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

For Immediate Release

Iomega Reports Second Quarter Net Income Growth and Revenue Decline

SAN DIEGO, July 18, 2002 -Iomega Corporation (NYSE: IOM) today reported net income of $11.5 million, or $0.22 per diluted share, for the quarter ended June 30, 2002. This net income included a pre-tax $2.2 million reversal of restructuring charges as well as a $0.7 million decrease in the Company’s valuation allowance for net deferred tax assets. This compares to a second quarter 2001 net loss of $35.9 million, or $0.66 per diluted share. The second quarter 2001 net loss included pre-tax non-restructuring and restructuring charges of $46.0 million and $1.1 million, respectively. Operating income in second quarter 2002 was $14.2 million compared to an operating loss of $15.2 million in the same period a year ago, excluding non-restructuring charges and restructuring charges and reversals.

During the second quarter, the Company’s total cash, cash equivalents, and temporary investments grew $30.7 million to $372.1 million as of June 30, 2002.

Second quarter 2002 revenue of $145.2 million decreased $38.5 million, or 21%, compared to second quarter 2001, primarily due to decreased Zip® and Jaz® product line revenues, partially offset by slightly higher CD-RW revenue. The second quarter 2002 gross margin percentage was 37.8%, compared to 28.2%, before non-restructuring charges of $44.9 million, for the second quarter of the prior year. Second quarter 2002 operating expenses were reduced by 39%, from $67.0 million in second quarter 2001 to $40.7 million this year, excluding non-restructuring charges and restructuring charges and reversals in both years.

“While we have demonstrated our ability to stabilize our cost structure and have been profitable for the last three quarters, our key challenge remains to reverse the revenue decline and to lay the foundation for future revenue growth,” said Werner Heid, president and CEO, Iomega Corporation. “As planned, during the quarter, we extended our business with a new line of portable and external hard drive products and a series of Networked Attached Storage (NAS) solutions with breakthrough price and performance features.”

“We are increasing the velocity of product generation and continue to focus resources on enhancing and expanding Iomega’s software solutions,” continued Heid. “Our goal remains to enable all users of Iomega’s product platforms, which range from 100 megabytes to 480 gigabytes, to easily store, share, and protect their digital valuables.”

Second quarter 2002 Zip revenue of $114.3 million decreased $29.1 million, or 20%, from second quarter 2001 Zip revenue of $143.4 million. Iomega’s second quarter 2002 Zip drive shipments were 1.0 million units, a decrease of 0.2 million units when compared to second quarter 2001. Second quarter 2002 Zip disk shipments were 6.6 million units, a decrease of 2.0 million units when compared to second quarter 2001. Zip drive unit shipments to OEM customers of 0.6 million units decreased 0.1 million units from second quarter 2001 and represented 57% of total unit shipments in the second quarter, which compares to 55% in second quarter 2001. The second quarter 2002 Zip gross margin percentage of 45.0% increased from 39.9%, excluding non-restructuring charges of $4.5 million, in the same period a year ago, reflecting lower costs, and a continuing trend from Zip 100MB to Zip 250MB drives and disks. Improved margins and significantly lower operating expenses more than offset the impact of the decrease in sales, resulting in a second quarter 2002 Zip product profit margin (PPM) of $40.5 million compared with $34.8 million, excluding $4.5 million in non-restructuring charges, in second quarter 2001.

Second quarter 2002 CD-RW revenue of $20.3 million increased $2.1 million from second quarter 2001 CD-RW revenue of $18.2 million. The second quarter 2002 CD-RW product loss of $1.1 million compares to a product loss of $11.0 million, excluding $10.0 million in non-restructuring charges, in the second 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.

Second quarter 2002 Jaz revenue of $3.2 million decreased $10.0 million from second quarter 2001. Jaz PPM in the second quarter was $1.0 million which compares to $2.5 million in the second quarter of 2001. The year-over-year decrease in Jaz revenue and PPM was a result of the Company’s decision to discontinue the Jaz product line.

Other revenue in second quarter 2002 included Peerless™ revenue of $3.4 million, compared with $3.8 million in the prior year quarter, and $3.0 million from the initial shipment of portable hard disk drives. Further, the Company shipped $1.5 million of NAS products, of which $0.5 million was recognized and the balance deferred 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.

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.

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Copyright© 2002 Iomega Corporation. All rights reserved. Iomega, Zip, Peerless, Predator, DataSafe, QuikSync, HotBurn and LifeWorks 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.