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

FOR IMMEDIATE RELEASE

IOMEGA REPORTS THIRD QUARTER 2001 RESULTS

SAN DIEGO, California, October 18, 2001- Iomega Corporation (NYSE: IOM) today reported revenue of $182.1 million and a net loss of $71.2 million, or ($1.32) per diluted share, for the third quarter ended September 30, 2001. This net loss includes pre-tax restructuring charges of $33.3 million, pre-tax non-restructuring charges of $31.1 million, and an income tax charge of $28.7 million relating to an increase in the valuation allowance for net deferred tax assets.

Third quarter 2001 revenue of $182.1 million was almost flat compared to second quarter 2001 revenue of $184.1 million, despite the slowness that followed September 11. Third quarter 2001 revenue and net loss compares with third quarter 2000 revenue of $320.5 million and net income of $55.4 million, or $1.00 per diluted share, which included a $20.9 million income tax credit attributable to a decrease in the Company's valuation allowance for net deferred tax assets and a $2.3 million pre-tax credit attributable to a reversal of restructuring charges. Third quarter 2001 net loss compares with a second quarter 2001 net loss of $35.9 million, or ($0.66) per diluted share, which included $46.0 million of pre-tax non-restructuring charges, $1.1 million of pre-tax restructuring charges, and an income tax benefit of $22.3 million.

"Iomega has made significant progress with its broad restructuring initiatives and reorganization," said Werner Heid, President and CEO, Iomega Corporation. "We have taken aggressive actions to adjust our business model, to increase our customer focus and to improve our operational and supply chain efficiencies. We understand how difficult these steps have been for shareholders, employees, customers and suppliers, but we also know that they were essential for our future success. Iomega's employees have done a terrific job under difficult business conditions this quarter, stabilizing sequential quarterly revenue despite continuing weakness and uncertainty in the technology sector, and executing the restructuring initiatives."
The Company's third quarter 2001 gross margin percentage of 17.7% compares to 4.0% in the second quarter 2001 and 40.8% in the third quarter 2000. Excluding non-restructuring charges of $25.2 million in the third quarter 2001 and $44.9 million in the second quarter 2001, the gross margin percentage improved to 31.6% from 28.4%, respectively.
Third quarter 2001 restructuring and non-restructuring charges totaled $64.4 million, within the range of $55 to $65 million previously announced. Approximately $33 million of these charges are expected to be cash charges, mainly related to severance expenses, lease terminations, contractual and other obligations. The remainder of these charges, approximately $31 million, are expected to be non-cash charges.
The restructuring charges of $33.3 million include $17.4 million associated with exiting leased facilities, of which $9.8 million is related to asset write-downs and $7.6 million is associated with lease terminations, and $15.9 million related to the reduction of 1,234 regular and temporary personnel worldwide, or approximately 37% of the company's worldwide workforce. The Company anticipates these actions, when fully implemented over the remainder of the year, will result in an annual cost reduction of approximately $65 million, beginning in fiscal year 2002.
The non-restructuring charges of $31.1 million include $15.1 million related to write-downs of HipZip™, FotoShow™, CD-RW, and other inventory, $9.1 million associated with the termination of various contractual arrangements, $6.3 million related to write-downs of manufacturing equipment and other assets, and $0.6 million of other charges. A total of $25.2 million of the non-restructuring charges are included in cost of sales; the remaining $5.9 million is included in operating expenses.
The Company did not record a net tax benefit on the third quarter pre-tax loss (which would have reduced the third quarter net loss), reflecting a $28.7 million non-cash charge relating to an increase in the valuation allowance for net deferred tax assets.
Third quarter 2001 Zip® revenue of $142.8 million was almost flat compared to $143.6 million in the second quarter 2001. Zip drive unit sell-through was flat in the third quarter 2001 compared with the second quarter 2001, while Zip media unit sell-through declined. Third quarter 2001 Zip revenue decreased $104.6 million from third quarter 2000 revenue of $247.4 million. The decrease in Zip revenue compared to the same period a year ago was primarily the result of lower prices and lower shipments of both disks and drives. The third quarter 2001 Zip gross margin percentage excluding the non-restructuring charges was 41% compared to 40% in the second quarter 2001 and 46% in the third quarter 2000. Third quarter 2001 Zip product profit margin (PPM) of $27.9 compares with $31.4 million in the second quarter 2001 and $87.8 million in the third quarter 2000. Excluding non-restructuring charges of $7.5 million and $4.5 million the Zip PPM was $35.4 million and $35.9 million in the third and second quarter 2001, respectively. Cumulative worldwide Zip drive shipments now exceed 44 million units and Zip disk shipments now exceed 275 million units.
Third quarter 2001 Jaz® revenue of $13.6 million increased $0.3 million from the second quarter 2001 revenue of $13.3 million and decreased $21.3 million from third quarter 2000 revenue of $34.9 million. Jaz PPM of $3.5 million compares with $2.5 million in the second quarter 2001 and $9.8 million in the third quarter 2000. The year over year decrease in Jaz revenues and PPM primarily reflects the anticipated lower shipments towards the end of the product lifecycle of both Jaz drives and disks.
Third quarter 2001 CD-RW revenue of $17.6 million decreased $0.7 million from second quarter 2001 revenue of $18.3 million, and decreased $16.8 million from third quarter 2000 revenue of $34.4 million. Third quarter 2001 CD-RW product loss of $17.0 million compares to a product loss of $21.0 million in the second quarter 2001 and a product profit margin of $2.1 million in the third quarter 2000. Excluding non-restructuring charges of $7.5 million and $10.0 million, the CD-RW product loss was $9.5 million and $11.0 million in the third and second quarter 2001, respectively.
Third quarter 2001 PocketZip™ revenue of $2.1 million compares to $2.3 million in the second quarter 2001, and $3.0 million in the third quarter 2000. Third quarter PocketZip product loss of $5.3 million compares to a product loss of $23.0 million in the second quarter 2001, and a product loss of $4.9 million in the third quarter 2000. Excluding non-restructuring charges of $3.6 million and $17.9 million, the PocketZip product loss was $1.7 million and $5.1 million in the third and second quarter 2001, respectively.
Other revenue includes Peerless™ revenue of $4.8 million and $3.8 million in the third and second quarter 2001, respectively. Other product losses of $20.3 million and $21.2 million include non-restructuring charges of $6.6 million and $12.5 million in the third and second quarter 2001 respectively, as well as costs related to Peerless, FotoShow, software, sourced products, and other miscellaneous products.
For the first nine months of 2001, Iomega's net loss was $97.2 million, or ($1.80) per diluted share. This compares to net income of $147.6, or $2.66 per diluted share, for the first nine months of 2000. Revenue of $644.4 million for the first nine months of 2001 decreased $324.6 million from $969.0 million for the first nine months of 2000 due to lower Zip and Jaz revenue.
The Company's cash, cash equivalents, and temporary investments balance at September 30, 2001 was $336 million with no long-term debt. During the third quarter of 2001, the Company repurchased 1.25 million shares (split adjusted) of its common stock for approximately $8.0 million. Cumulative shares repurchased under the buyback program announced on September 8, 2000 are 1.57 million shares for approximately $15.4 million through the end of third quarter 2001.
Iomega today also announced the relocation of its corporate headquarters from Roy, Utah, to San Diego, California. The move to San Diego is in process and expected to be completed in the next six months. Approximately 100 employees will be based in the San Diego area. Among the corporate functions to be relocated to San Diego are corporate marketing, product marketing, Internet marketing, strategic product sourcing, software applications and customer advocacy, as well as certain executive staff members and personnel in human resources, legal, finance and information technology. Iomega will continue to have engineering, research and development, and various operations offices at its previous headquarters in Roy, Utah, the world center of research and development excellence and expertise in removable magnetic storage.
"I want to emphasize the strategic value of this headquarters relocation," said Heid. "In reorganizing the company, it is critical that we encourage a decentralized, 'global thinking' and diverse organization that is positioned and empowered to quickly seize opportunities. Decentralizing our headquarters is an important step in this direction. We are also convinced that we will have an easier time attracting and retaining high-tech oriented sales and marketing personnel and executive staff in Southern California. Further, San Diego is the home of many major technology innovations, which will be important components for future Iomega solutions."
Please refer to the attached supplemental information schedule for unit information by product line and by region.
Conference Call Information
AS PREVIOUSLY ANNOUNCED, THE COMPANY WILL HOLD A CONFERENCE CALL BEGINNING AT 4:30 P.M. EDT TODAY TO DISCUSS IOMEGA'S THIRD QUARTER RESULTS. A SIMULTANEOUS WEBCAST OF THE CONFERENCE CALL AND REPLAYS FOR TWO WEEKS WILL BE AVAILABLE AT http://www.iomega.com.

Reverse Stock Split

All share and per share information included in this release gives retroactive effect to the one-for-five reverse stock split effected as of the close of business on September 28, 2001.

About Iomega
Iomega Corporation (NYSE:IOM) manufactures and markets the award-winning Zipâ, Jazâ and PocketZipÔ 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 progress of the Company's restructuring initiatives and reorganization, anticipated annual cost reductions resulting from restructuring activities, impact of these activities on the Company's future success, the cash and non-cash nature of various charges, 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 unforeseen difficulties in implementing restructuring activities, the level of retail and OEM market acceptance of and demand for the Company's products, declining consumer confidence levels and 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, any inability to achieve a 4th quarter "seasonal" benefit in the Company's business, 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.

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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.