Analyst/Investors, please contact:
Jim Recob, Iomega Corporation, (801)332-4430 recob@iomega.com

FOR IMMEDIATE RELEASE

Iomega Reports Second Quarter 2001 Loss Of $35.9 Million

Company Announces Plans to Restructure and Reverse Stock Split

ROY, Utah, July 19, 2001 Iomega Corporation (NYSE: IOM) today reported a net loss of $35.9 million, or $0.13 per diluted share, for the second quarter ended July 1, 2001. This net loss compares to second quarter 2000 net income of $40.4 million, or $0.15 per diluted share. Second quarter 2001 revenue of $184.1 million decreased $119.5 million from $303.6 million in the second quarter 2000, primarily due to lower Zip® and Jaz® revenue. Iomega’s second quarter results are within the range previously announced on June 18, 2001, and include $46.0 million of pre-tax non-restructuring charges and $1.1 million of pre-tax restructuring charges.

“We are disappointed with second quarter revenue and earnings, but are making good progress with our comprehensive review of Iomega’s business and its short-term and long-term strategies,” said Werner Heid, who joined Iomega as president and CEO on June 18, 2001. “We will be attacking our cost structure. We will also be focusing on creating demand to foster growth of our installed base, and we will be providing new applications for the Zip drive and other Iomega products people already own. We are entering the third quarter with new products that include the new Peerless drive system, and we have recently announced two new Zip drives and two new Active Disk titles.”

Second Quarter Results

Iomega’s second quarter 2001 pre-tax loss of $58.2 million compares to pre-tax income of $41.2 million in the second quarter 2000. This decline in profitability reflects a significant reduction in gross margin due to lower Zip and Jaz revenue. The pre-tax loss also includes non-restructuring charges totaling $46.0 million, primarily reflecting writedowns of HipZip™, FotoShow™, and CD-RW inventory and equipment and loss accruals for related supplier purchase commitments. Additionally, the pre-tax loss includes restructuring charges of $1.1 million, primarily related to the consolidation of Utah manufacturing operations at the Company’s Penang, Malaysia, manufacturing facility announced in June.

The Company’s second quarter 2001 gross margin percentage declined to 4.0%, primarily due to $44.9 million in non-restructuring charges. Excluding these non-restructuring charges, the gross margin percentage for the second quarter was 28.4%, compared to 39.5% for the second quarter of 2000.

Second quarter 2001 Zip revenue of $145.2 million decreased $92.1 million from the second quarter of 2000. Zip product profit margin (PPM) of $21.1 million decreased $48.5 million from the second quarter of 2000. The Zip PPM decrease primarily reflected lower prices, lower shipments of both disks and drives, and $13.4 million in non-restructuring charges to reflect estimates of the net realizable value of inventory and equipment and related loss accruals primarily relating to the FotoShow digital image center. The second quarter 2001 Zip gross margin percentage excluding the non-restructuring charges was essentially flat with the first quarter of 2001 at approximately 40% and compares to approximately 43% for the second quarter of 2000. Cumulative worldwide shipments now exceed 43 million Zip drives and 265 million Zip disks.

Second quarter 2001 Jaz revenue of $13.3 million decreased $24.6 million from the second quarter of 2000. Jaz PPM of $2.5 million decreased $9.3 million from the second quarter of 2000. The Jaz PPM decrease primarily reflected lower shipments of both disks and drives.

Second quarter 2001 CD-RW revenue of $18.3 million decreased $6.3 million from the second quarter of 2000. The second quarter 2001 CD-RW product loss of $21.0 million reflected lower prices and shipments, and included non-restructuring charges of $10.0 million to reflect estimates of the net realizable value of inventory and equipment and related loss accruals.

Second quarter 2001 PocketZip™ revenue of $2.3 million decreased $0.9 million from the second quarter of 2000. Second quarter 2001 PocketZip product losses increased $19.8 million, primarily due to $17.9 million in non-restructuring charges to reflect estimates of the net realizable value of inventory and equipment and related loss accruals.

For the first six months of 2001, Iomega’s net loss was $26.0 million, or $0.10 per diluted share. This compares to net income of $92.2 million, or $0.33 per diluted share, for the first six months of 2000. Revenue of $462.2 million for the first six months of 2001 decreased $186.3 million from $648.5 million for the first half of 2000, primarily due to lower Zip and Jaz revenue, partially offset by higher CD-RW revenue.

Iomega’s cash, cash equivalents, and temporary investments balance at July 1, 2001 was $359.9 million with no long-term debt. Please refer to the attached supplemental information schedule for unit information by product line and by region.

Corporate Restructuring

Mr. Heid stated that the Company expects to commence the following restructuring actions in the third quarter:

Adjust the Company’s operating structure in accordance with revenue expectations;
Reduce the Company’s workforce during the second half of 2001 by approximately 800 to 1,100 persons worldwide;
Streamline the Company’s supply chain and logistics strategy;
Consolidate labor-intensive tasks into Malaysia;
Consolidate the Company’s operations and facilities, including the relocation of corporate headquarters to the West Coast; and
Revise the Company’s product strategy.
The Company expects that it will record substantial restructuring charges during the third quarter in connection with these planned actions, and will detail these charges during the first week of August.

Reverse Stock Split

The Company also announced that its Board of Directors has approved, and will recommend to the Company’s shareholders for their approval, a one-for-five reverse stock split of the Company’s outstanding shares of common stock. A special meeting of shareholders will be convened to obtain approval for the reverse stock split. If the reverse stock split is implemented, every five outstanding shares of common stock will be automatically changed into one share of common stock, thereby reducing approximately 273 million shares of common stock currently outstanding to approximately 55 million shares.

David Dunn, Chairman of Iomega’s Board of Directors, said the Board is recommending the reverse stock split for several reasons:

To encourage greater investor interest in the Company’s common stock by making the stock price more attractive to the many investors, particularly institutional investors, who refrain from investing in stocks that trade below $5 per share;
To reduce trading fees and commissions incurred by shareholders, since these costs are based to a significant extent on the number of shares traded; and
To enable the Company to focus on restructuring its business in the long-term best interests of shareholders.
“We have no way of knowing the short-term impact on Iomega’s stock price of the Company’s various restructuring actions, or how Iomega will be affected by general market conditions” said Mr. Dunn. “The goal of these actions is to make Iomega stronger and more profitable over the long term, with the expectation that these actions will ultimately have a beneficial effect on our stock price.”

Conference Call Information
as previously announced, the company will hold a conference call beginning at 4:30 EST today to discuss Iomega’s second QUARTER RESULTS. A simultaneous webcast of the conference call and replays for two weeks will be available AT http://www.iomega.com.

About Iomega
Iomega Corporation (NYSE:IOM) manufactures and markets the award-winning Zip, Jaz and PocketZip drives and disks, the Peerless™ drive system, the HipZip™ digital audio player, the FotoShow™ digital image center, LifeWorks™ software, and Iomega QuikSync™ software; Iomega also markets Iomega CD-RW drives, Iomega CompactFlash™ and SmartMedia™ memory cards, DataSafe™ network attached storage servers, and the Iomega Microdrive™ miniature hard drive. Iomega’s products help people to save, share, manage and create important information such as Internet downloads, audio files, personal photographs, spreadsheets, and slides, while protecting that content from viruses and hackers. Used in homes, businesses, government and educational facilities and by creative professionals everywhere, Iomega storage solutions are the enabling technologies preferred by millions. The Company can be reached at 1-888-4-IOMEGA (888-446-6342), or on the Web at http://www.iomega.com.

Special Note Regarding Forward-Looking Statements
The statements contained in this release regarding the completion of the Company’s review of its business and strategies, the Company’s restructuring plans (including all of the items discussed under the heading “Corporate Restructuring”), the Company’s focus on creating demand and providing new applications and products, plans to effect a reverse stock split and anticipated benefits from the reverse stock split and restructuring actions, and all other statements that are not purely historical, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are based upon information available to Iomega as of the date hereof, and Iomega disclaims any intention or obligation to update any such forward-looking statements. Actual results could differ materially from the current expectations. Factors that could cause or contribute to such differences include the need for the Company to complete its review of its business and strategies prior to finalizing and implementing contemplated restructuring activities, the requirement to obtain shareholder approval for the reverse stock split, market reaction to the reverse stock split, the level of retail and OEM market acceptance of and demand for the Company's existing and new products, general market demand for PCs and consumer electronics products, the Company's success in timely producing and marketing its products, the Company’s ability to maintain stringent quality assurance standards and enhanced customer service, availability of critical product components, manufacturing and inventory issues, intellectual property rights, competition, litigation, general economic and/or industry-specific conditions and the other risks and uncertainties identified in the reports filed from time to time by Iomega with the U.S. Securities and Exchange Commission, including Iomega's most recent filings on Forms 10-K and 10-Q.

Important Additional Information Will Be Filed with the SEC
Iomega plans to file with the SEC and mail to its shareholders a proxy statement in connection with the special meeting. The proxy statement will contain important information about the proposed reverse stock split. Investors and security holders are urged to read the proxy statement carefully when it becomes available. Investors and security holders will be able to obtain free copies of the proxy statement through the web site maintained by the SEC at www.sec.gov and at www.iomega.com/about/investor.
Iomega, and its directors and executive officers, may be deemed to be participants in the solicitation of proxies in connection with the special meeting. Information regarding Iomega’s directors and executive officers is contained in Iomega's Form 10-K for the year ended December 31, 2000, and its proxy statement filed on March 27, 2000, relating to the 2001 Annual Meeting of Shareholders, which are filed with the SEC. As of July 16, 2001, Iomega’s directors and executive officers beneficially owned approximately 25.5 million shares, or approximately 9.3%, of Iomega’s common stock.
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Iomega, Zip, Jaz, PocketZip, Peerless, DataSafe, HipZip, FotoShow, QuikSync, and LifeWorks are either registered trademarks or trademarks of Iomega Corporation in the United States and/or other countries. Microdrive is a trademark of IBM Corporation and is used with permission. Certain other product names, brand names and company names may be trademarks or designations of their respective owners.