Iomega Corp plans to cut 450 jobs and take a second quarter restructuring charge of around $45m, the company announced Friday, as part of its efforts to improve operating results. The charge will pay for the plant closures in San Diego and Milpitas, California it announced last month (CI No 3,652). It didn’t announce a specific number of job cuts at the time. Iomega said it also plans to consolidate the French and Scottish operations it acquired last year along with Nomai SA. Write-off of assets related to a discontinuance of various development projects makes up the rest of the total.
Around $27m of the charge will be non-cash, with the remaining $18m applying to severence-related expenses, lease buyouts and other cash expenses. Iomega hopes to see annual costs savings of $40m as a result of the charge. It says it expects to post a net loss, excluding the re-structuring charge, in the range of $0.05 and $0.10 per share on sequentially lower revenue. In the same period last year, the company reported a loss of $0.13 per share, excluding special charges, a loss of $39.9m on revenue of $394m. First quarter 1999 revenue was down to $386.2m, on which Iomega managed to generate a small profit of $569,000. Actual second quarter results could be higher or lower, the company warned, depending on the impact of sales through distribution and retail channels.
The expected decline in revenue and earnings, says Iomega, is due to continuing weakness in its Jaz drive and disk sales, the initial delay in shipping the Click! PC card drive, which finally began shipping on June 17, and component shortages which limited sales of its Zip 100 and Zip 250 drives. The lower than expected sales of Jaz drives has led to further inventory and asset write-offs. President and CEO Jodie K Glore, said he expected the re-structuring to improve operating results going forward, focusing on Zip and Click!
Last week, Iomega lost its chief operating officer, Scott Flaig, who said he was retiring to pursue consulting and academic roles. His duties were taken over by John Conely, VP of worldwide manufacturing. Mike Lynch, worldwide director of the Beyond PC Applications Group at Iomega, also left the company to become head of sales, licensing and strategic partnerships at digital imaging software firm Digital Intelligence Inc. Lynch had set-up non-PC related OEM deals with companies including Sega Enterprises Ltd, Lexmark Inc, Microtek Inc and NEC Corp. At PC Expo in New York this week, Iomega is expected to reveal its intentions in the optical market, new Click! products aimed at notebooks, and new software for portable storage systems.
