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Friday, January 30, 1998 Thursday, Iomega closed at $8 11/16, up $9/16 (+6.92%). TODAY'S RECAP: In the IOM board today, posters discussed the competition. Most specifically, SyQuest and the new SparQ drive which may or may not have had an impact on Iomega sales in the fourth quarter. Despite a slight rise in the stock price, the board continued to hear from disgruntled investors over the company's varied strategies (financial and marketing) as well as the handling of the conference call. 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++ DW20001 proposes ideas for "improving the investment."
Recap written and posts compiled by TMF Weekly. _______________________________ And now, the Best of the Board...Started 9:00pm ET 1/28/98. 1+++++++++++++++++++++++++++
Subject: Share Walue Just a couple of items that I believe should to be addressed that could improve our investments. !. I believe that the law of supply and demand will prevail and with the recent stock split there is too much stock. This has become a huge mountain to climb. Every time the stock moves up a point there will be profit taking and downward pressure. We had hoped in the past that the institutionals would pickup the slack but it looks like that will be a long time in coming. For this reason I am proposing a statement of error on behalf of the stockholders and a reverse split. 2. The reason for the split was the lamest I have ever seen. Given that we have 100 mil to do advertising, I would propose that a cutback of 10 mil to 90 mil. The 10 mil would than be used for a stock buy back to address the employee options issue. 3. I would propose that those analyst that are actively following the company be given an opportunity to meet with the company and at the least be given some on going guidance so as to avoid the mistakes that were responsible for the vcall conference. Perhaps I'm being a little naive here, but perhaps a group will form that will act on behalf of the stockholders with the goal of improving stockholder value. Isn't that what the board is supposed to do ? I would further propose that a review be taken to establish the goals of the board. 2+++++++++++++++++++++++++++
Subject: SparQ shippments (SYQT HYPE) From the posts I have read since early December, I got the impression that SYQT had shipped 50,000 SparQs, and from their news releases expected 50,000 by the end of the quarter ending December 31,1997. Well HOLD THE PRESSES!!! SYQT's Fiscal year ends September 30th. Their Q1 ended December 31, 1997 (THIS DATE IS IMPORTANT), Q2 ending March 31. SYQT had 3 press releases, December 4, 1997, December 12, 1997 and January 9, 1998. From the Dec 4th press release, it seemed like SYQT HYPED that they were going to ship 50,000 units and 90,000 cartridges by the end of the quarter (their quarter ending Dec 31), quoting " it expects to ship all SparQ products scheduled for manufacture this quarter, nearly 50,000 SparQ drives and 90,000 SparQ cartridges" NewsAlert - SYQT Dec 4, 1997 . In the Dec 12th release, it appears that they have they have HYPED the shipments again, quoting "With the shipment of EIDE units, SyQuest is now shipping in volume all configurations of SparQ in time for the holiday buying season. The company expects to ship approximately 14,000 SparQ drives of all configurations during the week of Dec. 15, 1997. As previously announced, the company plans to ship approximately 50,000 SparQ drives by the end of current quarter" (the end of the quarter was December 31st) NewsAlert - SYQT Dec 12, 1997 . In the Jan 9th 1998 report, here's a quote "SyQuest Technology, Inc., (NASDQ: SYQT), announced that after the first two weeks of volume production, shipments of its popular new SparQ product have surpassed the company's original estimates for initial shipments. Nearly 50,000 SparQ drives and 90,000 SparQ cartridges scheduled for manufacture are expected to be shipped" (this is SYQT's Q2 and is seems as if 50,000 units were still NOT shipped). NewsAlert - SYQT Jan 9,1998 . The point is that all of this SyQuest HYPE damaged Iomega's stock price when actually there appeared to be a very small amout of SparQs ACTUALLY SHIPPED. Since Wall Street and the shorts on this message board think that this product is such a big threat and that all the SparQ units were sold out during the Christmas season, The fact was that there was only a very very small amount of SparQs shipped in time for Christmas. Iomega probably shipped over 1 MILLION Zip drives/vs/about 14,000 SparQs in the same period of time. At SYQT's production rate, this is going to present a big problem for Iomega.....NOT A CHANCE!!! If you saw my previous post, ORB has not shipped 1 unit because of SYQT's lawsuit. I wonder how SYQT is paying for the lawyer fees? SYQT & IOM both seem to be having supply shortages. SYQT, because they don't have money to buy the components, and Iomega, because they can't get the components fast enough. This is an update on the competition, while Iomega just ZIPS ALONG. It took a while to write this post, how about some comments!!!! 3+++++++++++++++++++++++++++
Subject: SparQ speed? << Somebody correct me if I'm wrong, but isn't Sparq available only as a parallel port machine? The speed difference would be enormous -- seems to me Sparq's appeal would be considerably limited by it's slow speed. Sort of like comparing a Chevy to a Ferrari >> According to the Boston Globe article posted earlier, the SparQ is twice as slow as the Superdisk, with the Superdisk taking 10 secs. to copy a 5 meg file while it took the SparQ 20 seconds to copy a 5 meg file. So imagine how much slower it is than the Jaz. 4+++++++++++++++++++++++++++
Subject: Some unposted issues Now that things have quieted down... I have a few comments to make about the conference call, Iomega, and managment. I first bougt IOMG after seeing KE on CNBC. He had just announced the N*hand. Being a futurist of sorts, I couldn't resist... after all, it was comming out shortly... sometime after Feb The tone of this post may sound bearish... it is one of frustration. It is the operations problems that have been bothering me the most. Since I have owned the stock there have been these issues: -N*hand delay -Buz delay -Laptop Zip delay (x2 or so) -Zip chip problem -Jaz2 delay -Beck O' delay ;-) -Clik! delay Am I making a point? I think after the Q3 conference call I and others posted about the Ops problems. Unfortunatley, they are still here. I have no idea on the breakdown of SG&A, but my hunch is that some Ops issues are buried in there as well as in R&D. When the developing segement of $1000 computers hit the news last fall, I was very excited. It was so obvious to me that this segement was made for Zip drives, but in the conference call, KE said something along the lines of "...we're still trying to figure that one out." One word: DUH!!! Small hard drives, made with web surfing in mind, and KE is still trying to figure this one out? The lack of analyst coverage has hurt the stock price. The poor disclosure policy of Iomega is why there are few analysts. The was discussed over a year ago, and met with venom by some of the regulars (possibly because better disclosure was also supported by Hypemenot and Benjamin70.) I am curious on your opinion now. With more coverage, IOM is more likely to be priced at analysts' "fair value." Based on my own experience, I believe Iomega is having HR problems. I look pretty good on paper, but have not had any response from them... nothing... I have been sending resumes since early last Oct. for several different business disciplines... nothing. Not even a dreaded "thank you" letter. Poor business practice, imo. (wouldn't you at least contact a MBA/MS Finance with a BS in Aerospace Engineering?) In summary, something has to change. Iomega is experiencing "growing pains" much longer than they should. This is plain old managment problems. While KE has done well in the past with the Zip (from a marketing side,) he needs to address the Operations issues now, as well as the other issues I have brought up. It is time for these issues to be addressed in a "prepared for" conference call. PS Jaz2 hurt Jaz1 sales. DUH... on us. Did anyone mention this before the fact? Of course now it seems obvious to me... maybe it was the delay that hurt Jaz1 sales. Also, I do not buy the Asian excuse either. 5+++++++++++++++++++++++++++
Subject: Re: Some unposted issues << Jaz2 delays should not have had an effect on 4Q earnings >> The delay is not what caused the problem. It was the fact that they announced it would be for sale shortly (instead of at some indefinite time in the future that caused folks to forestall Jaz1 purchases. The same thing happened last year when MMX was announced for Q1 of 97, thereby hurting 1996 Q4 computer sales. This was a marketing and operations blunder. The drive should never have been announced for sale if it was not ready to roll. 6+++++++++++++++++++++++++++
Subject: Disclosing Tie Ratio (Was Re: Jaz2 announced early?) << On another note, I'm not at all happy with Iomega's disclosure policy. Why keep tie ratios a secret? You and I both know the big investors know what the tie ratio is. I'm sure some of the analyist know roughly how many disks were sold during the 4th quarter. The only people that don't have this information is the retail investor. >> I doubt anyone but top Iomega management actually sees the tie ratio. With Iomega organized into the different divisions, I doubt even division heads know the real figure. You can believe what you want though. Keeping the tie ratio secret is incredibly critical. Iomega in the future will need to license more Zip drive production. Don't you think it would be hard to get the best deal possible if all your potential licensees knew exactly how much the disk sales were worth? How about negotiating with the disk co-branders? You think Iomega gets the best deal from Maxell et al if they knew exactly how much profit margin Iomega is making on the disks? How about competition from Matsushita/Mitsumi (LS-120), don't you think it would have helped them to know exactly how much Iomega's Zip drive cost was? If you knew the tie ratio you can figure out the gross margin on a Zip drive. What about Sony (HiFD)? Why make their life easier by letting them know Iomega's business model. The above three companies have hurt American companies in the past by selling below cost. If they don't know Iomega's cost it, selling below cost goes from a strategic business strategy to a big costly gamble. For all they know Iomega could meet their price at a positive gross margin. 7+++++++++++++++++++++++++++
Subject: Re: Jaz vs. SparQ (was Re: Jaz2 announced early?) << The Jaz drive is 15-16X faster than a SparQ. I don't see how anyone can get around that fact and make a case that SparQ steals Jaz sales. >> I really don't think it's much of a stretch to say SparQ steals Jaz sales. I'd say it's likely. << The Jaz buyer is a power user that is more concerned with speeds and feeds than price. Power users don't buy the cheapest Intel chip available, they buy the fastest. Power users don't buy the cheapest modem available they buy U.S. Robotics Couriers. >> And most "Power Users" don't actually create things on removable storage disks. You're absolutely right Patrick, power users want/need speed. And real speed doesn't come from any removable storage drive, even a Jaz. It comes from a top end fixed hard drive. It comes from something like a Seagate Barracuda or Cheetah hooked to a fast/wide SCSI card. I suppose with 288 MB of RAM, a 275MHz G3 chip, 10GB of online storage and Electric Image for creating animation I would qualify as a "power user". I also have 2 Jaz drives which I use for online and short term storage, and transport. I couldn't imagine creating animation straight on the Jaz drive. It might kick butt over the SparQ, but it doesn't approach my fixed drives. I use my Jaz to transport stuff a Zip won't hold back and forth to the office, and to give me online access to things I just don't need cluttering up my fixed drives. And the truth is, the SparQ would probably serve me just as well. Yes, it's slower. But the trade off is the lower price, and for what I use it for it would probably do. Now being an investor in Iomega & knowing what I know about SyQuest, I would never buy any of their products. But that has nothing to do with speed. It has to do with a fear of the company going out of business and bringing out numerous incompatible drive formats, both of which could leave me with no upgrade path. But not everyone follows the storage company's the way we do here. Not everyone who goes to buy a removable disk drive is going to know SyQuest has been hemoraging money. I really don't see it being a big stretch to say those who have bought a SparQ purchased it over a Jaz. Speed isn't always the end all and be all of power users. Speed is most important at the spot where you're actually creating your content. And I just have a hard time believing a lot of folks are creating content straight onto removable drives. The truth is, if I had to buy my setup new today removable storage would proabably be the spot where I'd look to save a few bucks. 8+++++++++++++++++++++++++++
Subject: Who & What To Blame? (Was Re: Boston Globe pans Zip) FlixRox posted and commented about the Boston Globe article, suspecting the author of that article may have compared PP Zip to IDE internal LS-120. FlixRox said: << Hard to believe that someone with his credentials innocently made the mistake of comparing PP speed (for Zip)to SCSI/IDE speed (for SuperDisk) >> I like to add that it may also be a case of comparing a cached LS-120 (using hard disk caching schemes --- copying the file to the hard disk first and then copying the file from the hard disk to LS-120 later in the background) to a non-cached Zip, which the author of the Boston article admitted when referring to why LS-120 was "so fast": << thanks to an excellent caching utility that does much of the copying in the background, so you can move on to other tasks. >> So maybe it was like the Zip was being tested against a Hard disk there, not the LS-120. I think Zip can also be run with some cache programs or run in the background under some operating systems. (Please correct me if I am wrong here.) So, the author's comparsion was totally biased and meaningless. As a matter of fact, other carefully engineered tests from more respectable computer publications which tests were designed to truly compare HARDWARE performance of Removable Media Drives and not the software cache programs (they did the tests by disabling all hard disk and memory caches) consistently had Zip way ahead of LS-120. Not only did that article try to put down Zip and promote LS-120 by an unfair and biased comparison, the author also tried to slam Jaz in favor of SparQ. Jaz and external SparQ shouldn't be compared and there is simply no comparison. They are not even in the same class. And sure, it seemed the author knew everything from PP to SCSI interfaces and back. The author knew how to castrate (or should I say "put a chastity belt on") a very potent Jaz in order not to make the "born impotent" External SparQ look too bad. Then the author complained that the castration process (or the "chastity belt") would cost money for Jaz but you wouldn't need it with SparQ. From that Boston Globe article: << Also, you have to buy a $50 accessory to connect an external Jaz drive to your computer's printer port. Sparq requires no extra gadgets. >> (Some slightly more serious notes: 1. External Jaz drive is a SCSI device and naturally works very fast on computers with a SCSI port (One can install a SCSI card such as JazJet if the computer doesn't already have a SCSI port). Iomega does offer an additional accessory to allow the external SCSI Jaz to work on parellel port also. It is an additional convenient cross platform feature for the occasional event that you may transport your Jaz to work with other computers that don't have a SCSI port. 2. External SparQ is only available as a parallel port device and is extremely slow comparativley speaking.) No, I don't believe there are any extreme right wing ultra conservatives, or any extreme left wing ultra liberals, out there trying to get IOM. Our chief KE himself sounded kind of funny during the recent conference call for whatever reasons though. Seriously, I think Iomega may be doing a very poor job in communicating with the media and investment communities. Or they may have some kind of serious attitude problems. They may not be explaining their technologies well to the public and still not being able to tell the true Iomega story to the media and investment communities in a serene manner without being regarded as hyping. Attitude (hip but arrogant?) may have further degraded Iomega's image. Please, Iomega, don't leave this job to Internet kooks, but you can't sit around and do nothing to correct misinformation out there either. _______________________________ End Report. Posts covered through 9:30pm ET 1/29/98. _______________________________
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