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Iomega returns to profitability

Former Utah firm netted $3.9 million for fourth quarter

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SAN DIEGO — Iomega Corp., with major operations in Roy despite major job cuts in 2001, returned to profitability in the fourth quarter after being in the red the previous two quarters.

The maker of removable data storage disks and drives said Thursday it had net income of $3.9 million, or 7 cents per share, for the fourth quarter. The figure included a pre-tax restructuring charge of $4.6 million.

The lone Wall Street analyst responding to a First Call survey had expected the company to lose 7 cents per share in the quarter.

The figures compare to prior-year net income of $22 million, or 41 cents per share, which included $13.9 million attributable to a decrease in the company's valuation allowance for net deferred tax assets.

Excluding restructuring charges, operating income for the fourth quarter of 2001 was $9.4 million, down from $10.4 million in the 2000 period.

Slippage in the Zip, Jaz and CD-RW product lines caused revenue year-over-year to fall $141.2 million, to $189.9 million.

The $4.6 million in restructuring charges included $2.1 million in severance resulting from reductions in the work forces in the United States and Europe and $2.5 million primarily associated with lease cancellations and asset write-downs as a result of the company's decision to outsource distribution and logistics in Europe.

"Our operating results in the fourth quarter indicate that our restructuring efforts are beginning to bear fruit," said Werner Heid, Iomega's president and chief executive officer. "While we continue to focus on improving our operational efficiencies, the challenge ahead of us will be to generate sustained profitable growth."

Heid told analysts during a Thursday conference call that the result of the moves is "a leaner, more competitive company."

In late December, the company cut 80 employees in North America, with most coming from Roy. The company has about 675 workers there involved in engineering, research and development. Heid said Thursday the company has completed its headquarters move from Roy to San Diego. The headquarters has about 100 workers.

During the last half of the year, the company cut more than one-third of its overall work force, including more than 400 workers in Utah. That followed an earlier cut of about 110 Utah jobs as the company consolidated manufacturing at its Malaysia plant.

For the full year, Iomega's net loss totaled $93.3 million, or $1.74 per share, on revenue of $834.3 million, compared with prior-year net income of $169.6 million, or $3.07 per share, on revenue of $1.3 billion.

"Let me reiterate, we have made significant progress, but we still have a long way to go in order to get this company in the shape it needs to be in," Heid said.

Fourth-quarter Zip product revenue fell $76.6 million to $145 million. The Jaz line's revenue fell $25.7 million, to $11.5 million. CD-RW revenue dropped from $54 million to $24 million year-over-year, primarily because the company left the internal CD-RW drive market.

The new high-capacity Peerless line had 20 percent growth from the third to fourth quarters, although the company has cut promotional spending for that line.

Heid mentioned that Zip needs better marketing, and the company plans to add capacity to Zip disks — they now are offered in 100- and 250-megabyte versions — to keep pace with customer needs.

Heid also expressed an interest in Iomega becoming a global company, indicating that China, Latin America, Japan and India are prime sites for future sales.

Iomega's earnings announcement followed the close of the markets Thursday. The company's stock was down 18 cents, or 2 percent, to $8.60 per share in early trading today. In the past year, the price has ranged from $5.50 to $22.45.


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