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Iomega drops 'Son of Clik' as losses swell

Storage firm ends CE flirtation to focus on business kit

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Iomega is to ditch its consumer-oriented 1.5GB micro removable drive system, DCT, and focus on business products in a bid to recover from its financial woes, the storage company said this week.

It also posted a widening $19.8m (38 cents a share) loss on sales totalling $77.6m for its second fiscal quarter, which ended on 17 June 2004. Those figures mark a fall in revenue of 23 per cent on the year-ago quarter, when it lost $4.4m (nine cents a share).

Gross margin from 34.1 per cent in Q2 2003 to 19 per cent in Q2 2004. Iomega's operating loss of the period was $16.1m, up from Q2 2003's $1.4m operating loss.

The company's DCT (Digital Capture Technology) was launch exactly a year ago, but while some big names - Fujifilm, Citizen and Texas Instruments - agreed to evaluate the system, few went on to buy it. Iomega envisaged DCT as an alternative to Flash-based memory cards, seeing a role for the format in digital cameras and camcorders.

As we noted at the time, DCT was essentially a second generation of Iomega's ill-fated Clik! drive, which likewise failed to set consumer electronics companies alight. Similarly, Zip never won the backing of CE vendors that it had gained from PC manufacturers.

CE companies seem wedded to solid-state storage, and if they do move away from that kind of technology, it's likely to be to the increasingly capacious, ever-shrinking hard drives of the kind found in Apple's iPod and Sony's upcoming HDD Walkman.

On a 'three strikes and your out', Iomega will drop DCT and hopefully its attempts to win CE plaudits. Instead, it will focus on its REV system, a removable hard drive technology pitched at back-up applications for businesses both big and small. It will also focus on its NAS products. The latter saw year on year revenue growth of 344 per cent to $4m in Q2 2004. REV yielded $7.5m in Q2 sales.

"Our primary goals for the second half of 2004 are to aggressively ramp REV product sales, and to define a corporate strategy with the goal of returning the company to profitability," said Iomega CEO Werner Heid. ®

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