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Iomega earnings beat estimates

The storage product maker posts better-than-expected earnings, due mostly to brisk sales of its Zip drives.

Relying on the strength of demand for their Zip drives, storage maker Iomega (IOM) overcame analysts low expectations and posted an 86 percent increase in second-quarter earnings.

Iomega's profits reached $26 million, or 19 cents a share, for the period ending June 30. The company earned $14 million, or 11 cents a share in the year-ago period.

Without the cost of recalling 75,000 of its Jaz drive cartridges during the quarter, Iomega's earnings would have been 21 cents per share.

Iomega said it recalled the drives because of a reliability problem with a component used in the drives.

Wall Street had expected the portable storage maker to post earnings of 18 cents a share, according to First Call, which tallies anayst estimates.

Rick Berry, an analyst with Murphey, Marseilles, and Smith, wasn't surprised that the recall had little effect on the bottom line:

"I don't think it had an impact on earnings, so much as an impact on their image, " Berry said. However, he did concede that it may have an impact on future earnings if it's a precursor of things to come.

Kim Edwards, president and CEO of Iomega, also credited the popularity of the Zip drive for the increase in earnings.

"We achieved another significant growth milestone this quarter," said Edwards in a statement, "We have now shipped over 7 million Zip drives, over 1 million Jaz drives, and more than 2 million Ditto drives."

Not all news was rosy for the company. Iomega announced yesterday the resignation of two key members of their marketing department: Tim Hill, vice president of worldwide marketing and sales, and Michael Collins, senior director of marketing.

Both executives left the company to join software maker Software AG.