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By Kent Larsen
Iomega Shocks Utah, Will Move to West Coast
ROY, UTAH -- Disk drive maker Iomega shocked its employees and the Northern
Utah community of Roy that has been its home by announcing that it will move
its headquarters to an undisclosed location on the West Coast. The
announcement came last Thursday amid announcements of the company's
performance during the last quarter and just one month after it hired a new
President and CEO Werner Heid. News reports indicate that the company's
Chairman, LDS Church member David Dunn, and Heid both live in San Diego,
California.
Iomega Thursday released the results of its operations for the 2nd quarter
of 2001, and those results continued a downward trend in sales. Sales were
$184.1 million for the quarter, a drop of 39% since the same quarter last
year and the 13th straight quarter of declining sales for the company.
Overall, sales have declined 62% from their high of $501.3 million for the
last quarter of 1997. The company also reported its first quarterly loss in
two years.
Other announcements Thursday included plans to layoff 800 to 1,100 people,
as much as one-third of the company's workforce, in addition to the
headquarters move to the West Coast. The only piece of the company that
would remain in Roy, Utah is its Research and Development division. Iomega
previously announced (June 13th) that its manufacturing operations would
already be consolidated in Malaysia. In addition, the company announced a
reverse stock split under which shareholders would receive one share for
every five they own.
On Friday, Iomega's stock dropped 14% on the combined announcements.
Reaction from the state of Utah and the city of Roy, Utah expressed
disappointment. "It's certainly a loss for the state, especially northern
Utah," said Utah Information Technology Association CEO Richard Nelson. Roy
city manager Blake Wahlen said, "Obviously, we are disappointed, mostly
because we [will] have a lot of people out of jobs. I have several personal
friends I am concerned for."
Company employees and investors wondered about the reasons for the move,
with many speculating that the move comes because both Chairman Dunn and CEO
Heid live in San Diego. Some argue that overhead costs will be higher on the
west coast. Analyst Stan Corker with Emerald Research thinks corporate
politics may be behind the move, "To me it seems a waste of money. This
seems to be another activity that just forces changes in management."
But regardless of the reason, the move will hit Iomega's employees and the
city hard. While some employees may move to the west coast, the economic
impact will still be felt in the Mormon-dominated community, and will likely
leave the company with fewer Mormon employees.
Iomega has struggled in recent years in spite of its dominant position in
the removable storage market. Its woes are mostly due to reduced use of
removable storage products, like the company's Zip Disk, due to the ease of
transferring files over the Internet. While the company has tried to
reposition its products for use in digital cameras and portable music
players, those efforts have not been successful enough to reverse its
declining sales and earnings.
Sources:
Iomega Overhaul Baffles Utah
Salt Lake Tribune 21Jul01 B4
By Paul Beebe: Salt Lake Tribune
Job cuts, departure of company headquarters will hurt the state
Employees hear news of layoffs
Ogden UT Standard-Examiner 20Jul01 B4
By Vicky Campbell and Gary Hinds: Standard-Examiner staff
Iomega may idle about 550 workers in Top of Utah
Iomega moving offices
Ogden UT Standard-Examiner 20Jul01 B4
By Gary Hinds: Standard-Examiner staff
California site of new headquarters; up to 1,100 jobs will be cut worldwide
Iomega stock plummets after report
Ogden UT Standard-Examiner 21Jul01 B4
By Gary Hinds: Standard-Examiner staff
Analyst critical of company's plans to lay off 25% of work force
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