Iomega profits way up – hurrah!

Troubled storage company Iomega saw a major hike in profits for its first quarter of fiscal 2000, making the period the second most profitable in Iomega's 20-year history. Falling sales, however, mean the company can't afford to assume its problems are over. For the three months to 26 March, Iomega recorded profits of $31.7 million. Add in a hefty one-off piece of fund management - the company shuffled $20.1 million out of its 'money for the taxman' pile - and earnings reach $51.8 million or 19 cents a share - rather more than the four cents a share Wall Street was expecting. That compares to the $569,000 it made in the same period, last year, and the $21.4 million it made in the previous quarter, Q4 1999. It all sounds very healthy, but the Iomega's profitability, like that of the previous quarter, came from reduced operating costs exceeding declines in sales of Iomega's main product lines - and there's no sign the downward trend is changing. Q1 2000 saw 800,000 fewer Zip disk shipments than Q1 1999, and Zip drive sales were down by 500,000 units. It sold 43,000 fewer Jaz drives, though Jaz disk sales were up by 21,000 units. Overall, Q1 revenue reached $344.9 million, a fall of $41.3 million, or 10.7 per cent, from Q1 1999's $386.2 million. Iomega has since launched a major, "multi-million dollar" ad campaign to promote its Zip drive, but since the bulk of the sales shortfall is down to OEMs declining to buy the device, perhaps Iomega is looking in the wrong direction. ®