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Iomega earnings double

First-quarter earnings for the portable storage maker more than double, in part because of strong sales of its Zip drives.

Portable storage maker Iomega (IOM) today reported first-quarter earnings that more than doubled, bolstered by strong sales of its Zip drives and improved gross margins.

Iomega reported net profits of $23 million, or 17 cents per share, for the period ending March 30, compared with earnings of $10 million, or 8 cents a share, a year ago.

Iomega beat analysts' estimates, who had expected the company to post earnings of 13 cents a share.

Revenues grew jumped by 63 percent to $361 million, compared with $222 million a year earlier.

The manufacturer of both the Zip and Jaz storage drives seems to be exceeding many analysts' lukewarm predictions for this year.

Analysts, as well as Iomega president Kim Edwards, credited strong sales of the Zip drive to improved gross margins, tighter control over operating expenses, and Zip drive sales.

Sales of the Zip and newer Jaz drives grew by 74 percent in the quarter, compared with year-earlier periods.

Iomega's sales in America grew 64 percent to $226 million, while its European sales grew 72 percent to $107 million and Asia jumped 30 percent to $28 million.

Meanwhile, the company's gross margin increased to 29.7 percent of sales in the quarter from 27 percent a year ago. The company was able to improve its margins, in part by producing its drives in Malaysia, which lowered costs.

In a report published March 31, Howard Rosencrans of H.D. Brous was optimistic about the Iomega's future, despite Wall Street skepticism about whether the Zip market has reached saturation. Rosencrans pointed to the strength of Zip sales in both consumer and business markets, as well as cost reductions which will allow for lower Zip pricing.

Rosencrans also attributed the continued strength of Zip sales to positive word of mouth from PC makers such as Compaq (CPQ) , Gateway 2000 (GATE), and Dell (DELL), which have appeared in industry journals calling the Zip drive a "key catalyst" to improving PC sales.

Iomega also recently announced it had signed a letter of intent with NEC to license its Zip drive technology.