By B. PARKER JONE
Before Iomega Corp. came to Roy, 40 miles north of Salt Lake City, the small community’s only claim to national recognition was a head-band- wearing, Super Bowl shuffling, Chicago Bears quarterback known as McMahon. Although Jim McMahon and Iomega compete in two entirely different fields, both have much in common.
Recently, both Iomega common stock and McMahon have been traded with regularity and slipped in value.
Almost daily, Iomega is the leader in total volume among the stocks offered on the NASDAQ, America’s largest over-the-counter market. The high volume may be the cause of the stock’s increasing volatility.
Since December 1995, Iomega shareholders have seen their early investments increase more than 1,000 percent, from $5 per share, to $112 per share in April of this year. However, between the May 21 two-to-one stock split and June 24, the stock fell approximately 13 points including a $10.25 per share dip following June 18 trading.
Recent negative stock price volatility does not seem to concern Iomega, manufacturer of the Zip drive, a portable storage drive with a capacity of 100 megabytes — the equivalent of 70 floppy disks.
“Obviously we do not control the price of outstanding shares. Fortunately volatility has been on the upside for us in the past,” Iomega treasurer Robert Simmons said. “All we can do is continue to produce high quality products that satisfy market demand.”
Iomega reported a net income of $8.5 million on sales of $326 million of sales in 1995 and a reported net income of just over $9 million on approximately $220 million in revenue for the first quarter of 1996.
According to Simmons, future plans for the Zip drive include an agreement with IBM to include the Zip as a replacement to conventional floppy drives in IBM’s new Aptiva line of personal home computers.
“Zip drive coming standard in machines like IBM is the success that will eventually drive the volatility out of Iomega stock,” Simmons added.
Unfortunately for Iomega, producing quality products alone may not be enough to decrease volatility. According to a May 23 Wall Street Journal article, much of Iomega’s increase and subsequent decrease could be attributed to online bulletin or “chat” boards.
The Motley Fool is a bulletin board on America Online that allows information-hungry investors to communicate with others who may have in-depth information on diverse companies. Recently, many Iomega investors and potential investors have turned to the Motley Fool for information about Iomega dealings.
Following the Wall Street Journal Article, Iomega stock fell nearly $12 per share, causing some analysts to speculate the true value of Iomega shares.
“There is a lot of anticipation and speculation among people that are involved with any technology stock,” said Dan Nelson, branch manager at Smith Barney in Provo. “Technology stocks all trade on anticipation not earnings.”
Simmons disagrees.
“People point to the Internet to explain the volatility of the stock,” he claimed. “It’s just an easy way for people who don’t do a thorough analysis of the company to explain it.”
Whether it be the Internet or the lack of analysis by interested investors, the recent dive in Iomega stock has frightened uneasy investors. However, many plan on holding on to the stock because of past earnings.
“(Iomega) makes me nervous, but I’ve owned other computer stocks and every time they climbed back,” said Daron Stevens of Salt Lake City.
