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Recordable CDs may replace Zip on PCs

Recordable-rewriteable CD-ROM technology is steadily becoming the PC's storage platform of choice, and may be a direct threat to Iomega's Zip technology.

It looks like sunset may be coming for the Zip drive.

Recordable-rewriteable CD-ROM technology (CD-RW)--which allows users to record their own CD-ROMs and play them back on stereos or PCs--is steadily becoming the storage platform of choice among PC manufacturers and consumers.

CD-RW drives come with only a few high-end PCs now, but declining prices, improvements in speed easier-to-use interfaces, and other factors will prompt PC makers to start including CD-RW units as a feature in more models by 2000. Performance users, meanwhile, already can get CD-RW drives that run DVD disks as an added bonus.

The migration will likely mean the decline in sales of magnetic storage devices such as Zip drives, but Iomega does not intend to go quietly. Executives readily admit the storage maker is looking at technologies like recordable CDs, and sources say an announcement regarding optical storage could come next week at PC Expo.

"There are a lot of computer customers talking about bundling CD-RW. Most are now add-in products," said K.Y. Lee, president of Acer Peripherals, one of the larger makers of CD-ROM drives. "The demand for read-write drives is very strong."

Declining cost for both drives and media, of course, constitute a the major drivers in CD-RW adoption. Consumers now have to pay around $150 to $200 for a very basic add-on CD-RW drive, according to various estimates, while manufacturers are paying around $85 to $90 per drive incorporated into PCs. More deluxe models running at faster speeds can go for $350 or more.

These prices are higher than the retail and wholesale costs for Zip drives or garden variety CD drives, but gap is closing fast. Concurrently, the speed of now slower CD-RW drives is increasing. By 2000, these trends will make CD-RW a more viable option as a standard feature for most PCs.

"The sweet spot for [computer] manufacturers is a 4 x 4 x 24 for under $100," said Mary Bourdon, an analyst at Gartner Group Dataquest. "You won't see it this year, but you should see some interesting things next year?I would expect to start seeing some more heat on the competition." (The "4 x 4 x 24" refers to the speeds at which the drive records, rewrites, and reads data. Currently low-end drives record and rewrite at 2x and read at 24x.)

Some competition for the Zip, in fact, appears to already be occurring. Sales of add-on Iomega drives--the kind you buy after you've already bought a PC--have already leveled off, said Bourdon, attributing the drop partially to CD-RW sales.

Six million external CD-RW drives shipped last year. In total, Iomega shipped 9.5 million drives last year, according to Dataquest.

As for media prices, CDs are already winning, according to Ted Pine, an analyst at InfoTech Research. CD-R disks, which allow a user to burn data or music onto a CD, but not erase or re-record data, cost under $1 retail. Classic CD-RW disks, which let users erase and re-record data in a similar fashion to cassette tapes or floppy disks, sell for under $20 and should dip below $10 by year end. Iomega Zip disks, by contrast, cost around $10.

Cost, however, is not the only factor in driving adoption, Pine said. Another important consideration is the ubiquity of the CD-ROM standard. CDR and CD-RW disks are largely compatible with standard CD-ROM drives, which are included on nearly every computer and home stereo system. Iomega disks can only be played back on their own drives.

"There is no other backup medium that can have that possibility," said Pine, who predicted that the uptick in CD-RW sales could start later this year. The complex user-interfaces for CD-RWs are also improving, he added. Thirdly, Pine pointed out that some CD-RW drives coming out soon will also run DVD-ROM disks, which further adds to the platform's attractiveness.

Brian Smith, senior product specialist at Gateway, one of the more active proponents of CD-RW, said the company has not seen CD-RW sales cannibalize Zip sales. However, that could change over time as consumers understand the cost savings in terms of the recording media.

Iomega isn't scared
While the rise in popularity of the storage platform creates storm clouds for Zip and Iomega, the company is apparently reacting quickly to changes. For one thing, the price of Zip and Jaz drives will continue to drop, which will keep competitive heat on CD-RW proponents, said Bob Katzive, an analyst at DiskTrend. Second, the company is intent on transforming itself from a purveyor of its own technology into a general storage outlet.

"They want to be the company you think about when you think about storage," he said. "They want to be the one-stop shop. "

Indeed, some sources stated that the company plans to announce their product strategy for CDs next week at PC Expo.

Keith Slankard, director of business development at Iomega, would not comment on any upcoming announcements, but stated that the company is open to new technologies, including CD drives.

"We're always looking at technology to better serve our customers," he said.

At the same time, Slankard added that the CD-RW market actually can complement Zip drives. Because of the speed and complexity involved with current CD-RW drives, consumers who have both often prefer to edit on Zip drives and use the CD-RW drive for final storage. In the future, he conjectured that there is no reason both types of drives can't coexist on PCs.