Storage company Iomega's woes are continuing and it will lay off 600-700 staff.
The company expects to make a second quarter net loss of between $25 and $35 million, and will take steps to reduce its costs to improve its performance. Those will include job losses, while the company also warned that its credit lines could be affected in its third quarter.
Iomega said that the loss is due to "softer than expected" aftermarket sales, combined with lower margins on sales of its drives to OEMs.
Shipments of its Zip drive to the OEM market, it said, represent arounmd half of its total shipments for the second consecutive quarter.
James Sierk, CEO and president of Iomega, said he was disappointed with the company's financial performance. He said Iomega will make between 600 and 700 staff redundant, around 10 per cent of its total headcount worldwide. He wants to cut $50 million of overheads during the year.
He added that Iomega will attempt to move swiftly to the concept of a virtual corporation, which he claimed will shorten the supply chain, reduce stock levels, and offer customers better service.
While Sierk said he regretted the fact that staff will be made redundant, he said that the reality was that Iomega needed to become profitable as an OEM supplier and to make more money from its higher margin Zip disks.
But he warned that the second quarter loss made it possible that Iomega could breach covenants on a $200 million loan. It is now talking to its financiers about renegotiating terms and conditions on its credit line. It has $60 million in advances outstanding, the company said.
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