Iomega Corp. (NYSE: IOM) drifted lower Friday after the company warned of a second quarter loss due to slack sales of its Zip and Jaz products. The company also said it would cut as much as 10 percent of its workforce.
Shares fell 3/8 to 4, or 9 percent, in early trading.
The company is forecasting losses in the range of 5 cents to 10 cents per share on lower revenues. And that projection excludes a second quarter charge.
Iomega was expected to break even in the quarter ending June 27, according to First Call Corp. Iomega said a continued weakness in its Jaz drive and disk sales and a delay in shipment of its new Clik! PC Card drive were at fault.
Iomega plans to cut 450 jobs and take a $45 million charge, or 11 cents a share, in the quarter in a bid to shore up profits. The company has 4,800 employees. It also plans to close facilities in California, and consolidate operations in France and Scotland. The restructuring is expected to generate almost $40 million in annual cost savings.
Things were looking up for Iomega at the tail-end of 1998 as its main competitors Syquest Inc. essentially folded. Iomega even bought Syquest's remaining assets. But instead of flying high, Iomega is beginning to look a little more like the now-dead Syquest with each quarter.
Shares of Iomega closed at 4 3/8 Thursday, well below a 52-week high of 10 3/16. They had just dipped below $4 for the first time since October after a flurry of departures from the executive suite.
"The actions we have taken are designed to eliminate the redundancies in our product development, marketing and operations infrastructure and allow us to focus on our core products, such as Zip, and exciting new technologies like Clik!," Jodie Glore, the company's president and chief executive officer, said in a release.
Iomega is just the latest company in the data storage sector with a profit warning.
Iomega's announcement comes on the heels of Western Digital Corp.'s (NYSE: WDC) profit warning Thursday. Western Digital said fourth quarter losses are expected to be in the range of 90 cents a share to 98 cents a share were blamed on competitive pricing pressures.
Other storage stocks such as Seagate (NYSE: SEG), Quantum (Nasdaq: QNTM), and Komag Inc. (Nasdaq: KMAG) have been under pressure (chart).