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Friday, November 28, 1997 Wednesday, Iomega closed at $32 3/8, up $1/8 (+0.39%). THIS HOLIDAY'S RECAP: Over the Thanksgiving holiday, Iomega message board posters took the time to express what they are thankful for -- they also spent some time discussing a range of topics: Zip disk prices, Nomai, clik!, the stock split, the LS-120, Sony's forthcoming HiFUD drive, and even the Avatar Shark. Also, ~Benjamin70~ provided a detailed post on Iomega's sales abroad and other issues related to potential revenue growth. 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++ DavidG48 has some new quotes from a recent HFN regarding clik!
Recap written by TMF Weekly; posts
compiled by TMF Weekly. As always, the following posts represent the thoughts of our contributors, not those of The Motley Fool.
And now, the Best of the Board...Started 9:01pm ET 11/25/97. 1+++++++++++++++++++++++++++
Subject: New quotes! (I believe) A healthy & happy upcoming holiday season to all! I'm a long time reader of this board and have been long into IO since I first starting buying in at 3 7/8! In the 11/24 issue of HFN in the Comsumer Electronics section (Home/Housewares industry) there is a interesting article with many quotes that I though might be of interst to all. Clik! Mike Lundgren: "Store anything digital, any portable with a serial port or access to a serial port is game" The article goes on to say that at the press conference Kodak, HP.,Mortorola, Matsushita, Citizen & Texas Inst., among others endorse the device. KE: " We will build awareness and create pull-through with the external drive. We will follow with built-in products in portable devices" Edwards said it could take up to a year for the market to be established suffciently for devices with built in drives. These devices with built in Clik! drives will have a premium of no more than $100.00 Edwards said. Matsushita & Citizen have signed nonbinding letters of intent to licence the technology, which means they would manufacture & market their own Clik! drives if final agreement is signed. It goes on to talk about the $9.95 Clik! retail and $199.95 retail for an external with docking station. The article finished with my favorite saying for this quarter . . . 10 million sold since production launched almost 3 years ago. Happy Turkey Day! 2+++++++++++++++++++++++++++
Subject: Planning for Cabot Cabot has recommended buying and selling IOM(g) many times. He used to be a great contrary indicator (stock always dropped after his buy recommendation). He got it right the last time but missed the move from $55 to $28 (like many of us). Just another momentum buyer entering IOM. William O'Neill was recommending it last week (from what I hear). It took about 6 months of uptrend for IOM to get noticed by these types but it is happening. I think its important to step back and look at some numbers in case the stock reacts violently one way or the other. YPEG This is how I do it: I use KE's revenue growth projection of 35% yearly growth in revenues ($3 billion by 2000, $5 billion in 2001) as the long term PE. First Call has the Fy98 estimate at $1.22. 35 X $1.22 = $42/share fair value. PSR Not a big fan of the PSR and IOM has little track record of PSR stability. IOM(G) traded at a PSR of 3-5 for a long time until it just stopped doing so. Maybe this was because sequential revenue gains stopped. I don't know. FWIW (I'm using 4 X 3Q97 revenue not trailing 12-month) PSR currently = 2.6 The lowest IOM ever traded, AFAIK, was a PSR of 1.5. Assuming IOM does $570 MM in revenue (current H&Q estimate I think) in 4Q97 then the 6 month trailing revenues (3Q97 + 4Q97e) would be about $1 billion. Annualized that is $2 billion. A 1.5 PSR on those $2 billion estimated annualized revenues would be $21. I think if the momentum guys send IOM stock above $42 then its starting to get ahead of itself. On the other hand, if they send it below $21 then it presents a unique opportunity. I think everyone should decide what they would want to do now. Believe me, you will be too giddy with IOM at $43 to think clearly LOL. You might be too busy puking with IOM at $20 to think clearly too. :-P Happy Thanksgiving :) 3+++++++++++++++++++++++++++
Subject: Re: Nomai Thoughts << I disagree. From Nomai's standpoint, it is far better to find out now, than 3 years from now, where they stand. Even if Nomai goes down in flames, by litigating now they minimize their losses. >> Your point is well taken, except TIMING is more important here,IMO. Nomai should have waited until most of the French & German litigation concluded in or near their favor. Then they could have commenced an action here before they incurred even greater expenses. This might have taken some time, but guess who I met at Comdex? The President of Nomai!!! I did not see him at first but GMoney0214 (Gary) saw him at the Syquest booth where we were both viewing their products and operations. I talked to the President of Nomai, a short fellow about 50 years of age, well dressed who was brought over by a young very enthusiatic Syquest rep. The President did n't seem too impressed by Syquest. As he was walking away, I asked him if he was the President of Nomai and he said he was. I asked if he had an exhibit at Comdex and where it was located because I would like to see his products. He said that he only had a private room at Comdex and that he was closing it up right about then that afternoon (Wednesday). I asked him how his lawsuits with Iomega were coming, he paused sort of stunned I guess, and slowly without any conviction stated, "fine", he then walked away quickly. To say the least I was really surprised to run into him by chance like that. Ron Mason in a prior post mentioned the sparcity of furniture, accomodations or much product in that "private room" that I had never seen. I think they are pirates as KE stated and they are DUMB to boot. 4+++++++++++++++++++++++++++
Subject: Armada/Shark bundle Don't know if this has been posted. Compaq currently has (at Ingram Micro) the Avatar Shark bundled with their Armada 1500 series laptops (5 models). They also have the same models, w/o the Shark bundle, for a lesser price. The Armada 1500 has been a highly successful series for Compaq. Has anyone here seen this bundle actually advertised? 5+++++++++++++++++++++++++++
Subject: Re: For those who still doubt the benefit to IOM's bottom
line... << Thanks Ben for the NEEDED correction. I knew in general that Asian sales had increased year to year, but I couldn't remember if it was 8% or whether it was 16%. >> Nick, Actually, while on a dollar basis "Pacific" sales did increase year over year -- remember, Iomega breaks the world into three chunks: Americas, Europe, and Pacific -- actually, on a percentage basis, Pacific sales were down in Q3 '97 over Q3 '96 In Q3 '96, Pacific sales were $29.2 out of a total revenue pie of $310, equaling a 9.4% slice of revenues. In Q3 '97, Pacific sales were $37 out of $432, equaling 8.6% of total revenue. (all millions) So, in that year, while total revenue grew 39% (year over year), Pacific revenue only grew 27%. As well, Q3 '97, on a dollar basis, Pacific revenue was down over Q2 '97 ($37 versus $46.4), even while Iomega grew total top line from $400 to $432. However, it should be noted that as a percentage of revenue Q2 '97 was an excellent Pacific quarter for Iomega, with Pacific sales accounting for more than 11.5% of total revenue. In recent quarters, only Q2 '96 was better on a percentage basis. << That is even substantially better yet for IOM because earnings are affected negatively less because of the Asian currrency problems, however, the cost of raw materials, parts, and labor in Malaysia and other parts of Asia should be substantially lower. That's what Michael Dell of Dell Computers was stating on CNBC. In other words our Asian earnings will be susbstantially less but in proportion to our Asian costs of raw materials, parts and labor, IOM is way ahead proportionally. >> While we will know more when we get the gross margin for Q4, I'm actually not expecting a huge helping hand from the Pacific manufacturing plants. Essentially, we don't know enough about the make-up of Zip -- Zip accounts for the majority of Iomega's revenue which is why I focus on it rather than the other products lines, and, with Jaz2 not in stock in many places and Jaz1 sales probably down as folks wait for backorder Jaz2, I expect Zip to be even more important this quarter -- to jump to any conclusions. My new Zip plus, for example, is made of "US and foreign" componants. How much of each? I have no idea. We could start guessing but Dell specifically quoted a percentage number (I remember it as 70%+ but don't hold me to that) of Asian parts used in his PCs. Iomega's could be around that or as low as 10%. We just don't know. As well, it isn't even the percentage of parts made in Asia but the weighted cost of them. What Dell didn't say is that the Pentium processor can make up 25% of the cost of the PC. So what percentage of the DOLLAR cost of the machine's parts do those 70%+ parts account for? Michael didn't say. We could probably guess why. Most likely, Iomega is reaping some dollar purchasing power from the strength of our almighty dollar, but whether it is on the same relative basis as Michael Dell implied his company is getting, we just don't know. In the long-term, I expect this all to balance out anyway as Asia will most likely bounce back, though perhaps not in the next 12 months. However, at that point, any COGS savings will be lost. I'm looking at Q4 earnings from a top line level and an efficiency level in terms of net operating assets. Iomega has made some significant investments and I'll be looking at PM (profit margin, including core PM) and ATO (asset turnover) to evaluate whether these assets are giving a signficant return on their investment. Iomega has already made clear that SG&A should be up, on a percentage level, next quarter. (side note, I've seen the "condor" commercial perhaps six times and each time I haven't noticed the commercial until the very end. I think they could do better and should, as someone mentioned, perhaps get a "theme song" like the Intel notes or the NBC "jingle"). However, I do expect gross and net margin to be up but more on the help of higher margin product mix, especially Zip Plus, rather than inherent cost savings involved with the older product lines. Is $1.8 billion and $0.90 out of the question? Nope, but we have a long way to go to get there for the year. With the holiday season about to gear up (weather looks good this year on the East Coast from the long range forecasts I've seen) and Intel not forcing consumers to delay sales like they did last year by pre-announcing MMX but not delivering until after the year had closed, high tech and consumer products could have a good season. Tickle Me Elmo is out and Sing-n-Snore Ernie is in. :-) 6+++++++++++++++++++++++++++
Subject: ZipDisks $7.99 10 pak for 79.99 with $20 rebate, at CompUSA These look like Fuji's. Could it be that the rebates will run through Christmas, and then we will see the price lowered without a rebate in Q1 98? On the one hand, I'm reluctant to give up the premium the disks command, but the further under $10 they go, the less it hurts if they don't get returned. 7+++++++++++++++++++++++++++
Subject: Re: The way I see it.(ZIP) <<Iomega currently has an installed base of approx.11M units they must get this figure to 20+M before they can be considered a standard. >> Spring of 98 is the earliest that the HiFUD is scheduled to appear. Before the product can achieve any sort of acceptance among users it will need to demonstrate reliability and functionality. And with the continuing decline in component costs, the drive must be competitive in price. It won't be able to gain acceptance as an external drive, because everyone already has a floppy, and there is no compelling reason for Dell, Compaq, Acer, NEC etc to adopt it. So, IMHO, if 20 million drives is the level which Iomega must achieve before ringmuscle feels Zip the standard, that level should be reached by next summer. How many HiFUD drives could Sony possible have installed by then? Too late, too much, too bad. Sony should do the smart thing and license Zip. I believe at one point they were very close to an agreement. The HiFUD may be a bargaining chip with Iomega to obtain a favorable deal from IOM, like a bigger piece of the disk revenue, and Fuji is in on the poker game. I sure as heck would hate to declare a Japan boycott, especially against Sony. It would make homelife hell. 8+++++++++++++++++++++++++++
Subject: Updated transfer data (Zip vs. LS-120) Some may remember in June when I reported on some data transfer tests I ran between a PP Zip and an internal LS-120 on a Compaq in my office that came with LS-120 standard. The test results I ended up with showed the internal LS-120 writing data at 7.7 MB/min and the PP Zip was just slightly faster. The rates were so close that the conclusion was that PP Zip & LS-120 transfer rates were comparable (even though an IDE Zip would be needed for an apples-to-apples comparison). Well, some time after the test I began to wonder that since I only temporarily installed the Zip software ("guest" from floppy) that maybe the fastest Zip PP driver had not been loaded during my test. Today, a guy in my office that recently purchased a PP Zip and who has permanently installed the Zip software on his machine informed me that he ran the Zip "Parallel Port Accelerator" to set the transfer speed at maximum throughput for his machine's parallel port. He then transferred a large amount of data to his Zip and achieved an average transfer rate of 21 MB/min (and this data came from the network rather than his hard drive). This is nearly TRIPLE the transfer rate obtained in my tests on the INTERNAL LS-120!! The results obtained today were on a Compaq with an identical configuration to the one I performed my original tests on in June. 9+++++++++++++++++++++++++++
Subject: Bear compendium Here is the condensed version of the bear barrage; (Must have the day off at the short side trading desks) 1. <<currently HP HPD does not carry the ZIP & Sony will drop it on all shipments Jan 98 on>> No No No... that is "Sony will drop Zip IN ALL shipments" 2. <<EXCELLENT ANALYSIS. KEEP I ON SYQT. BEEN MAJOR DEFECTS FROM MARKETING AREA OF IOM TO SYQT. GET THE HINT.>> My feelings exactly. SYQT's marketing has been defective and Iomega's castoffs can't stem the tide. 3. <<BE CAREFUL. DEFECTS FROM IOM TO SYQT OF MAJOR PLAYERS IN LAST 6 MOS. MANY IOM TPD ARE HEDGING BETS NOT SO SECRETLY WITH SYQT SHARES. INFO COMES FROM RETURNED DEFECTOR.>> Information on product return info from SYQT are always welcome. We are not interested in returned former execs... good riddance. 4. <<Did anyone see the Time magazine article in the Nov. 24, 1997 issue? It was a tech guide and SYQT was featured in it. Check it out the next time your at your local supermarket. Remember if your a IOM shareholder you should always beaware of what the competition is doing and that my friends is SYQT ( IOM's number 1 competitor).>> I suppose they could be considered the #1 competitor, Warren's numbers on the LS-120 say different. Of course perspective is important.... IOM is like Denali; SYQT and IMN combined amount to Dotties "Hill of Beans" 5. <<I read the tech guide article in Time magazine. And to be honest with everyone I've been very confident that Iomega would remain the leader in personal storage solutions. However after attending the Comdex show and seeing syquest everywhere and hearing about the award that the SYJET won, it does make me worry about 1998.aking a huge part of IOM's market share. After the hoopla of this 2 for 1 split IOMEGA is going to have to get REAL and start a huge marketing campaign of their own or SYQT will again dominate the market place.>> Can SYQT sustain the pace? PS: IOM has a marketing campaign called Zip Built-In 6. <<Anybody ever heard of Terastor around here? How long can IOM rely on ZIP? You've got to branch out, but where? Well, well...they want low end high capacity, but will they get it? QNTM ain't no Syquest. HMMM, I call IOM a short at next resistance level. My two cents.>> Yes, we have heard of Terastor. We have visited its website. Months ago. When clik! sells its first million units, I sentence you to an hour listening to the clikker I got at Comdex. No, QNTN ain't Syquest... who said it was? Short away. Its your money. You get what you pay for. _______________________________ End Report. Posts covered through 9:00pm ET 11/27/97. _______________________________
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