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Iomega hears a Clik!
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May 22, 1998: 7:04 p.m. ET
Company broadening product line with small, portable storage device
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NEW YORK (CNNfn) - Iomega Corp. was able to get many computer users to Zip. Later this year, it hopes to get people to Clik! as well.
Roy, Utah-based Iomega put itself on the map with its Zip drive, a small, portable storage device capable of holding 100 megabytes of data.
According to a recent report by H.D Brous & Co. Inc., Iomega has sold more than 13 million of the disk drives. The drives come bundled with some computers and are also available separately as a stand-alone product.
To broaden its product line, Iomega developed a new compact storage system called Clik!, designed for use with small, handheld devices like cellular phones, digital cameras and personal digital assistants.
Unlike Zip drives, Clik! drives, which use removable 40-megabyte disks, can actually be included in the devices themselves. However, stand-alone versions also are planned.
"Clik! is targeting battery-operated products that require a new category of storage that's much small than the Zip," said Mike Lundgren, general manager of Iomega's Clik! business unit.
A key advantage of Clik! is its low price point, which enhances the capability of commonly-used devices. For instance, the capacity of Clik! disks make it possible to load multimedia presentations on to portable computers.
Clik! has been under development for about two years. To accelerate its advancement into the marketplace, Iomega has granted manufacturing licenses to companies like Citizen Watch Co. Ltd. and NEC Corp. of Japan. Iomega will also continue to make the devices.
"We're obviously targeting digital camera and handheld computer makers. Most, if not all, are evaluating the product, such as Hewlett-Packard and Polaroid," Lundgren said.
One key advantage to Clik! drives is they add only about six ounces to a product's weight.
Lundgren wouldn't detail how much Iomega has spent on research and development for Clik! He did say Iomega was able to leverage its Zip technology to decrease the money required to get Clik! to market.
Iomega could definitely use a shot in the arm. In March, the company reported a first-quarter loss of $18.5 million, or 7 cents a share. That's a steep decline from the profit of $23 million, or 8 cents a share, a year earlier.
Iomega's shares also have been on a wild ride in the past year. They currently are trading at just under 7, well off the 52-week high of 16-3/4. (Click here to see an Iomega stock chart)
Those losses led to the resignation of former Iomega Chief Executive Officer and President Kim Edwards in late March.
Analysts say it's a little early to gauge the impact Clik! will have on the company.
"It's a neat device that leverages magnetic storage technology, which is very mature and something they know a lot about.
"It's a superb idea. I think the price points are good and it's a well thought out product," said Daniel Kunstler, technology analyst at J.P. Morgan & Co.
Kunstler said whether the product is actually a success will depend largely on Iomega's execution.
"If there is a hurdle to be crossed, it is convincing [device] manufacturers of the dependability of not only the product but of Iomega as a company," he said.
Kunstler doesn't expect Clik! to make noticeable contributions to Iomega's revenues this year. His forecasts currently estimate just over $30 million in hardware and $24 million in disks will be sold this year.
Brous believes the popularity of Zip plus the strong industry endorsements for Clik! make Iomega an attractive long-term investment.
"We believe Clik! has very significant potential if successfully developed and commercialized. Clik! will offer a price/value proposition vastly superior to alternative hand-held storage solutions," Howard Rosencrans, senior security analyst at Brous, wrote in a recent report.
Joseph Besecker, president of Emerald Research, said although Clik! offers Iomega many opportunities, one hurdle the company must climb is getting equipment makers to built it into their products.
"They can't duplicate their efforts with Zip because there's not as much call for a removable storage device that's outside the product. I hold high hopes for it and like what they've done," he said.
Like most analysts, Besecker doesn't see major revenue contributions until 1999.
-- by staff writer Cyrus Afzali
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