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Iomega CEO resigns

Kim Edwards resigns as chief executive officer less than two weeks after the company projected a loss for the first quarter.

Iomega (IOM) said today that chief executive Kim Edwards has resigned and that he will be replaced temporarily by James Sierk, an Iomega director.

Iomega stock fell 3/8 of a point to close at 7 today, near a 52-week low. The company's stock has been on a downward slide since the end of last year.

Buckingham Research analyst Peter Labé said one reason for Iomega's falling stock price could be the unknown surrounding the future of the company.

"People are confused, and they don't know what this [resignation] means," he said. "People don't fully understand what happened and why it happened."

Last week, Iomega shares fell nearly 20 percent after the company warned that it would report a first-quarter loss rather than the profits analysts had expected. A class-action lawsuit was filed against Iomega yesterday, alleging that company executives practiced insider trading after disseminating misleading information to stockholders.

Labé said Edwards's resignation, Iomega stock chart which is effective immediately, has nothing to do with the company's first-quarter results. Rather, he said, there was disagreement between Edwards and the board of directors on corporate strategy.

"I thought he was the right person until today," Labé said of Edwards, who held the title of company president as well as CEO. "It is a strong-willed board, and he is strong-willed as well."

"The company is built on foundation that Kim set out for us, and we are taking a shift in the strategy," added Willow Baum, an Iomega spokeswoman. "We are going to be less concerned with becoming a $3 billion company, and [ more concerned] with becoming a $10 billion company. It is a shift in the mind-set."

Baum said that Edwards brought to the company "a relentless focus on the customer," but she acknowledged that, under Edwards, the company built a customer base faster than it could support that customer base.

The board said that the ideal candidate for Edwards's successor would be a senior officer, possibly a president or general manager of a substantial division of a major company--one that is preeminent in quality and customer service.

Sierk, 59, said he is not a candidate for taking the CEO position permanently. The company will begin a search for a permanent leader, and said the ideal candidate will be a "senior officer, possibly a president or general manager of a substantial division of a major company--one that is preeminent in quality and customer service."

"The board of directors very much regrets Mr. Edwards's departure," Iomega chairman David Dunn said in a statement. "He has been directly responsible for Iomega's success over the past four years."

The past year, however, has been a difficult one for the company, said Labé, citing a number of product delays and poor product quality, as well as a lack of customer satisfaction and support.

Labé said it is clear that the board would like greater quality control than it has seen up until now.

Last month, Iomega agreed on the settlement of a class-action lawsuit brought by consumers frustrated with the company's spotty technical support and service. The breach-of-warranty suit alleged that Iomega users who called for technical support and customer service were put on hold for excessive amounts of time and charged unfairly for those calls.

The company also has been in and out of court with rivals SyQuest Technology (SYQT) and Nomai.

Nomai recently won a major victory in its battle against Iomega when a U.S. District Court lifted a temporary restraining order that had prevented Nomai from selling its Zip-compatible disks in the United States.

In addition, Iomega last year charged competitor SyQuest with patent infringement for both its Jaz and Zip products.

"One of Iomega's core values has been to set and achieve unrealistic expectations," Edwards added. "I leave Iomega confident that the management team and employees are equipped to continue this unique tradition."

Sierk joined Iomega's board in October of last year. He previously was a senior vice president at AlliedSignal.

Edwards cashed in nearly $13 million in stock options during 1997, according to a recent filing with the Securities and Exchange Commission. (See related story)