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Iomega beats up on Syquest

Stock filings show that Syquest is reeling in its battle with Iomega.

The marathon battle between Iomega and Syquest continued today with Iomega's announcement that it will drop the price of its 1GB Jaz drive.

The price drop is a part of Iomega's strategy to make the Jaz drive a standard in the backup storage market, the company said in a written statement. The retail price of the external Jaz is expected to drop from $599 to $499, while the price of the internal model will drop from $499 to $399.

In conjunction with the price drop, the company announced a new internal PCI card that boosts the speed and performance of the Jaz drive on both the PC and Mac.

Iomega's aggressive marketing moves are mostly aimed at Syquest, and a document recently filed with the Securities and Exchange Commission indicates that Syquest is staggering from the blows.

In the registration statement, SyQuest says it is seeking to convert 20,000 shares of preferred stock that was sold last month into some 3 million common shares because the company is still in need of cash. Last month's sale raised $19 million, but the company is struggling to pay suppliers for parts needed to manufacture new products, the statement shows.

According to the company's statement in the filing, the company has not been able to ramp up production of its new EZ Flyer drive yet because there aren't enough components to make them--a shortfall attributed to SyQuest's inability to pay suppliers. Even if production gets up to speed, the company isn't sure it can sell the drives for a profit because of the intense competition with Iomega.

Earlier this month, SyQuest announced steep price cuts on its EZ135 in an effort to cut into sales of the Iomega 100MB Zip drive. The company was already losing money on each unit sold.

Iomega turned around earlier this week and offered a $50 mail-in rebate on ZIP drives sold from July 1 to September 15, 1996. In addition, Iomega has announced that several major vendors will be shipping Zip drives in desktop PCs. The company is also aiming to supply a Zip drive for laptops, though no vendors have yet come forward to support the product. Overall, Iomega is hoping to position the ZIP as the predecessor to the 3.5 inch floppy disk drives found on desktop computers now.

After posting a gross loss of $25.4 million in the last fiscal quarter, the outlook for SyQuest remains bleak even through next year. The company said it will probably need another infusion of cash to cover operating expenses, all while trying to fend off new competition in the form of the LS120 high-capacity optical disk drive being developed by Compaq Computer and other partners.

Related story:
Iomega fires at rival Syquest again