Iomega, Class Act or Class Action?:
A Continuing Study
Into How Iomega Treats
Its Customers and Employees
Paraphrased Financial World article from the December 16, 1996 issue; "1997 investment Guide," p. 64, "Down the Up Market" by Debra Sparks, "Five stocks to short in 1997":
[The gist of this article is here put into my own words. --SL, 10 Feb 1997]
[Emphases in red added 28 February 1997. --SL, 28 Feb 1997]
Some stock prices fall because of accounting problems or fraud.
Five stocks are presented as possible candidates for shorting in 1997:
Doug Kass, of the hedge fund Kass PerkinsPartners has suggested that 3 stocks in particular are now too pricey:
1. Starbucks 2. Abercrombie & Fitch and 3. Sunglass HutAnonymous sources are suggesting that iomega [the company name is capitalized in the article] should be shorted. Although revenues over the past 2 years went "from $35 million a quarter to $300 million a quarter," problems with offering a $50 rebate on the $189 Zip drive are noted, maybe because the company has had problems estimating how much to reserve for redemptions, which affect the bottom line.
Some say that iomega assumed that 50 percent or fewer customers would actually redeem their coupons. iomega treasurer Robert Simmons is quoted as saying that actual rebate claims have been " . . . less than 100% but more than 50%. But it's closer to 50%." But the reporter editorializes that this seems to be an admission on the low side, since the $50 rebate represents "a significant savings" on the $189 cost of a Zip drive.
The reason this is so important is that even though iomega earned something like $21,000,0000 before taxes, "50% to 100% of those third-quarter earnings" could be wiped out if more people than anticipated actually receive their rebates.
Speaking of the potential for iomega stock prices to fall to values that are associated with hat sizes, the anonymous source points out that we won't know about iomega's profitability until it is known how much actually went out for rebates.
The fifth company that is mentioned as a candidate for shorting is System Software Associates.
[End of paraphrased article from Financial World.]
Return to February 1997 Correspondence
By the way, you might like to visit "Seatbelts for School Buses"
Thank you for your interest!
©Stephen A. Langford, Oro Valley, Arizona, 12 April 1997. ALL RIGHTS RESERVED. This document may be freely transmitted in its entirety, so long as no monies are earned during the transaction/s. Permission is required for any and all other pertinent circumstances.
(Metering for this page begun 28 February 1997.)