Analyst/Investors, please contact:
Barry Zwarenstein, Iomega Corporation, (858) 795-7188

For Immediate Release

Iomega Reports Third Quarter Results

SAN DIEGO, October 17, 2002 - Iomega Corporation (NYSE: IOM) today reported a net loss of $25.7 million, or $0.50 per share, for the quarter ended September 29, 2002. This net loss included charges relating to Iomega's previously announced agreement to sell its Penang, Malaysia, manufacturing subsidiary to Venture Corporation Limited, consisting of $10.7 million in impairment charges and an additional $26.8 million in tax provisions. Excluding the impairment charges and the tax provisions, adjusted net income for third quarter 2002 was $11.8 million, or $0.23 per share.

In comparison, the third quarter 2001 net loss was $71.1 million, or $1.32 per share, including $18.8 million of after-tax non-restructuring charges, $20.1 million of after-tax restructuring charges and the establishment of a $28.7 million valuation allowance for net deferred tax assets. Excluding these amounts, third quarter 2001 adjusted net loss was $3.5 million, or $0.07 per share.

Operating income in third quarter 2002 was $16.3 million compared to an operating loss of $9.1 million in the same period a year ago, excluding non-restructuring charges and restructuring charges in the third quarter of 2001, and the loss on the agreement to sell the Malaysian subsidiary and restructuring reversals in the third quarter of 2002.

During the third quarter, the Company's total cash, cash equivalents, and temporary investments grew $18.4 million to $390.5 million as of September 29, 2002.

Third quarter 2002 revenue of $136.4 million decreased $45.5 million, or 25%, compared to third quarter 2001, primarily due to decreased Zip®, Jaz® and CD-RW product line revenues. The third quarter 2002 gross margin percentage was 33.7%, net of $10.7 million charges relating to the agreement to sell the Penang subsidiary. Excluding these charges, the third quarter 2002 gross margin percentage was 41.6%, compared to 31.5%, before pre-tax non-restructuring charges of $25.2 million, for the third quarter of the prior year. Third quarter 2002 operating expenses were reduced by 39%, from $66.4 million in third quarter 2001 to $40.3 million this year, excluding non-restructuring charges and restructuring charges and reversals in both years.

"We are pleased to report a fourth consecutive profitable quarter of operating income, and continued progress on key initiatives during the quarter," said Werner Heid, president and CEO, Iomega Corporation. "With the global launch of the Zip 750, we have tripled the capacity and more than doubled the performance as compared with Zip 250. While it is too early to predict the product's success with end users, we are encouraged by the initial technical reviews the product has received. We also launched Windows® powered network attached storage (NAS) servers to address the rapidly growing storage needs for small and medium-sized businesses. Finally, we expect that the agreement to sell our underutilized Penang, Malaysia facility will permit us, over time, to realize reduced operational overhead and more variable product costs.

"At the same time, we are disappointed that we failed to make progress in slowing the overall rate of decline in Zip product line revenue," continued Heid. "The Zip revenue decline in the quarter was adversely affected by price protection of existing products in the channel, caused by the introduction of the Zip 750. As we enter the important fourth quarter holiday season, we remain focused on further improving the execution of programs targeted to improve Zip and NAS revenues. While we expect sequential revenue growth, we do not anticipate that we will be able to achieve our previously stated goal of reversing the decline in revenue from existing products during the fourth quarter of 2002."

Third quarter 2002 Zip revenue of $110.7 million decreased $32.0 million, or 22%, from third quarter 2001 Zip revenue of $142.7 million. Iomega's third quarter 2002 Zip drive shipments were 1.0 million units, a decrease of 0.3 million units when compared to third quarter 2001. Third quarter 2002 Zip disk shipments were 6.8 million units, an increase of 0.1 million units when compared to third quarter 2001. Third quarter 2002 Zip drive unit shipments to OEM customers of 0.6 million units decreased 0.1 million units from third quarter 2001 and represented 56% of total unit shipments in the third quarter, equal to third quarter 2001. The third quarter 2002 Zip gross margin percentage of 49.5%, excluding $10.6 million impairment charges in anticipation of the sale of the Penang, Malaysia subsidiary, increased from 40.8%, excluding non-restructuring charges of $7.5 million in the same period a year ago, reflecting lower costs, and a continuing trend away from Zip 100MB drives and disks. Improved margins and significantly lower operating expenses more than offset the impact of the decrease in sales, resulting in a third quarter 2002 Zip product profit margin (PPM) of $42.0 million, excluding $10.6 million of Penang related impairment charges, compared with $34.5 million, excluding $7.5 million in non-restructuring charges in the third quarter 2001.

Third quarter 2002 CD-RW revenue of $14.2 million decreased $3.4 million from third quarter 2001 CD-RW revenue of $17.6 million. The third quarter 2002 CD-RW product loss of $3.0 million compares to a product loss of $9.6 million, excluding $8.8 million in non-restructuring and restructuring charges in third quarter 2001. The year-over-year improvement was mainly the result of significantly lower fixed manufacturing overhead resulting from the change from an in-house final assembly model to a fully sourced model.

Third quarter 2002 Jaz revenue of $2.6 million decreased $11.0 million from third quarter 2001. Jaz PPM in the third quarter was $1.2 million, excluding $0.1 million of impairment charges relating to Penang, which compares to $3.5 million in the third quarter of 2001. The year-over-year decrease in Jaz revenue and PPM was a result of the Company's earlier decision to discontinue the Jaz product line.

Other revenue of $8.4 million in third quarter 2002 increased compared to $6.0 million in the third quarter 2001. Revenue from external hard drive products totaled $6.1 million, comprised of $4.0 million for the HDD line of portable and desktop hard drives introduced in the second quarter, and $2.1 million in Peerless™ revenue, compared with $4.8 million of Peerless revenue in the prior year quarter. Further, the Company recorded $2.0 million of NAS revenue during the third quarter and deferred $1.6 million under the Company's revenue recognition policies.

Please refer to the attached supplemental information schedule for unit information by product line and revenue 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.

About Iomega
Iomega Corporation provides easy-to-use, high value storage solutions to help people protect, secure, capture and share their digital valuables. Iomega's award-winning storage products include the popular Zip® 100MB, 250MB and 750MB drives, high-performance Iomega® HDD portable hard drives that feature capacities from 20GB to 30GB, Iomega® HDD external hard drives that offer capacities from 40GB to 120GB, and Iomega® external CD-RW drives. Iomega simplifies data protection and sharing at home and in the workplace with Iomega® Automatic Backup software, Iomega® Sync software, Iomega HotBurn® CD-recording software, and Active Disk™ technology. For networks, Iomega NAS servers offer capacities of 120GB to 480GB. The Company can be reached at 1-888-4-IOMEGA (888-446-6342), or on the Web at www.iomega.com.

Special Note Regarding Forward-Looking Statements

The statements contained in this release regarding the expectation to close the sale of the Company's Penang manufacturing facility and to realize reduced operational overhead and more variable product costs, the implementation programs targeted to improve Zip and NAS revenues, the expectation of sequential revenue growth in the fourth quarter 2002, 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 closing the Penang transaction or in subsequently transitioning management of that facility, 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 inability to reverse the revenue decline on the Zip product line, the Company's inability to achieve profitability on its CD-RW product line, technical difficulties, competitive pricing pressures or a lack of market acceptance with respect to any of the Company's new products, the Company's inability to maintain stringent quality assurance standards and enhanced customer service, availability of critical product components, the failure or delay of any sole source supplier, products and technology obsolescence, manufacturing and inventory issues, management turnover, intellectual property rights, competition, adverse final judgments in the Nomai litigation, other 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 Form 10-Q and Annual Report on Form 10-K.

Copyright© 2002 Iomega Corporation. All rights reserved. Iomega, Zip, Peerless, Predator, HotBurn and ioLink are either registered trademarks or trademarks of Iomega Corporation in the United States and/or other countries. Certain other product names, brand names and company names may be trademarks or designations of their respective owners.