Not Everyone Sold On Iomega’s New Disk Drives

Sat., June 1, 1996

From Wire Reports

Iomega Corp. may have a tougher time selling its high-powered computer disk drives than its high-flying shares.

The company can’t count on setting a standard for the next generation of disk drives - which store information for use by personal computers - because it now faces some much bigger competitors, analysts said.

And even if Iomega wins that battle, it may have trouble convincing people to abandon the standard 3-1/2-inch drive and buy its more expensive Zip drive, which provides more than 70 times the storage capacity on a single disk.

Most computer users don’t need anything more than the current drive and it’s much cheaper to produce, said Jim Porter, president of Disk/ Trend, a consulting firm that charts disk sales for the industry.

“Are you going to replace the conventional floppy? I’m in the ‘Hell no’ camp,” Porter said.

The prospect that Iomega’s drive could become an industry standard helped boost its stock price almost six-fold this year. Its shares hit a high of $55.12-1/2 May 23 from a low of $8.04 at the beginning of the year, adjusted for a stock split. Friday it closed at $44.12-1/2 after being one of the most active U.S. stocks for the week.

At that price, the Roy, Utah-based company’s stock trades at 17.6 times sales for 1995, and 103 times analysts’ estimated earnings for 1996. The company is short on cash, with only about $700,000 in the bank as of March 31. It filed earlier this month to raise more money by selling 5 million common shares.

Some of the stocks that moved substantially or traded heavily Friday:

NYSE

Corrections Corp. fell 2 to 74.

The private prison company priced 2.85 million shares at $75 on Thursday. The size of the offering was raised from an original 2.5 million shares.

Best Buy rose 1-1/4 to 22-3/4.

Goldman Sachs upgraded the computer retailer’s stock to trading buy from market perform.

Varity rose 3-1/8 to 49-1/8.

Lucas Industries PLC and Varity Corp. said they will merge in a stock swap, forging a big Anglo-American manufacturer of auto parts valued at $4.9 billion. Lucas is based in London, Varity in Buffalo.

NASDAQ

Intel rose 4 to 75-1/2.

Intel Corp. executives on Thursday reiterated their expectation that the leading maker of computer chips will report slight profit margin growth and flat revenue in the second quarter. But Merrill Lynch upgraded its intermediate-term rating to buy from neutral.

Bed Bath & Beyond Inc. fell 7/8 to 28-1/8.

The housewares retailing chain said co-chief executives Warren Eisenberg and Leonard Feinstein sold 2 million common shares, or a little less than 3 percent of the outstanding shares. The co-chief executives retained more than 30 percent of the company’s shares.

Republic Industries rose 4 13-16 to 52.

Addington Resources Inc. rose 3-1/2 to 20-1/2.

H. Wayne Huizenga’s Republic Industries agreed to acquire Addington Resources in a stock swap valued at about $322 million. Republic, which provides waste management and electronic security services, will exchange 0.45 of a share for each of Addington’s 15.2 million outstanding shares.

AMEX

Bema Gold rose 1/4 to 4-1/4.

Echo Bay rose 3/8 to 13-1/2.

Royal Oak Mines rose 33-16 to 4 7-16.

Pegasus Gold rose 1/4 to 15.

Hemlo Gold rose 3/8 to 12-3/4.

Gold-mining shares rose with gold prices in Europe. Spot gold futures were up 30 cents an ounce to $390.90.

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