Iomega posts $6.7 million loss, realigns product strategy

As expected storage specialist Iomega posted another quarterly loss, amounting to $6.7 million on revenues of $65.7 million for the second quarter of this year. Also announced were significant changes to the operations of the company, which are believed to result in savings of $38 to $42 million by the end of this year and help to bring the company back into profitability. The company announced a far-reaching cost reduction program that includes a cutback of the workforce by 120 employees, cancellation of contracts with 29 contractors, as well as a reduction of office space and marketing expenses.

The overall new product strategy, the company said, will "focus" on harddrive-based solutions, including the firm's HDD, NSS and REV series. Other than Tom's Hardware Guide reported on Tuesday, the Zip drive remains a part of the firm's overall product line. Spokesman Chris Romoser told us that, at this time, no products are announced to be phased out or discontinued. Instead, the realignment of the product strategy is simply focused on harddrive-based products.

Looking closer at the earnings statement, The Zip drive accounted for $16.8 million or 25.5 percent of Iomega's total revenue. The company said that the drive will remain a major contributor to the firm's income in the future. However, Zip revenues are down 48 percent year over year. According to Werner Heid, CEO of Iomega, the current product is at the end of its life cycle and a decline in revenue is to be expected. Q2 Zip product profit margin was $7.7 million, compared to $10.7 million in second quarter of 2004.

Iomega spent little time on its consumer products strategy, omitting CD/DVD burners, MP3 players and USB storage. Instead, Heid spent most time on detailing a strategy to increase visibility and sales of the REV series. According to the executive, the company will try to raise awareness for the harddrive-based archive/backup solution aimed at the small- and medium business (SMB) market. (THG)