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Iomega outlines job cuts, restructuring

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CIOL Bureau
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ROY: Iomega Corp., faced with declining sales of its core Jaz and Zip data

storage devices, on Thursday said it would cut some 38 per cent of its staff and

take a third-quarter charge under a restructuring of the troubled computer

storage company.

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Roy, Utah-based Iomega said it expects to record restructuring and other

charges in the range of $55 million to $65 million in the third quarter, in an

effort to align its cost structure with its expected revenue levels. The

third-quarter charges will reflect expenses associated with the reduction in the

company's worldwide work force, a plan which will trim staff in the second half

of this year to 2,050 from 3,300. The charges also cover other issues such as

termination of contractual obligations.

"Our goal in the short term is to significantly lower the break-even

point of this business, stop the revenue decline and improve operational

efficiencies," said Werner Heid, president and chief executive of Iomega.

The company, which first announced on July 19 its plans to launch a

restructuring, anticipates the actions will result in an annual cost reduction

of about $65 million, beginning in fiscal year 2002.

As a result, Heid told analysts Thursday the company expects to be profitable

throughout 2002.

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On July 19, Iomega, which in June named Werner Heid as its third chief

executive in two years, posted a second quarter loss of $35.9 quarter and 35 per

cent revenue drop amid slumping sales of its marquee Zip and Jaz drives,

portable products which allow users to store and transport huge amounts of data

on pocket-sized disks.

At that time, the company also said it would move its headquarters to the

West Coast from Roy, Utah, and pursue a one-for-five reverse stock split of the

company's common stock, a proposal that must be approved by shareholders. The

fate of Iomega's Zip drives and related disks are closely tied to the personal

computers industry, where demand has been flagging.

Iomega shares closed Thursday at $1.65, off 7 cents, or 4 per cent. Since

June 18, when the company announced it hired Heid to replace previous CEO Bruce

Albertson, the stock has declined 20 per cent and underperformed the Standard

& Poor's 500 index by 19 per cent.

(C) Reuters Limited 2001.

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