAY'S RECAP: The weekend gave Fools a chance to mull over the events of the past week. Major topics in the folder included the apparent turnaround in the direction of the stock price, the effects of earnings downgrades on market expectations for Iomega's third quarter report, and some tantalizing rumors from Japan that Toshiba and NEC would soon be offering Zip drives in laptop computers. And one other thing: MF Chiros is back! 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 IOMG Today window and try again.)
1++HYPEMENOT wonders why Iomega bulls are so excited about the new BIOS
announcements. And now, the Best of the Board... Started 3 a.m. 9/20/96.
1+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re: Confused and Puzzled Date: 96-09-20 09:08:16 EDT From: HYPEMENOT
In the nearly six months that I have been an active participant on this Board, I dont recall a single post stating that the inability of the Zip drive to serve as the bootable A:drive in a PC was a matter of any consequence, let alone a significant impediment to it becoming the successor to the 1.44MB floppy!
In fact, werent the predictions I have often read here of 5-6 million Zip drive sales in 1996, and a much larger number in 1997 (Chiros used to talk about 10-12 million Zips, conservatively) based on a non-bootable, non-A:drive perception?
And so my puzzlement is this, if the matter of the Zip drive being unable to serve as the boot/A: drive, was not a PROBLEM or DRAWBACK worthy of ANY serious discussion during the past 6 months, how can the prospective RESOLUTION of this NON-PROBLEM, now be interpreted by so many posters here as a MAJOR positive development? I have no doubt that many of you will be able to easily explain this seeming contradiction to this doddering old cynic.
And while your at it, could you also explain how the following quote in Iomegas press release << There are currently more than 2 million Zip drive owners around the world ... >> squares with the continuing projections on this board of 5-6 million Zip drive sales in 1996. I remind you that this statement from IO comes with less than three and one-half months left in the year (and some of the 2 million plus Zips were sold in 1995). My math skills are pretty good, and they tell me that Iomega probably has to sell at least 3 million Zips between now and December 31, just to reach the LOWER end of the predicted range.
Finally, I thought that if the Zip drive had any significant disadvantage re the LS-120 it was backward compatibility with the 1.44MB floppy, not the ability to serve as the boot drive. IMO, the reality has been that the ability to serve as the bootable A:drive was CRUCIAL for the LS-120 since, all along, the intention has been for it to actually REPLACE the 1.44MB drive, whereas the same capability was relatively unimportant (or certainly non-essential) for the Zip, since the strategy expressed clearly and frequently on this board has been to have machines contain BOTH the Zip and a 1.44 floppy drive.
As many here are fond of saying , time will tell. It will be particularly interesting to see, as we move through the early months of 1997, how many OEMs will be willing to offer machines that have a bootable Zip drive, but NO 1.44 floppy drive! I suggest for any adventuresome OEM that is willing to offer a machine with this configuration, they put a disclaimer on the cover of the owners manual that says in large bold type: THIS COMPUTER IS NOT INTENDED FOR USE BY ANYONE WHO HAS VALUABLE PROGRAMS OR DATA ON AFFORDABLE, TRADITIONAL, WORLDWIDE STANDARD, 1.44MB FLOPPY DISKS!!
HYPEMENOT 2+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Back from Summer Date: 96-09-20 11:43:29 EDT From: MF Chiros
Dear Fools,
I am back from Korea... Looks like Iomg is back from Summer Doldrums too... :) There seems to be assumed here that the recent rise is fueled by the Phoenix announcement. So, there is a debate about really how large of an impact bootability has. IMHO, the bootability issue is not so large in the minds of Wall St. investors. It is a long time off before it will become an issue...
IMHO, it appears JPM and H&Q's downgrade led to this rise in the stock price. All along, the cloud hanging over this stock was possibility of poor performance in 3Q. Long term prospects, especially 4Q performance was assumed to be intact. So, shorts piled on expecting a disastrous 3Q, and longs like me waited on the sideline for 3Q to pass. But, JPM and H&Q's downgraded estimates now make 3Q a sort of a past history. Their numbers are so low that if anything, Iomg will surpass them. So, shorts have little to expect going forward, and potential longs have little to fear going forward. Ergo, the stock rises. This is what I think happened.
Eerily, this reminds me of what happened back in May 24th when Packard Bell was announced. The stock failed to rise further. Next day, it fell 20%. In this case, it is the exact reverse. Bad news of downgrade came out, and the stock failed to fall. Next day, it rose 20%. I can't help thinking that the trend has reversed... :)
Foolishly, MF Chiros :)
p.s. This year, I need to make my Ph. D. program my primary focus, if I ever want to get out of MIT. Thus, I won't be able to make as much contribution as I used to. But, I will try my best. :) 3+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: NEC/Toshiba Notebook ZIP!!!! Date: 96-09-20 15:40:54 EDT From: GTR2000
According to the 9/20/96 Japanese Newspaper "Nikkei Shimbun", there is a very bullish comment about the ZIP.
The article's headline says that "ZIP Penetrates Widely", sub-headline "Licensing Agreement with MCI - IOMEGA Expands Supply".
Well the following is the summary of the article:
Since the introduction of ZIP (capable of 100MB of storage, equal to about 70 FD) in 95, as a peripheral storage device for PCs, about 3 million drives have been sold worldwide as of end of July 96. Expects to sell at least 6 million drives by the year end.
Previously, Iomega manufactured ZIP drives along with Seiko-Epson, but due to the expected growth in the future demand, Iomega signed a licensing agreement with MCI (the FDD giant).
In addition to the present external and internal drives designed for desktop PCs, Iomega has developed a slimmer model designed for the notebook PCs. This new slimmer model is planned to be installed in VERSA by NEC and TECRA by Toshiba in early 1997. In addition to all the previously announced OEM agreements with the US companies, the addition of two powerful Japanese companies will more likely to be accepted widely and many PC Manufacturers are looking to install ZIPs in their machines.
If you want a copy of the original article in Japanese, send e-mail to my friend Shig2@aol.com who has a fax machine.
George 4+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Recap from Fool Port Date: 96-09-20 23:08:44 EDT From: MF Spirit
Fools, I am posting David Gardner's comments this evening from the nightly recap of the Fool Portfolio, for those who missed it.
"Iomega, as it so often has in the past, provided the options players with plenty of volatility on this, their day. IOMG opened with about 3 million shares traded (its average overall daily volume) within the first 10 minutes. Zooming up as high as $19 7/8, the stock was making us feel very nostalgic and almost smug as it rocketed the Fool Port into the plus category. Glory be, it was May all over again! But as the shares flew, so did the profits eventually. That last hour was bewitched as usual, Iomega closing unchanged at $17 7/8. The stock traded in excess of 18 million shares, 15% of its total capitalization. Eighteen million shares, my fellow Fools, without a speck of news.
If there were any doubt about Wall Street shenanigans at play in the fields of IOMG, this latest example would seem to disperse it. The most heavily shorted shares on the Nasdaq, Iomega's certificates (and valuation) have often taken on a life of their own apart from fundamentals. Earlier this year, the market erred on the upside; today, we believe the market has erred on the downside. That's even after the stock's 40% rise over the past few weeks.
You wanna talk valuation? Fellow Fool Patrick Keeler did so earlier this week in the Iomega folder, and for those who know how to calculate the Fool Ratio (you can read about this in our Fool's School), here's the numerical work (I've updated the numbers to reflect today's closing price). PKeeler wrote:
Here is Iomega's updated PEG (Fool Ratio) using the revised estimated (H&Q) earnings for 1997 of $0.77.
Present 12-month trailing EPS = $0.29 Present Price = $17 7/8 Present PE = 17.875/0.29 = 61.6
Annualized Growth = ((0.77/0.29)^.67-1)*100 = 92.3%
Note: .67 = 1/1.5
PEG = Present PE/Annualized Future Growth = 61.6/92.3
PEG = 0.67
Fair Value: PEG = 1.0 = $26 3/4
Sounds about right to me, given the current expectations. These expectations will rise or fall based on further news coming out as we go forward. Time, generally a great ally to the patient investor, is (I believe) a strong ally to IOMG shareholders today. Time and patience."
I agree time and patience, will be rewarded.
Spirit, another Fool 5+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: My take On Q3 Date: 96-09-21 11:38:55 EDT From: MF Ben
Q3:
I've stated more than once that Q3 isn't all that important to me in my on-going decisions on what to do with the stock I own. I believe Iomega's current product lines are subject to the retail PC seasonality factor and, as such, Q4 will be the important quarter that determines that year over year growth number that fuels a higher valuation in the future.
That said, I still believe Q3 matters. I can't dismiss it outright. If Iomega came in at $150 million revenue and a ($.50) you'd better believe I wouldn't be shrugging it off, posting trite likes its time to buy more, load up the truck, KE planned it, its a short trap, etc.. Sometimes bad news is just that, bad news.
I don't think the numbers will be anywhere near that low. They won't be $400 million and $.20 either. "Reality", as it has been said, "sux."
Upon re-reading the JP Morgan downgrade however, I must say I believe it. I believe that sales in July and August sucked. I didn't spend much time buying stuff; neither did many people I know. It was summer. It was warm. There were better things to do. I understand the dangers in extrapolating out from such empirical evidence, but I have little else to rely on and so it goes.
"But the rebates should have stimulated sales!" you cry, quoting the marketing "study" that Kim Edwards himself quoted -- Jeanie, I won't trash marketings forecasts too much. True. Edwards did cite a marketing study that allegedly showed a correlation between rebates and a stimulation in demand. A study. A forecast perhaps. An uncertainty. Emphasis on UNCERTAIN.
I don't think it worked. OK, not fair at all. Maybe it worked. Maybe without the rebates, sales would have stunk even worse in July and August. I don't know. All I know is that I believe sales must have really sucked in July and August, especially for the analysts to redo their numbers so. Period.
In order to have revenue levels below Q2 levels one of three things must have happened this quarter. I outlined them already. I believe the answer to that quiz is Zip unit sales declined. Even with the rebates. Declined. Not because people hate the Zip or its a fad but because of seasonality. Nevertheless, I believe Zip drive unit sales this quarter will be below Q2 levels. UGH.
If true, there is NO way to make that a positive. None. Some may try but they will try in vain. I asked in my Q2 take whether "Zip is dead" and got flamed for it. It is a legitimate question based on what I believe will be a unit number decline. I also believe, as I did then, that the answer is no. That momentum got slammed this summer...
What about September? A quarter of a year is THREE MONTHS and July and August are but two. September looks very good. Back to school, temperatures drop, work life gets more serious after a silly August. Zips sell.
Edwards said Q3 would be challenging. Based on underwriter equity analyst downgrades it looks like he was right. It was no trick. He was not managing expectations down for some backhanded reason but for the simple reason that he believed it. Go figure.
It looks like, according to my empirical evidence, according to the analyst downgrades, Edwards was right. Maybe too challenging. If Iomega does indeed come in with revenue below Q2 levels then we can be certain this is a seasonal retail company now. Of course new products can reduce the seasonality factor, as Zip and Jaz did on their introductions, but more mature products will be subject to the same laws of retail that have governed our universe since Macy first came up with all those parades. THE LAWS OF RETAIL. Ugh.
What do I expect for Q3?
I expect the analyst estimates. I don't count on them as Iomega COULD come in under. Anyone who doesn't believe that possibility exists should think back three weeks when they believed Iomega could easily beat then then much higher analyst estimates. Analysts, especially underwrite analysts, don't downgrade numbers for the heck of it.
Will I be disappointed with matching estimates? Nope. I've been expecting a challenging quarter and a bad July and August. What I do NOT expect is a bad September. I want that momentum. Iomega is proving they have a very capable marketing department when momentum is rolling along. They seem to have trouble managing the down times in the seasonal cycle but hopefully they learned for next summer's doldrums. Learn and grow. Learn and grow. Apply those lessons. Don't rely on rebates to counter the seasonality. Money alone won't keep people inside on their computers.
A good September brings us smack into the holiday season when the leaves change, the windows frost up, and surfing the Web for the best airfares to Aruba (:-) seems like a good excuse for a second cup of hot chocolate.
I expect a good Q4. I can live with the downgraded Q3 hoping that Iomega -- and it shareholders -- now understand that IOMG is mortal, that the seasonality factor skips no one for too long in their business, that there are marketing lessons to be learned from the rebate "attempt" and that these lessons can be applied to next year's retail "slump." I can live with Q3 as I look forward to Q4, to the number that will tell us with certainty what Iomega's 1996 EPS growth rate was.
The year over year EPS and revenue growth rates.
It is those numbers that keeps me from selling my shares. It comes every 12 months. Talk about a lesson in patience.
Cheers,
Benjamin 6+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Iomg in NEC/Toshiba Notebook Date: 96-09-21 13:41:32 EDT From: MF Chiros
Dear Fools,
I've been sent a copy of Nikkei article via complements of Shig2. I thank you. I have a Japanese friend who can translate it for me later today. But, I can read Kanji, and it looks to me like Zip will be in NEC/Toshiba notebooks. This is a very good piece of news. Toshiba is THE name in the notebook market.
I am not happy about my analysis and my actions in May-July. I have suffered over 80% loss from the peak. I had thought that Iomg's story was all but clinched already. If the story(next generation floppy) is intact, this company is worth 100, no doubt. If the story is not intact, this company is probably worth 10-20. 2Q shortfall and summer slowdown has put a damper on the story. Consequently, there has been a drastic fall. I was not able to foresee this. So, I suffered along with many of my friends. In fact, I would be better off today if I had just stuck with my initial investment in Iomg back in Mar. 1995 rather than trafficking in options and margin as I became more and more bullish. So, I suffered from my decision.
As soon as 2Q results came out in July, I stated on this board that there is short-term cloud hanging over the stock price because of questions surrounding 3Q resulting from KE's comments and analyst downgrades. So, I stated that I am putting on a short-term hedge around the stock, while being bullish for the long term, because I still believed in the story. But, until 3Q is done and out of the way, it would be difficult for the stock to move upward, because of the questions surrounding the 3Q results.
Now that H&Q and JPM has downgraded, 3Q is in effect over. I tend to think Iomg will beat the newly revised estimates. My friends who are doing the channel checks tell me that there is momentum building on Zip sales, that there are record sales being booked... I still believe in the long term story. Sure, Zip is now a product affected by seasonality. But, any product selling to the tune of billion dollars per year is bound to be affected by seasonality. That doesn't invalidate the story in my mind... A strong 4Q will make this a strong growth company. It's year-over-year that matters now. You can still grow 100%+ a year easily without achieving quarter-over-quarter growth every quarter.
I am, and have always been a long-term bull. Now, it's true I've been bearish for the short term since July. But, I hope this board is not about cheerleading. I am after truth, not cheerleading. I am not always right. But, let the logic in the analysis stand for itself. If a bear makes a good case, I am grateful. I hope this board can be a useful place for people looking for information and analysis distilled from many working together to put the mosaic in perspective.
Just one more thing. I have warned people in the past not to listen to my posts, but to think for themselves. My failing to foresee the summer slowdown proves only too clearly my fallibility. If this board is looking for a cheerleader or an infallible prophet, then I am indeed disqualified from participating on this board. But, as an added voice in analysis, I hope to be able to contribute to this board.
Foolishly, MF Chiros :) 7+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Zip drive sales problems? Date: 96-09-21 19:44:56 EDT From: DPlotnick
I work for small software development company that has been around for quite a few years. Since we do buy stuff occasionally, and we are on everybodies lists, we get cold calls from all the manufacturers and distributors of practically every hardware and software product in the PC marketplace. Since we are small, we are probably a "C" customer in their books, that is, we are generally ignored while they have business from all their A and B customers. Once business starts falling off, they start calling companies like mine since they are desperate. Basically, any company that is calling us for business is in trouble, and we get to see it a few months before it hits the news. For example, in the last two months I have gotten cold calls from about 6 internet service providers looking to either hook us up to the internet or have us change from our current ISP. These ISPs doing the calling obviously have trouble finding new business if they are reduced to calling us "C" customers. We also got calls from Bay before all of their trouble, Borland also, along with a number of others. In any case, on to my point.
Guess what? In the last few weeks I am starting to get calls from channel distributors looking to sell Zip drives and Zip cartridges. I think they gots a problem brewing. Most people who want a Zip drive already have one. Cartridges don't wear out like razor blades do. Iomega is headed for trouble. 8+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Update for Chiros ;-) Date: 96-09-21 23:07:59 EDT From: PKeeler
To bring MF Chiros up to speed (although he doesn't need it really) I'd like to summarize the fundamental news that has occurred since end of May.
1. IBM offers IDE Insider in Aptiva model 2. Syquest EZFlyer 230 SCSI does not ship on June 15th promise date. Still hasn't shipped. 3. Mid-June ship date for LS-120 external comes and goes. Still no retail LS-120s. 4. Seagate is signed to produce Jaz disks. Already shipping. 5. Iomega reports $0.11 EPS on $283MM in revenue. $141MM in Cash. KE warns that 3Q could be challenging and that company is focused on 4Q. 6. Iomega buys a Quantum plant in Penang complete with staff. KE predicts Jaz drives produced in Penang by 9/30/96. 7. Iomega announces a new 15mm form factor Zip Insider for laptops. 8. Reuters reports Sentinel NV has reports secured loans from the Belgian Gov't to expand facilities to produce Iomega Zip Drives. 9. VST announces they will OEM Laptop Zip. 10. Swan/Mitsumi settle court dispute; will work together to sell UHC-130 to OEMs. No OEMs announced yet. 11. Iomega announces $50 rebate on PP, SCSI Portable, and SCSI Insider Zips. Epson and Memorex-Telex (?) follow. North America only. 12. HP puts Zip in one of its new Pavillions. NEC puts Zip in four new models. P-Bell puts Zip in one new model. No Zip OEM has stopped offering IDE Insider. 13. Iomega gives a non-exclusive license to Matsushita to produce Zip drives, all types. MKE announces Zip production starting in 4Q. 14. Canon OEMs IDE Insider. 15. PCs with IDE Insiders stocked at CompUSA and Computer City stores. 16. Two major PC BIOS manufacturers report new BIOSes will support booting any ATAPI compliant device. This includes IDE Insider. 17. Sony and Iomega team up to sell Iomega branded Ditto 2 GB drives and disks. Drives and disks seen at retail next day. 18. Software keeps getting larger. Quake reported to need 75 MB of HD space, AOL for Win95 needs minimum 35 MB of hard drive, scanners getting cheaper and widespread. Microsoft delays shipping FAT32 to OEMs which when implemented will almost double the useful space on new OEM 2 GB hard drives.
PKeeler Patrick Keeler 9+++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re: My take On Q3 Date: 96-09-22 00:17:02 EDT From: PKeeler
MF Ben wrote: >>> In order to have revenue levels below Q2 levels one of three things must have happened this quarter. I outlined them already. I believe the answer to that quiz is Zip unit sales declined. Even with the rebates. Declined. Not because people hate the Zip or its a fad but because of seasonality. Nevertheless, I believe Zip drive unit sales this quarter will be below Q2 levels. UGH <<<
You seem to overlook the obvious. Zip price has declined. Further, it would be helpful if you talked about Zip as the different products/markets it represents. Zips are sold at retail and to OEMs in three distinct parts of the world (N.America, Asia, Europe).
Lets put aside the rebate. What if Iomega shipped 800K Zips last quarter, of which 50K were OEM Zips. Using made up prices of $120 and $70 (ignoring the fact that Zips sell for different prices worldwide) you would have Zip revenue of $93.5MM. Lets say this quarter, in our fantasy world, that Iomega sells 825K Zips with 150K being OEM Zips. Using the same $120 and $70 you would have revenue of $91.5MM. Zip unit sales are up but Zip revenue is down.
Ever since the 2Q conference call you have been adamant that unit sales for Zip have slowed. You have also harped on Cynicalguy and others for not making factual statements. There is no evidence that unit sales of Zip have or will decline from 2Q to 3Q. It could happen, but there is no proof that it will. I find it disturbing that you post that Zip unit sales are declining without any proof. You took the post about the JP Morgan revision where it was listed that their prior estimate was 900K drives sold and now it was 700K. You posted, or insinuated, that this is the proof. Zip unit sales were declining. It isn't. JPM's estimate for 3Q declined yes. But what is there opinion on how many were sold last quarter? If JPM thinks IOMG sold 650K Zips in 2Q then there revised estimate still has Zip unit sales increasing. I'm sure we will never know.
Post your evidence Zip unit sales have or will decline 2Q to 3Q. My personal channel checks show Zip unit sales increased July over June and have stayed above June's level ever since. BTW, in the post I'm responding to, you repeatedly used the word 'empirical' where you should have used 'anecdotal'.
PKeeler Patrick Keeler 10++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: LS-120 Date: 96-09-21 21:22:23 EDT From: Holloway3
Here is my conclusion about the curious case of the LS-120. I suspect that Compaq has some legal obligation to sell the LS-120 in some of their drives, but for some reason, they are really not enthusiastic about the prospect, so they will do only enough to fulfill their legal obligation but nothing more. That explains why they have not advertised it and have made it available in only a very small way, if at all. They probably agreed to sell it several years ago, but then those who made the agreement have been replaced by others who are less interested or something about the technology has caused them to be more cautious. At any rate, marketing something like this where several companies are involved, with competing interests, is difficult. Sort of like herding cats. If this scenario is correct, then the only thing that can save the LS-120 is unexpected consumer acceptance and so far, there is no indication of that. Maybe HYPE ME NOT will buy one and review it for us. Hey, it only costs about $229, according to one poster. He should be able to easily pay for that out of his future profits from shorting Iomega. 11++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Backward Compatibility Date: 96-09-22 10:36:55 EDT From: Aanalyst
>>Zip and Jaz are the only viable options at this point. LS-120 with backwards compatibility really means very little. A 3 1/2 inch drive today AT RETAIL cost around $40. Every computer that I know of has a 3 1/2 inch drive. So who really cares about LS-120's ability to read these little disks. please flame me if I'm wrong.<<<
I believe you are wrong on this point for two reasons:
First. There are millions 3 1/2 drives out there . OEMs and corporate buyers want them to be able to transfer data. Certainly net based systems obviate some of this concern. But many notebooks have small 3 1/2 inch drives and need a means of handing off data. For instance, exec comes back from road trip and doesn't want to transfer files electronically since he is sitting next to his computer at work. Instead uses floppy. So compatibility is always of interest.
Second: If it costs $40 for a 3 1/2 drive thats $40. Most mfgs of computers want to cut any cost they can. If offering a single drive allows a cost reduction rather than offering two drives then this will give OEMS an incentive to take on LS-120.
Third: Drive bays a precious. The biggest issue may actually be the use of precious real estate. There are numerous things a mfg can put in the limited number of drive bays. scanners, cd roms, dual cd-roms. I have two in my box so I can boot a cd rom application and listen to a cd on the internal stereo.
BEFORE YOU FLAME ME ON THE LS-120 COMMENT.
I believe the only advantage of LS-120 is the backward compatibility issue. This is achieved by putting a second drive mechanism in the LS-120. I bet next ZIP model has this as an option. This would totally eliminate LS-120 advantage and end the discussion. I'm waiting anxiously for this to happen.
Has anyone heard rumor of this occurring? 12++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:Backward Compatibility Date: 96-09-22 10:57:51 EDT From: BarbPayne1
>>>I bet next ZIP model has this as an option. This would totally eliminate LS-120 advantage and end the discussion. I'm waiting anxiously for this to happen.
Has anyone heard rumor of this occurring?<<<
I have heard rumors that the LS 120 may actually ship sometime in the future. :-)
I think I have heard this mentioned before, however what's the point? It would slow down the Zip drive, and would not really enhance capability. Don't know about you, but I am anxious to become 1.44 Meg free. I actually think that backwards compatibility would eliminate Zip's advantage, not vice-versa. Out with the old, in with the new.
You do realize that IO sold the LS120 to the companies that own it, now don't you?
You do realize that the Laptop Zip will be out next year?
Barb 13++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re:DVD to replace ZIP? Date: 96-09-22 13:37:36 EDT From: MF Ben
<<<Isn't it quite possible that the DVD drive will become the standard drive in the future, replacing the 1.44MB floppy drive?>>>
I highly doubt it for three reasons.
1) DVD will not be re-recordable for 2-3 years
2) If they -- the consortium -- do with DVD blanks as they did with DAT, DVD blank disk prices will be kept artificially high due to a "tax" (whose proceeds go to a copyright slushy). High blank prices are also a method to discourage piracy.
3) the form factor is quite large (same size as a CD) and not very "pocketable."
In a very convenient linear yet parallel progression, it is my opinion that DVD will replace the current CD-Rom -- many PC manufacturers have already announced plans to include DVD players and not CD-Rom players in their mid/late 1997 models -- and some sort of larger capacity floppy will replace the current HD model. Optical to optical, floppy to floppy. How nice.
Each basic technology -- optical and "floppy" -- has inherent advantages and disadvantages that make these roles quite natural. For example, optical has a very low cost per megabyte ratio while floppy has a very low unit cost.
My $.025
Cheers,
Benjamin 14++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Re: My take On Q3 Date: 96-09-22 13:56:02 EDT From: MF Ben
<<<You seem to overlook the obvious. Zip price has declined.>>>
PKeeler,
Actually, they haven't. The same $199 will be booked as revenue this quarter as was booked last quarter. However, a certain amount will be taken as a reserve against income, not revenue. You cannot assume a retail price of $120 as you did in your model. Margins will be lower but not revenue. Iomega has not lowered the retail price.
Iomega will book the exact same revenue amount this quarter as it did last quarter for each Zip delivered.
<<<Ever since the 2Q conference call you have been adamant that unit sales for Zip have slowed. You have also harped on Cynicalguy and others for not making factual statements. There is no evidence that unit sales of Zip have or will decline from 2Q to 3Q. It could happen, but there is no proof that it will. I find it disturbing that you post that Zip unit sales are declining without any proof. >>>
I have never said such a thing. You are misinformed. I advise you check your facts again.
I have said I believed Zip demand GROWTH was slowing. Growth being a percentage, units being a hard and fast number. I have gone to great pains to ensure the distinction was understood. Obviously I did not go far enough.
In my Q2 write-up I mused that growth always gets harder as the number get bigger. When only 100,000 Zips were sold a quarter, 250% growth or more was not as difficult as when 600,000 Zips are sold a quarter. Nature of the beast.
I had not even considered the scenario where Zip UNITS sales DECLINED from Q2 levels until H&Q and J.P. Morgan lowered revenue estimates for this quarter to below Q2 numbers. I hypothesized, emphasis on that, how the numbers could be lower. It is the first time I even contemplated such a thing.
To refresh your memory from a post when those downgrades came out:
Possible explanations why Q3 revenue may come in below Q2.
1) Zip unit sales declined. Remember, $199 is the same revenue being booked as last quarter.
2) Jaz flat or only slightly up. Jaz retail price WAS lowered thus Jaz units could have increased with same booking of revenue.
3) Ditto sales decline.
Logically, I concluded that Ditto sales would not be the huge factor by virtue of their % of total Iomega revenue. I also don't consider Jaz to be that large an issue which leaves us with 1.
Of course, maybe revenue doesn't come in under Q2 levels (doubtful but always possible) or perhaps it was a drop off in numbers 2 or 3 or a combination of them all. I also mused that it was most probably a combination.
I based this all on the estimate that Q3 revenue would be below Q2. If you can find another option besides 1,2, or 3, please do. I would love to hear it. However, I cannot.
GAAP tells me that with Jaz and Ditto being equal, if revenue is down then it is Zip UNIT sales that did it. Period. IF revenue is down. Therefore, my analysis is not being presented as fact but as logic based on a given scenario.
Cheers,
Benjamin 15++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Apple & Zip Date: 96-09-22 14:48:41 EDT From: BonesB8
http://www.iliad.com/ogrady/1400.html
This page has pictures of unannounced Apple PowerBook 1400. It says the expansion bay will accept Zip. Introduction in Nov.96
Sorry if it's been posted already. I do not read this board often. 16++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: BIOS News - A:LS-120's Case Date: 96-09-22 15:50:45 EDT From: NOVWOO
1. Not fully functional as drive A: in a PC is detrimental to LS-120 because LS-120 camp has highly touted this internal drive as "totally backward compatible", "two drives in one" and "the only removable media drive needed in a computer". It turns out that when the drive holds a 120MB diskette, the drive can't be A:, it becomes D: or higher and can't boot from there.
2. And now needing a new "BIOS specification" and/or new BIOS to make LS-120 fully functional as drive A: this late is not entirely good news for the LS-120 camp either. At best, it will just enable LS-120 to do what it is supposed to do at the first place at a later time and/or with added costs. "Does the Compaq model I am ordering with the LS-120 come with the new BIOS set up?" Don't you think trying to make LS-120 fully functional as A: has already added and may further add to the delay of sales or the cancellation of orders of Compaqs with LS-120 if any? If there is any more delay, some customers may simply write off the idea of even considering LS-120 with Compaqs and therefore may cause LS-120 to fall further behind in its already seriously lagging marketing position.
The only thing the early LS-120 BIOS announcement did was to scare some Zip camp people into thinking that "they are putting LS-120 into the BIOS but not Zip". Now as more news come out, it became clear that early LS-120 BIOS announcement was a pre-announcement, a leak if you will. It seems to be the same thing that was announced several times from 8/27/96 up 'til 9/19/96, when it was last announced again within a few minutes of the Zip BIOS news. I think the LS-120 BIOS news was meant to be announced on 9/19/96 because this latest announcement seemed to be more formal and from more sources simultaneously. It could have been: Phoenix had already been working on a BIOS enhancement for Zip first, then later added some provisions for LS-120 and others together for the next upgrade, or the other way around. It didn't matter which order. They are going to be done at about the same time. The one who is the most desperate had pre-announced its portion of the news.
(A:Zip's case will be followed in another post.) 17++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: BIOS News - A:Zip's Case Date: 96-09-22 15:51:57 EDT From: NOVWOO
(A:LS-120's case was posted in a previous piece.)
Now the A:Zip's case:
3. Not functioning as drive A: was no big deal for Zip. Since most of the Zips being sold now are external ones and the Zip camp realizes an external Zip or even an internal Zip can happily co-exist with an internal 1.44 as Drive A: for a while . The gradual phasing out of the 1.44 by Zip doesn't demand Zip to work as drive A: right away, particularly for the external Zips. For most of the consumers who are buying the external Zips now (and even some internal Zips), they won't even have to think about the new BIOS like the LS-120 customers will. The only semi-big deal was the incorrect perception of Zip not included in a future BIOS upgrade that unjustly scared some Iomega share holders.
4. Getting full BIOS supports for drive A:Zip this early is gigantic news. The Zip camp knew this would eventually come but didn't know it would come so soon. The earlier than expected arrival of the BIOS supports made bigger news. I think Zip marketing emphasizes the bottom up approach, not the top down approach like LS-120. Zip is supposed to get into the mass first and be recognized by the establishments later, like Iomega shares? (Zip has more luck in the computer world than Iomega shares in the financial community. Zip's technical excellence and advantages are not always easily explainable to non-techies.) For Zip, supports by BIOS are important recognitions by the "computer establishments". BIOS makers, while not big establishments themselves, usually won't support a device like Iomega Zip in their BIOS unless they think it is or will be a standard device. They know Zip has most of the market shares.
To be more precise, I think Iomega uses multiple approaches to Zip marketing and getting into the BIOS is a later stage strategy. Anyhow, to get into the BIOS is close to the finish line and winning the race for Zip. To get into the BIOS is to get out of the gate for LS-120. For being only available as an internal drive now and for supposedly being the only needed floppy drive in a PC, LS-120 actually has to get the BIOS support before even getting out of the gate. I think the reason why LS-120 could get into the BIOS at all was because Compaq put some weight behind it. To say face? For some obligations? Anyway, "the top down approach". I could imagine Compaq argued that the LS-120 is a family member of the old 1.44 standard that is already supported by the BIOS, so the BIOS must be extended to support LS-120. And I could also see the BIOS maker included LS-120 only as a tagalong of a new group of mass-storage removable media drives popularized by Zip, not because they can see LS-120 will gain any major market share or become any new standard.
Getting full BIOS supports for drive A:Zip so early unexpectedly opens up many more uses of Zips on top of the numerous Zip applications already in place due to its superior performance alone. These BIOS supports at this time are something extra for Zip and will add to the gigantic marketing lead that Zip already enjoys. This is the beginning of an avalanche of successes for Zip on all fronts. 18++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Nikkei Date: 96-09-22 23:56:50 EDT From: MF Chiros
Dear Fools,
I have completely confirmed (from my Japanese friend) the Nikkei article stating NEC and Toshiba intend to include Zip in their notebooks in early 1997.
Foolishly, MF Chiros :)
p.s. Ben, your analysis on DVD is very good. Thank you for your continued contribution on this board. :) 19++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subj: Backward Compatibility Date: 96-09-23 01:56:38 EDT From: Robra
There have been references to and debate of whether Zip will become "the standard" and/or will replace the floppy. I am not sure if these 2 scenarios are being used interchangeably or not, but I feel they are 2 separate outcomes.
My investment in Iomega does not require Zip to replace floppy (not for a few years, anyway). My investing in Iomega, though, at this stage, does more heavily count on Zip becoming "the standard". Continued healthy revenue and profit growth do not depend on Zip replacing floppy.
As far as Zip needing to be backwards compatible, I believe it was KE when asked a question, responded that Iomega was working on backwards compatibility. He gave no specifics that I recall. Although a reasonable argument can be assembled for the need for backward compatibility, I think this would be a mistake for Iomega. As a stockholder, I would prefer they not increase manufacturing costs and lower reliability (normally inherent in most dual device situations). As a consumer, from a reliability standpoint, I would much rather utilize 2 separate components on a desk top unit. It just seems to make life alot simpler. Obviously, the answer for a laptop does not come so easy. With the lack of 2 units in 1, could it be feasible/logical to either swap out removable floppy and removable Zip as needed, or just sit down (1 time) and copy floppy disks onto Zip Disks? I just am really turned off when somebody tries to manufacture 2 devices into 1.
As far as LS-120 goes, didn't someone state that with the large magneto optical head(s), it was unlikely it could be made to fit the needed 15mm space for laptop (let alone having a floppy drive in there too?
FWIW, in a somewhat related story, in July I was travelling in southern California, on business for my company. On my last morning there, while having breakfast at a Lenny's (Denny's), I overheard (nosey me) a gentleman explaining the Zip drive to another gentleman. When they were getting ready to leave, I asked the first guy if he owned a Zip drive. As it turned out he was the owner of the local PC Doctors. His main comment on the Zip when I asked how they were selling was "the Zip has a lock on it". He made the statement more than once. Robra
End Report. Posts covered through 3 a.m. 9/23/96. _______________________________
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