A product transition has hit computer drive maker Iomega, which Thursday announced a net loss of $US35.9 million -- or $0.13 per diluted share -- for its second fiscal quarter ended July 1, compared to profits of $40.4 million and $0.15 per diluted share for the same quarter last year. The company announced plans to reduce its workforce by 800 to 1,100 employees and to make a five-for-one reverse stock split.
A slower economy took its toll, along with the PC industry's technology transition from Iomega's Zip and Jaz drives -- the company's bread and butter for revenue -- to CD-RW drives with comparatively less expensive prices for recording data. Iomega's revenue of $184.1 million for its second quarter is $119.5 million less than the $303.6 million in revenue the company drew in during the same quarter last year -- a revenue decrease of about 40 per cent.
Iomega took charges of $46 million against earnings, mostly to write off the value of inventory in its HipZip digital audio players, FotoShow digital image centers, and CD-RW drives and discs, along with loss accruals for related supplier purchase commitments.
The company said it plans to relocate its headquarters to the West Coast from Roy, Utah, looking for a bigger pool of technology workers. Iomega said it would lay off from 800 to 1,100 workers as a result. This comes on the heels of job cuts announced last month, when the company said it would cut 110 manufacturing jobs to consolidate all of its equipment production at its facility in Penang, Malaysia.
Iomega's stock (IOM) opened at $1.75 on the Nasdaq exchange Friday and quickly dropped to $1.63 from Thursday's closing price of $1.98 -- a 17.68 per cent decrease. The company plans to seek shareholder approval to perform a five-for-one reverse stock split. Iomega's stock price is down about 77 per cent from its 52-week high of $7 in November. Investors shy away from stocks trading below $5, the company said in its earnings statement.
If a stock trades below $1 for 30 consecutive days, the company risks being delisted from the exchange.