Iomega Revamps Strategy as Part of Restructuring
Iomega, which rose to fame on the success of its Zip drives, is undergoing another round of restructuring that eliminates 126 jobs and trims several product lines to focus on hard drive-based products.
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Among the devices under review for possible phaseout are CD-RW and DVD writers as well as USB flash drives, a spokesman told us at the DigitaLife show Fri. in N.Y.C. Also undecided is the fate of Iomega’s Mixx digital audio players, which are only being sold through its Web site. The restructuring is expected to result in Iomega taking a $7-$10 million charge against 2nd half earnings and result in annualized savings of $38-$42 million, the company has said. Those charges don’t include another $1-$3 million for product and information system “transitions” during the 2nd half.
Iomega has undergone a revamping of its product line before in discontinuing Jaz and Pocket Zip drives several years ago. It also discontinued digital capture technology (DCT) in 2004 after an initial customer -- a camcorder manufacturer -- dropped plans for introducing a product with it (CED July 26/04 p3). DCT was a small- form-factor magnetic drive technology with 1.5 GB storage capacity.
As it conducts a product review, Iomega also may start a phaseout of its Zip drives, most likely over a 2- year period. The Zip devices, which first brought Iomega to prominence in 1996, are being manufactured for and sold largely to govt. agencies in capacities of up 750 MB. But sales have been eroding rapidly, falling to $16.7 million in the quarter ended July 3 from $32.3 million a year earlier. “We're planning a soft landing for it,” a Iomega spokesman said. “We won’t leave people who've standardized on Zip alone on an island somewhere. But clearly the revenue is decreasing every quarter and the landscape it totally different than it was 10 years ago.”
Sales of consumer storage products rose in the quarter ended July 3 to $33.1 million from $32.7 million. Among the products in that sector is a “super” DVD+RW and DVD-RW writer sourced from LG. “We're going to de- emphasize optical because unlike CD, DVD hasn’t shown the same kind of killer application,” the spokesman said.
As it closes out some products, Iomega is forging ahead with new storage devices such as the StorCenter network hard drive that ships later this month in 160 MB ($199) and 250 MB ($289) configurations. Capacity will be expanded next year, Product Mgr. Brian Reeves said. The Linux-based StorCenter contains a 3.5”, 7,200 rpm drive with 8 MB cache, Freescale’s 200 MHz processor and 2 USB 2.0 ports. It also has VyteTaxi’s FolderShare software that allows for peer-to-peer sharing of files. Iomega purchased a stake in VyteTaxi earlier this year.
At the same time, Iomega is also introducing the ScreenPlay portable multimedia drive ($219) that will initially ship with a 60 GB storage capacity. The single- platter, 2.5” drive operates at 4,200 rpm and is packaged with FolderShare, MusicMatch and Adobe Photoshop Album 2.0 software. The drive connects to a TV via RCA or S-video jacks for playback of stored music, video and photos. “As the hard drive price points come down to a better sweet spot, we'll be moving up in capacity,” Reeves said. “We thought 60 GB was a good place to start because of the form factor.”
Meanwhile, Iomega is shopping patent technology to potential partners that allows for the encoding of data on the surface of a DVD so that more data can be stored. The goal is to find a partner to help bring product to market containing the technology, although timing for the introduction hasn’t been set, the Iomega spokesman said. - - Mark Seavy