Iomega moves in on old enemy

Iomega has picked up the remains of its former arch-rival Syquest, which was forced to file for Chapter 11 bankruptcy protection in November 1997, for the figure of $9.5 million.

After the US Bankruptcy Court grants its approval, the Zip drive manufacturer plans to acquire all of Syquest's intellectual property, inventory and fixed assets in the US, but will not assume any material obligations or liabilities.

Iomega also intends to make a bid for certain assets from the hard drive supplier's Malaysian subsidiary, which are being sold separately and as part of the deal. Syquest and Iomega said they would resolve their ongoing patent and trademark infringement disputes.

Sara Yale, chief analyst at Dataquest, said: 'Syquest's problems began several years ago when the Iomega Zip drive was launched. It tried to create products to compete, but ended up selling hardware on which it couldn't make any money.'

Syquest finally came up with competitive products, but a number of factors conspired to flatten the market for removable storage.

According to Yale, another contributing factor to the storage vendor's downfall was the glut of hard drives on the market, which sent prices falling and encouraged customers to buy larger internal disks rather than use removable ones.

But Iomega also appeared to have fallen on hard times recently, experiencing falling sales and three consecutive quarterly losses. After a long time, however, the vendor's stock price has rallied over the past few months and the supplier is expected to post a fourth quarter profit next week.

Following the announcement of the acquisition last week, Iomega shares fell $0.125 to $9.