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Study sees better sales than profits for drive makers

Purveyors of CD- and DVD-ROM drives won't have a tough time selling more products in 2000, but they will have a tough time making more money, according to a new report.

    Purveyors of CD- and DVD-ROM drives won't have a tough time selling more products in 2000, but they will have a tough time making more money, according to a new report.

    International Data Corp. issued a new forecast for the optical and removable drive market today that predicts a 24 percent rise in shipments of DVD drives and the like. However, revenues will lag shipment growth by a significant margin--drive makers will only eke out a 2 percent increase over 1999 results, the report said.

    The best hope for growing revenues is to target the rewritable CD (CD-RW) or DVD-ROM market, judging by the forecast. IDC expects the market for CD-RW drives to grow by 93 percent this year and for DVD-ROM drives to grow by 55 percent.

    Once promoted as a technology that would help advance the PC against the TV as an entertainment device, DVD-ROM has made a slower than expected incursion into the PC market, a situation that may only start to change this year. DVD-ROM offers much more capacity--up to 8.5GB per side--than its predecessor, the 650MB CD-ROM.

    "DVD-ROM has clearly not made much progress over the last 12 months" because of a lack of PC-specific content, said Wolfgang Schlichting, IDC's manager of removable storage research. There still will be more DVDs shipped with PCs compared to the number of stand-alone consumer DVD movie players.

    Still, "(the movie players) get more mindshare in the consumer electronics market because most of the content is clearly in the movie format," said Schlichting. It is estimated that about 9 million DVD-ROM drives shipped last year, compared to about 4 million DVD movie players, according to various industry reports. IDC figures DVD-ROM shipments will rise to about 17 million units this year.

    Iomega and its competitors, such as Imation and Sony, face a continued challenge from the CD-RW format. CDs pack in up to 650MB of data, vs. capacities of up to 250MB for the high-capacity floppies that Iomega and others offer. Standard floppy disks hold up to 1.44MB of data.

    Growth in what IDC terms the low end of the removable magnetic storage market will be good--shipments are expected to be 28 percent higher--but that's significantly lower than last year's 41 percent growth rate. That could leave a struggling Iomega in rough waters because of the relative low price of a Zip drive, its product for this market segment.

    The company's lifeline just might come in the form of its first CD-RW drive, introduced in August of last year. IDC is forecasting that manufacturers will ship around 15 million CD-RW drives this year because of the growing need to store music downloaded from the Internet.

    The only real limit on growth of CD-RW technology is the relative higher cost of the drives, Schlichting said. The drives cost users anywhere from $30 to $100 more than a DVD-ROM drive, based on prices quoted by various PC companies.