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Iomega Q2 loss deeper than expected

Predicted $18m restructuring charge balloons to $41.9 million

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Troubled storage specialist Iomega yesterday reported grim second quarter results centring on a total loss of $61.7 million on revenue of $349 million. Much of the loss came from a $41.9 million restructuring charge, made as the company cut jobs and made other cost-reduction manoeuvres under CEO Jodie Glore's ongoing battle to return the company to profitability. Last quarter, Iomega did indeed nudge itself into profitability, but Glore warned shortly after that upcoming cost-cutting tactics would lead to large-scale charges being taken throughout the remaining 1999 quarters. The company was anticipating spending just $18 million on restructuring, rather less than the hit it finally took. Iomega's loss before the restructuring charge was $19.8 million. The problem appears to be the company's inability to sell higher margin products, such as its Jaz removable hard drive system. While sales of the better-known Zip drive rose 27 per cent year-on-year to 2.5 million units, only 122,000 Jaz drives were shipped, a fall of 24 per cent. During the quarter Iomega finally began shipping its Clik! drive, notching up shipments of 4000 drives and 22,000 disks. Clik! shipments are set to increase considerably over the next six months, thanks to the number of OEM deals Iomega has struck. However, it's debatable whether they will match Zip shipments for long-term growth -- the technology isn't yet proven in the real world, and there have some major improvements in the price and capacity of solid-state storage systems since Clik! was announced over three-and-a-half years ago. Other signs call for optimism, though. Glore said inventory during the quarter was at its lowest for 12 quarters, and that cash and cash equivalents at the end of the period totalled $89.3 million. ®

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