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But revenue is down, and job cuts are coming, warns CEO

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Iomega struggled hard to post a profit for its first quarter results, reported yesterday, but it managed it -- just. CEO Jodie Glore also warned that staff cuts at the company were on the cards to take place during the next three months. The storage specialist made $569,000 on revenues of just $386 million. For the same period last year, it lost $18.6 million on revenues of $408 million. Gross margins were down from 25.1 per cent to 24.3 per cent, the company said. Iomega's Zip drive and media continued to sell well, increasing 44 per cent and 39 per cent to 2.6 million and 16 million units, respectively. However, shipments of its non-commodity Jaz drive and media fell 46 per cent and 32 per cent, top 118,000 and 422,000 units respectively. The simple fact is, hardly anyone is buying the products that make the most money for the company. The situation Iomega finds itself in not unlike that faced by its former arch-rival SyQuest. SyQuest rested on the laurels of a couple of good-selling products and failed to keep up the demands of the removable storage market. That hit its sales hard, and despite attempts to streamline the company for survival, it effectively died late last year. Iomega could go the same way -- ironic, since the company's success was founded on offering the innovative products SyQuest had neglected to come up with. Iomega, at least, spotted the problem and the recently-appointed Glore is working to solve it. His solution has seen the launch of the long-awaited upgrade to the 100MB Zip, taking the format to 250MB. Sales began in Q1, but not quickly enough to counter the fall in Jaz sales. Still, the technology has had some design wins, most notably Dell, which is now building 250MB Zip drives into certain systems. Iomega's much delayed Clik! format, aimed at digital cameras and other consumer electronics products, has won plenty of supporters too. But it's questioable whether the technology, arguably a couple of years out of date, can make much impact in the face of products like Sony's Memory Stick (see related story). Glore's revival plan includes further cost-cutting measures -- he stripped $15 million off of the company's operating expenses last quarter -- the consolidation of facilities and redundancies, though it was not revealed how many jobs will be lost. Second quarter figures, however, are likely to match the latest results, he warned. ®

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