Personal storage maker Iomega is fighting on three fronts, warning of massive losses as it defends itself against ongoing lawsuits from shareholders and French rival Nomai.
Shares in the maker of the Zip drive fell sharply when it announced that it expected to report a loss of between $10 million and $25 million for the first quarter of 1998. Analysts had expected the company to match the $23 million profits of the same quarter last year.
Iomega cited a shortfall in shipments as the major reason for the expected losses. Kim Edwards, Iomega president and CEO, said: 'Our shipments this quarter in all regions are lower than anticipated.
'The shortfall in sales, combined with over $20 million in incremental marketing expenses, appear to be the main factors contributing to our expected loss,' she added.
The slowdown in sales was linked to competition from French company Nomai, which is offering a similar product range to Iomega, but 30 per cent cheaper. Iomega is fighting a legal battle with Nomai over intellectual property rights in Europe and the US.
But Bob Payton, director of European storage research at IDC, believed Iomega's losses were due to the inevitable slowing down of the company.
He said: 'This is the first time it has had channel inventory. It shipped a lot of product into distributors and it has not filtered out as quickly as originally thought.'
A group of investors, who purchased Iomega stock between September 1997 and January 1998, are suing the company, claiming it made 'false and misleading misrepresentations and omissions' about expected financial performance and the delayed release of a 2Gb Jaz2 drive.
The stockholders claimed Iomega drove share prices too high with a series of announcements last year, just before two senior officials sold $11 million worth of company stock. Iomega is defending all claims.
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