UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 27, 1999


                         COMMISSION FILE NUMBER 1-12333



                               Iomega Corporation
             (Exact name of registrant as specified in its charter)

            Delaware                                 86-0385884
  (State or other jurisdiction            (IRS employer identification number)
of incorporation or organization)

                       1821 West Iomega Way, Roy, UT 84067
                    (Address of principal executive offices)

                                 (801) 332-1000
              (Registrant's telephone number, including area code)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                                  Yes X   No

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of March 28, 1999.

Common Stock, par value $.03 1/3                            269,456,569
     (Title of each class)                              (Number of shares)
<PAGE>



                               IOMEGA CORPORATION
                                TABLE OF CONTENTS
                                                                           Page
                          PART I - FINANCIAL STATEMENTS
Item 1.  Financial Statements

         Condensed consolidated balance sheets at June 27, 1999
              and December 31, 1998.........................................  3

         Condensed consolidated statements of operations for the three months
              ended June 27, 1999 and June 28, 1998.........................  5

         Condensed consolidated statements of operations for the six months
              ended June 27, 1999 and June 28, 1998.........................  6

         Condensed consolidated statements of cash flows for the six months
              ended June 27, 1999 and June 28, 1998.........................  7

         Notes to condensed consolidated financial statements...............  9

Item 2.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations........................... 20

Item 3.  Quantitative and Qualitative Disclosures About Market Risk......... 39


                           PART II - OTHER INFORMATION
Item 1.  Legal Proceedings.................................................. 40

Item 2.  Changes in Securities and Use of Proceeds.......................... 41

Item 5.  Other Events....................................................... 42

Item 6.  Exhibits and Reports on 8-K........................................ 44

Signatures.................................................................. 45

Exhibit Index............................................................... 46

This  Quarterly  Report  on Form  10-Q  contains  a  number  of  forward-looking
statements, including, without limitation, statements referring to: the expected
second  half  results;  the  expected  sufficiency  of cash and cash  equivalent
balances and  available  sources of financing;  expected  positive cash flow for
1999;  projected  effective  tax rates;  expected  realization  of deferred  tax
assets;  the impact on gross  margins of the sales  volumes of disks,  sales mix
between  disks and drives,  the mix between  OEM sales and sales  through  other
channels and the sales mix between the Company's  products;  targeted levels for
gross  margin,  selling,  general and  administrative  expenses and research and
development  expenses;  the  impact  of Clik!  drives  and  disks  and other new
products   introduced  or  expected  to  be  introduced  during  1998  or  1999;
anticipated  availability  of new  products  expected  to be  shipped  in  1999,
including  ZipCD drives and disks;  the possible  effects on future sales due to
supplier quality issues or component shortages;  efforts to be undertaken by the
<PAGE>


Company to improve its manufacturing supply chain management; the maintenance of
stringent   quality   assurance   standards;   the  impact  of  new   accounting
pronouncements;  the impact of the Euro conversion on the Company's  business or
financial condition; the timing and impact of restructuring activities and other
organizational  changes;  expected  cost savings  resulting  from the  Company's
restructuring  plan;  expected sales levels due to seasonal demand;  anticipated
hedging  strategies;  the  possible  effects  of an  adverse  outcome  in  legal
proceedings  described in Item 1 of Part II; estimated  additional  expenditures
associated  with the  Company's  efforts to address  Year 2000  issues;  and the
anticipated Year 2000 compliance of the Company's  computer systems and hardware
and  utility  software  products  and  third-party  suppliers.   Any  statements
contained  herein that are not statements of historical fact may be deemed to be
forward-looking   statements.   Without   limiting  the  foregoing,   the  words
"believes," "anticipates," "plans," "expects," "intends" and similar expressions
are  intended  to  identify  forward-looking  statements.  There are a number of
important factors that could cause actual events or the Company's actual results
to differ  materially from those indicated by such  forward-looking  statements.
These factors include,  without  limitation,  those set forth under the captions
"Liquidity and Capital Resources," "Factors Affecting Future Operating Results,"
"Disclosures  About  Market  Risk," and "Year  2000  Readiness"  included  under
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" in Item 2 of Part I of this Quarterly Report on Form 10-Q, and those
set  forth  in Item 1 of Part II of this  Quarterly  Report  on Form  10-Q.  The
factors  discussed  below do not  reflect  the  potential  future  impact of any
mergers,  acquisitions  or  dispositions.   The  Company  does  not  assume  any
obligation to update any forward-looking statements made herein.



<PAGE>
<TABLE>



                               IOMEGA CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                     ASSETS

                                 (In thousands)
<CAPTION>

                                             June 27,       December 31,
                                                 1999               1998
                                        -------------      -------------
                                         (Unaudited)
<S>                                     <C>                <C>
CURRENT ASSETS:
     Cash and cash equivalents          $      89,281      $      90,273
     Trade receivables, net                   185,999            233,662
     Inventories                              138,400            165,132
     Income taxes receivable                   12,916             24,974
     Deferred income taxes                     48,245             49,827
     Other current assets                      27,762             20,246
                                        -------------      -------------
         Total current assets                 502,603            584,114
                                        -------------      -------------

PROPERTY, PLANT AND EQUIPMENT, at cost        393,102            373,227
     Less:  Accumulated depreciation
               and amortization              (219,543)          (165,112)
                                        -------------      -------------
     Net property, plant and equipment        173,559            208,115
                                        -------------      -------------

INTANGIBLES, net                               38,310             33,580

DEFERRED INCOME TAXES                           9,716                  -

OTHER ASSETS                                    5,755              4,350
                                        -------------      -------------

                                        $     729,943      $     830,159
                                        =============      =============

</TABLE>






                       The accompanying notes to condensed
             consolidated financial statements are an integral part
                            of these balance sheets.


<PAGE>

<TABLE>

                               IOMEGA CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      LIABILITIES AND STOCKHOLDERS' EQUITY

                        (In thousands, except share data)
<CAPTION>
                                                 June 27,       December 31,
                                                     1999               1998
                                            -------------      -------------
                                             (Unaudited)
<S>                                         <C>                <C>
CURRENT LIABILITIES:
     Related party notes payable (Note 4)   $           -      $      40,000
     Accounts payable                             124,097            160,977
     Other current liabilities (Note 1)           175,656            152,843
     Current portion of capitalized
        lease obligations and notes
        payable                                     4,397              4,408
                                            -------------      -------------
         Total current liabilities                304,150            358,228
                                            -------------      -------------

CAPITALIZED LEASE OBLIGATIONS AND
NOTES PAYABLE,  net of current portion              5,089              4,607
                                            -------------      -------------

DEFERRED INCOME TAXES                                   -              4,903
                                            -------------      -------------

CONVERTIBLE SUBORDINATED NOTES,
     6.75%, due 2001                               45,505             45,655
                                            -------------      -------------

STOCKHOLDERS' EQUITY:
     Preferred Stock, $.01 par value;
        authorized 4,750,000 shares,
        none issued                                     -                  -
     Series C Junior Participating
        Preferred Stock, authorized
        250,000 shares, none issued                     -                  -
     Common Stock, $.03 1/3 par value;
        authorized  400,000,000  shares,
        issued 270,266,111 and 268,186,096
        shares at June 27, 1999 and
        December 31, 1998, respectively             9,008              8,937
     Additional paid-in capital                   291,052            286,206
     Less:  809,542 Common Stock treasury
               shares, at cost                     (6,088)            (6,088)

     Retained earnings                             81,227            127,711
                                            -------------      -------------
         Total stockholders' equity               375,199            416,766
                                            -------------      -------------

                                            $     729,943      $     830,159
                                            =============      =============


</TABLE>


                       The accompanying notes to condensed
             consolidated financial statements are an integral part
                            of these balance sheets.


<PAGE>

<TABLE>


                               IOMEGA CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)
<CAPTION>

                                                  For the Quarter Ended
                                            --------------------------------
                                                 June 27,           June 28,
                                                     1999               1998
                                            -------------      -------------
                                                      (Unaudited)
<S>                                         <C>                <C>

SALES                                       $     348,781      $     393,831

COST OF SALES                                     273,020            299,607
                                            -------------      -------------
     Gross margin                                  75,761             94,224
                                            -------------      -------------

OPERATING EXPENSES:
     Selling, general and administrative           82,828            124,399
     Research and development                      23,085             30,303
     Restructuring charge                          41,909                  -
                                            -------------      -------------
         Total operating expenses                 147,822            154,702
                                            -------------      -------------

OPERATING LOSS                                    (72,061)           (60,478)
     Interest and other expense, net                 (328)              (918)
                                            -------------      -------------

LOSS BEFORE INCOME TAXES                          (72,389)           (61,396)
     Benefit for income taxes                      25,336             21,486
                                            -------------      -------------

NET LOSS                                    $     (47,053)     $     (39,910)
                                            =============      =============

NET LOSS PER COMMON SHARE
     (Basic and Diluted)                    $       (0.17)     $       (0.15)
                                            =============      =============

WEIGHTED AVERAGE COMMON
     SHARES OUTSTANDING
     (Basic and Diluted)                          269,115            265,464
                                            =============      =============



</TABLE>





                       The accompanying notes to condensed
             consolidated financial statements are an integral part
                              of these statements.


<PAGE>

<TABLE>

                               IOMEGA CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)

<CAPTION>
                                                For the Six Months Ended
                                            --------------------------------
                                                 June 27,           June 28,
                                                     1999               1998
                                            -------------      -------------
                                                      (Unaudited)
<S>                                         <C>                <C>

SALES                                       $     734,993      $     801,331

COST OF SALES                                     565,496            604,971
                                            -------------      -------------
     Gross margin                                 169,497            196,360
                                            -------------      -------------

OPERATING EXPENSES:
     Selling, general and administrative          152,769            232,341
     Research and development                      43,798             53,436
     Restructuring charge                          41,909                  -
                                            -------------      -------------
         Total operating expenses                 238,476            285,777
                                            -------------      -------------

OPERATING LOSS                                    (68,979)           (89,417)
     Interest and other expense, net               (2,533)              (481)
                                            -------------      -------------

LOSS BEFORE INCOME TAXES                          (71,512)           (89,898)
     Benefit for income taxes                      25,028             31,412
                                            -------------      -------------

NET LOSS                                    $     (46,484)     $     (58,486)
                                            =============      =============

NET LOSS PER COMMON SHARE
     (Basic and Diluted)                    $       (0.17)     $       (0.22)
                                            =============      =============

WEIGHTED AVERAGE COMMON
     SHARES OUTSTANDING
     (Basic and Diluted)                          268,753            263,878
                                            =============      =============




</TABLE>





                       The accompanying notes to condensed
             consolidated financial statements are an integral part
                              of these statements.
<PAGE>
<TABLE>

                               IOMEGA CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<CAPTION>

                                                   For the Six Months Ended
                                               --------------------------------
                                                    June 27,           June 28,
                                                        1999               1998
                                               -------------      -------------
                                                      (Unaudited)
<S>                                            <C>                <C>
Cash Flows from Operating Activities:
     Net Loss                                  $     (46,484)     $     (58,486)
     Non-Cash Revenue and Expense Adjustments:
         Depreciation and amortization                46,142             30,218
         Deferred income tax benefit                 (13,037)           (20,454)
         Tax benefit from dispositions
            of employee stock                          1,061              1,954
         Restructuring charge                         41,909                  -
         Bad debt provision                            3,761               (404)
         Other                                           972              2,641
     Changes in Assets and Liabilities:
         Trade receivables, net                       43,902            137,287
         Inventories                                  22,112            (34,028)
         Other current assets                         (2,923)            (4,199)
         Accounts payable                            (36,880)          (134,105)
         Accrued liabilities                           1,974            (13,923)
         Income taxes                                 12,058            (40,425)
                                               -------------      -------------
             Net cash provided by (used in)
                operating activities                  74,567           (133,924)
                                               -------------      -------------

Cash Flows from Investing Activities:
     Purchase of property, plant and equipment       (25,688)           (49,514)
     Acquisition of SyQuest assets                   (12,093)                 -
     Sale of temporary investments                         -             36,319
     Net increase in other assets                     (1,955)            (3,845)
                                               -------------      -------------
         Net cash used in investing activities       (39,736)           (17,040)
                                               -------------      -------------

Cash Flows from Financing Activities:
     Proceeds from sale of Common Stock                3,706              2,914
     Proceeds from issuance of notes payable
        and capital leases                             3,532             60,000
     Payments on notes payable and capitalized
        lease obligations                            (43,061)            (3,265)
     Purchase of Common Stock                              -               (465)
                                               -------------      -------------
         Net cash provided by (used in)
            financing activities                     (35,823)            59,184
                                               -------------      -------------

Net Decrease  in Cash and Cash Equivalents              (992)           (91,780)
Cash and Cash Equivalents at Beginning
   of Period                                          90,273            159,922
                                               -------------      -------------
Cash and Cash Equivalents at End of Period     $      89,281      $      68,142
                                               =============      =============

</TABLE>


                       The accompanying notes to condensed
             consolidated financial statements are an integral part
                              of these statements.


<PAGE>
<TABLE>


                               IOMEGA CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<CAPTION>


                                                   For the Six Months Ended
                                               --------------------------------
                                                    June 27,           June 28,
                                                        1999               1998
                                               -------------      -------------
<S>                                            <C>                <C>

Supplemental Schedule of Non-Cash
Investing and Financing Activities:

     Property, plant and equipment financed
         under capitalized lease obligations   $           -      $       1,223
                                               =============      =============



















</TABLE>



                       The accompanying notes to condensed
             consolidated financial statements are an integral part
                              of these statements.


<PAGE>


                               IOMEGA CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)



(1)      SIGNIFICANT ACCOUNTING POLICIES

         In the opinion of the Company's management, the accompanying unaudited,
         condensed,  consolidated  financial  statements reflect all adjustments
         (consisting only of normal recurring  adjustments)  which are necessary
         to present fairly the financial  position of the Company as of June 27,
         1999 and December 31, 1998,  the results of  operations  for the three-
         and  six-month  periods  ended June 27, 1999 and June 28, 1998 and cash
         flows for the six-month periods ended June 27, 1999 and June 28, 1998.

         The results of operations  for the three- and  six-month  periods ended
         June 27,  1999 are not  necessarily  indicative  of the  results  to be
         expected for the entire year or for any future period.

         These unaudited, condensed, consolidated financial statements should be
         read in  conjunction  with the  consolidated  financial  statements and
         notes  included in or  incorporated  into the  Company's  latest Annual
         Report on Form 10-K.

         Pervasiveness of Estimates - The preparation of financial statements in
         conformity  with  generally  accepted  accounting  principles  requires
         management to make estimates and  assumptions  that affect the reported
         amounts of assets and liabilities and disclosures of contingent  assets
         and  liabilities  at the  date  of the  financial  statements  and  the
         reported amounts of revenues and expenses during the reporting  period.
         Actual results could differ from these estimates.

         Principles of Consolidation - These unaudited, condensed,  consolidated
         financial statements include the accounts of Iomega Corporation and its
         majority-owned   subsidiaries   after   elimination   of  all  material
         intercompany accounts and transactions.

         Revenue   Recognition  -  The  Company's   customers  include  original
         equipment  manufacturers,   end  users,  retailers,   distributors  and
         value-added  manufacturers.   Some  retail  and  distribution  customer
         agreements have  provisions  which allow the customer to return product
         under certain conditions within specified time periods.  Revenue,  less
         reserves for  returns,  is generally  recognized  upon  shipment to the
         customer.

         In addition to reserves for returns,  the Company defers recognition of
         revenue on estimated  excess  inventory in the  distribution and retail
         channels. For this purpose, excess inventory is the amount of inventory
         which  exceeds  the  channels'  30-day  requirements  as  estimated  by
         management.  The gross margin  associated  with deferral of revenue for
         returns and estimated  excess channel  inventory  totaled $23.7 million
         and $33.1 million at June 27, 1999 and December 31, 1998, respectively,
         and is  included in "Other  current  liabilities"  in the  accompanying
         condensed consolidated balance sheets.


<PAGE>


         Price  Protection and Volume Rebates - The Company has agreements  with
         certain of its customers which, in the event of a price decrease, allow
         those customers  (subject to certain  limitations)  credit equal to the
         difference  between the price  originally paid and the reduced price on
         units in the customers'  inventories at the date of the price decrease.
         When a price decrease is anticipated,  the Company establishes reserves
         against  gross  accounts   receivable  for  amounts   estimated  to  be
         reimbursed to the qualifying customers.

         In addition,  the Company records  reserves at the time of shipment for
         estimated  volume rebates.  These reserves for volume rebates and price
         protection  credits totaled $38.2 million and $47.6 million at June 27,
         1999 and  December  31,  1998,  respectively,  and are  netted  against
         accounts receivable in the accompanying  condensed consolidated balance
         sheets.

         Foreign Currency Translation - For  purposes of consolidating  non-U.S.
         operations, the Company has  determined the functional currency for its
         non-U.S.  operations  to be  the U.S.  dollar.  Therefore,  translation
         gains and losses are included in the determination of income.

         Cash  Equivalents  and  Temporary  Investments  - For  purposes  of the
         statements of cash flows, the Company  considers all highly liquid debt
         instruments  purchased  with  maturities of three or fewer months to be
         cash equivalents.  Cash equivalents primarily consist of investments in
         money market mutual funds, commercial paper, auction rate, money market
         preferred stock investments and taxable and non-taxable municipal bonds
         and  notes  and  are  recorded  at  cost,  which  approximates  market.
         Instruments with maturities in excess of three months are classified as
         temporary investments.  There were no temporary investments at June 27,
         1999 and December 31, 1998.

         Inventories - Inventories  include direct  materials,  direct labor and
         manufacturing  overhead  costs  and are  recorded  at the lower of cost
         (first-in,  first-out)  or market  and  consist  of the  following  (in
         thousands):
<TABLE>
<CAPTION>

                                   June 27,        December 31,
                                       1999                1998
                                -----------        ------------
<S>                             <C>                <C>

             Raw materials      $    59,193        $     62,613
             Work-in-process         17,291               8,482
             Finished goods          61,916              94,037
                                -----------        ------------

                                $   138,400        $    165,132
                                ===========        ============

</TABLE>

<PAGE>


         Other Current  Liabilities - Other current  liabilities  consist of the
following (in thousands):
<TABLE>
<CAPTION>

                                              June 27,        December 31,
                                                  1999                1998
                                           -----------        ------------
<S>                                        <C>                <C>

             Accrued payroll, vacation
                and bonus                       22,288              21,048
             Deferred revenue                   23,699              33,114
             Accrued advertising                41,326              30,226
             Accrued restructuring              20,651                   -
             Other accrued liabilities          67,692              68,455
                                           -----------        ------------

                                           $   175,656        $    152,843
                                           ===========        ============
</TABLE>

         Reclassifications  - Certain  reclassifications  were made to the prior
         periods' unaudited,  condensed,  consolidated  financial  statements to
         conform with the current period presentation.

         Net Income (Loss) Per Common Share - Basic net income (loss) per common
         share ("Basic EPS")  excludes  dilution and is computed by dividing net
         income  (loss)  by  the  weighted   average  number  of  common  shares
         outstanding  during the  period.  Diluted  net income per common  share
         ("Diluted  EPS")  reflects the  potential  dilution that could occur if
         stock options or other  contracts to issue common stock were  exercised
         or converted into common stock. The computation of Diluted EPS does not
         assume  exercise  or  conversion  of  securities  that  would  have  an
         antidilutive  effect on net income per common  share.  In periods where
         losses are recorded,  common stock  equivalents would decrease the loss
         per share and  therefore are not added to the weighted  average  shares
         outstanding.  For the three- and six-month  periods ended June 27, 1999
         and June 28, 1998, basic and diluted net loss per common share were the
         same due to the antidilutive  effect of recording net losses during the
         respective periods.

         Recent  Accounting   Pronouncements  -  In  June  1998,  the  Financial
         Accounting  Standards  Board  ("FASB")  issued  Statement  of Financial
         Accounting  Standards No. 133,  "Accounting for Derivative  Instruments
         and  Hedging   Activities"  ("SFAS  133").  SFAS  133  establishes  new
         accounting and reporting  standards for companies to report information
         about derivative instruments,  including certain derivative instruments
         embedded in other contracts (collectively referred to as "derivatives")
         and for hedging activities.  In June 1999, the FASB issued Statement of
         Financial  Accounting  Standards No. 137,  "Accounting  for  Derivative
         Instruments and Hedging  Activities - Deferral of the Effective Date of
         FASB Statement No. 133." This  statement  amended the effective date of
         SFAS  133.  SFAS 133 will now be  effective  for  financial  statements
         issued for all fiscal quarters of fiscal years beginning after June 15,
         2000. The Company does not expect this pronouncement to have a material
         impact on the Company's  results of operations,  financial  position or
         liquidity.


<PAGE>



(2)      ACQUISITIONS

         Nomai S.A.  During the third  quarter of 1998,  the  Company  purchased
         approximately  54% of the capital  stock of Nomai,  S.A.  ("Nomai"),  a
         France-based  manufacturer of removable  storage systems,  from Nomai's
         principal and other major shareholders.  As required by French law, the
         Company  subsequently  offered  all  other  shareholders  of Nomai  the
         opportunity  to sell their  shares to the Company at the same price per
         share that was paid to the principal and other major shareholders.  The
         initial  purchase and the tender offer  resulted in the Company  owning
         substantially  all of Nomai's  outstanding  shares.  The total purchase
         price of the  acquisition was  approximately  $45 million ($42 million,
         net of cash acquired).

         The transaction was accounted for as a purchase and, on this basis, the
         excess  purchase  price over the  estimated  fair value of net tangible
         assets  has  been  allocated,  based  upon an  independent  third-party
         valuation,   to  intangibles  and  purchased   in-process   technology.
         Intangibles of  approximately  $36 million arising from the acquisition
         are being  amortized on a  straight-line  basis over seven  years.  The
         Company  recorded a non-cash pre-tax charge of $11.1 million related to
         purchased  in-process  technology,  representing the appraised value of
         technology  still in the  development  stage that was not considered to
         have reached  technological  feasibility and had no alternative  future
         use. At the acquisition date, purchased in-process  technology projects
         and their respective assigned values consisted of the following:  a 2GB
         design drive and cartridge  projects  ($9.3  million),  a DVD and CD-RW
         interface   technology  project  ($1.3  million)  and  a  servo  writer
         technology  project ($0.5 million).  During the second quarter of 1999,
         the  Company   recorded  a  restructuring   charge  that  included  the
         discontinuance  of a drive  development  project that  included the 2GB
         design drive and cartridge  development  project that was acquired as a
         purchased  in-process  technology  project in the  acquisition of Nomai
         during 1998.

         The following  unaudited pro forma combined  financial data for the six
         months ended June 28, 1998  presents the results of  operations  of the
         Company as if the Nomai acquisition had been effective at the beginning
         of the period presented (in millions, except per share data):
<TABLE>
<CAPTION>

                                    June 28, 1998
                                    -------------
                                     (Unaudited)
                   <S>              <C>

                   Revenue          $         817
                   Net loss                   (65)
                   Diluted EPS      $       (0.25)
</TABLE>

         These  pro  forma  results  of   operations   have  been  prepared  for
         comparative  purposes  only and do not purport to be  indicative of the
         results of operations, which actually would have resulted had the Nomai
         acquisition occurred on the date indicated,  or which may result in the
         future.
<PAGE>


         SyQuest.  In April 1999, the Company  completed the purchase of certain
         assets of SyQuest Technology,  Inc. and its subsidiaries,  ("SyQuest"),
         including  intellectual  property,  inventory  and fixed  assets in the
         U.S.,  Europe  and  Malaysia.  The  total  purchase  price of the asset
         purchase in the U.S. and Europe was $9.2 million and the purchase price
         of the  Malaysian  assets was $2.9  million.  The assets  purchased are
         included in the Company's  other current assets and intangibles at June
         27,  1999.  The  Company is in the  process of  selling,  disposing  or
         utilizing   the   inventory   and  fixed  assets  from  the   purchase.
         Intellectual  property of $7.5  million  arising  from the  purchase is
         being amortized on a straight-line  basis over three years. No material
         obligations or  liabilities of SyQuest were assumed by the Company.  As
         part of the purchase, the Company released SyQuest and SyQuest released
         the Company  from all claims in  connection  with patent and  trademark
         infringement  litigation pending between the parties in Delaware and in
         Paris, France.

(3)      INCOME TAXES

         For the three- and six-months ended June 27, 1999, the Company recorded
         an income tax benefit at an effective rate of  approximately  35%. This
         tax rate is based on the  Company's  anticipated  mix of  domestic  and
         foreign pre-tax income (loss) for 1999.

         U.S. taxes have not been provided for unremitted foreign earnings which
         are considered to be permanently reinvested in non-U.S. operations.

         The Company has  approximately  $9.5  million of foreign net  operating
         loss  carryovers  for which the  Company  has  established  a valuation
         allowance. These carryovers expire at various dates beginning in 2004.

         The Company has a net  deferred  tax asset of $64.6  million as of June
         27,  1999,  reflecting  the  benefit  of $165.6  million  in future tax
         deductions. Realization is primarily dependent on generating sufficient
         taxable  income.  Although  realization  is  not  assured,   management
         believes it is more likely  than not that all of the net  deferred  tax
         asset  will be  realized.  The  amount  of the net  deferred  tax asset
         considered  realizable,  however,  could be  reduced  in the  future if
         estimates of future taxable income are reduced.

         Cash paid for income taxes was $4.2 million for the first six months of
         1999 and  $28.0  million  for the  corresponding  period  in 1998.  The
         Company  received  an income  tax  refund of $20.4  million  during the
         quarter ended June 27, 1999.



<PAGE>


(4)      DEBT

         Notes  Payable - On March 11,  1997,  the Company  entered  into a $200
         million  Senior  Secured  Credit  Facility with Morgan  Guaranty  Trust
         Company of New York,  Citibank,  N.A. and a syndicate of other lenders.
         During 1998 and 1999,  the  Company  and the lenders  agreed to several
         amendments to and waivers under the Credit Facility, the most recent of
         which was entered into on June 30, 1999,  (the "Credit  Facility").  At
         June 27, 1999, the Credit Facility is a $150 million secured  revolving
         line of  credit  that  expires  on July 14,  2000,  and is  secured  by
         accounts   receivable,   domestic  inventory,   domestic   intellectual
         property, general intangibles, equipment, personal property, investment
         property  and a pledge of 65% of the stock of certain of the  Company's
         subsidiaries.  Under the Credit  Facility,  the Company may borrow at a
         base  rate,  which is the  higher  of prime or the sum of 0.5% plus the
         Federal  funds  rate  plus a margin of 0.0% to 1.63%  depending  on the
         Company's earnings before interest expense, income taxes,  depreciation
         and amortization  ("EBITDA") and utilization of the Credit Facility, or
         at LIBOR  plus a margin of 1.25% to 2.75%  depending  on the  Company's
         EBITDA and utilization of the Credit Facility. There were no borrowings
         outstanding  on  the  Credit  Facility  at  June  27,  1999.  Borrowing
         availability  under the  Credit  Facility  is based on an  agreed  upon
         advance rate on  receivables  and inventory not to exceed $150 million.
         Total  availability  under the  Credit  Facility  at June 30,  1999 was
         $122.0 million. Among other restrictions,  the Credit Facility treats a
         change of control (as  defined) as an event of default and requires the
         maintenance  of  minimum  levels of  consolidated  tangible  net worth,
         EBITDA and  certain  other  covenants.  On June 15,  1999,  the Company
         amended the Credit Facility to exclude certain  restructuring and other
         charges  taken  in  the  second   quarter  of  1999  from  the  minimum
         consolidated  EBITDA financial  covenant and the consolidated  tangible
         net worth covenant for the period ended June 27, 1999. Further, on June
         30, 1999,  the Company  obtained a waiver to the Credit  Facility  with
         respect to the minimum  consolidated  EBITDA financial covenant for the
         period ended June 27, 1999.  Depending on its financial  performance in
         future  quarters,  the Company may be required to seek further covenant
         waivers  and  amendments  under the  Credit  Facility.  There can be no
         assurance  that the Company  will be able to obtain any such waivers or
         amendments on terms  acceptable to the Company,  if at all. Loss of the
         Credit  Facility may require the Company to find an alternative  source
         of funding, which could have a material adverse effect on the Company's
         business and financial results.

         Related Party Notes - In July 1998, the Company borrowed a total of $40
         million from Idanta  Partners Ltd. and another entity  affiliated  with
         David J. Dunn,  Chairman of the Company's Board of Directors,  pursuant
         to a series of three senior  subordinated  notes. The proceeds of these
         notes  were used for the cash  purchase  of  Nomai.  The  Company  used
         internally   generated  funds  to  repay  the  principal  and  interest
         associated with these notes upon their maturity on March 31, 1999.

<PAGE>


         Capital  Leases - The Company has entered  into various  agreements  to
         obtain   capital   lease   financing   for  the   purchase  of  certain
         manufacturing   equipment,   software,   office   furniture  and  other
         equipment.  The  leases  have  terms  ranging  from 36 to 60 months and
         mature at various  dates from August 1999 to April 2002.  Principal and
         interest  payments under the various  agreements are payable monthly or
         quarterly.  Interest rates are fixed and range from 7.1% to 10.2%.  The
         leases are secured by the  underlying  leased  equipment,  software and
         furniture.

         Cash paid for interest was $7.3 million and $5.5 million, respectively,
         for the  first  six  months of 1999 and  1998,  including  interest  on
         capital leases.  Included in interest  expense for the first six months
         of 1999 and 1998,  respectively,  was $0.8  million and $0.4 million of
         amortization of deferred charges associated with obtaining the debt.

(5)      BUSINESS SEGMENT INFORMATION

         The accounting policies of the segments are the same as those described
         in  Note  1  "Significant  Accounting  Policies."  Intersegment  sales,
         eliminated in  consolidation,  are not material.  The Company evaluates
         performance  based on product  profit margin for each segment.  Product
         profit margin is defined as sales and other income directly  related to
         a segment's  operations,  less both fixed and  variable  manufacturing,
         research  and  development  and  selling,  general  and  administrative
         expenses  directly  related to a  segment's  operations.  The  expenses
         attributable  to corporate  activity are not allocated to the operating
         segments.  The Company has four reportable  segments based primarily on
         the nature of the Company's customers and products: Zip, Jaz, Ditto and
         Clik!.  The Zip segment  includes Zip disk and drive  systems.  The Jaz
         segment  includes  Jaz disk and drive  systems  and the Buz  multimedia
         producer.  The Company's  restructuring charge in the second quarter of
         1999 included the write-off of assets related to the  discontinuance of
         certain Jaz segment products and projects  including the Buz multimedia
         producer and a drive  development  project.  The Ditto segment includes
         the Ditto family of tape backup  drives and tape  cartridges.  In March
         1999,  the Company agreed to sell certain  assets  associated  with its
         Ditto segment, including intellectual property, exclusive manufacturing
         rights,  certain software and intellectual property rights,  equipment,
         brand names and product logos. The Company  continued to sell its Ditto
         finished goods inventory  through June 27, 1999,  after which the buyer
         has  agreed  to  purchase  the  Company's   remaining   finished  goods
         inventory.  The Company will  continue to sell Ditto  cartridges  for a
         period of time. The Clik!  segment  includes Clik!  mobile and Clik! PC
         Card drives and Clik! disks.  Clik!  products began shipping in limited
         quantities  during the fourth  quarter of 1998.  The  "Other"  category
         includes  products  such as Bernoulli,  floppy disks,  ZipCD drives and
         other  miscellaneous  items.  The information in the following table is
         derived directly from the segments' internal financial information used
         for corporate management purposes.


<PAGE>
<TABLE>



         Reportable Operating Segment Information
<CAPTION>

                                            For the Three Months Ended            For the Six Months Ended
                                          -------------------------------       -----------------------------
                                                June 27,         June 28,            June 27,        June 28,
                                                    1999             1998                1999            1998
                                          --------------  ---------------       -------------  --------------
                                                   (In millions)                        (In millions)
         <S>                              <C>             <C>                   <C>            <C>

         Sales:
              Zip                         $          274  $           284       $         576  $          551
              Jaz                                     66               87                 129             197
              Ditto                                    6               21                  16              51
              Clik!                                    1                -                   6               -
              Other                                    2                2                   8               2
                                          --------------  ---------------       -------------  --------------

         Total sales                      $          349  $           394       $         735  $          801
                                          ==============  ===============       =============  ==============

</TABLE>

<PAGE>

<TABLE>
<CAPTION>




                                            For the Three Months Ended            For the Six Months Ended
                                          -------------------------------       -----------------------------
                                                June 27,         June 28,            June 27,        June 28,
                                                    1999             1998                1999            1998
                                          --------------  ---------------       -------------  --------------
                                                   (In millions)                        (In millions)
     <S>                                  <C>             <C>                   <C>            <C>
     Product profit margin
       before restructuring
       charge:
              Zip                         $           33  $            38       $          84  $           67
              Jaz                                     (5)             (21)                 (8)            (24)
              Ditto                                   (3)              (6)                 (4)             (7)
              Clik!                                  (17)             (10)                (30)            (18)
              Other                                   (6)              (2)                (12)             (3)
                                          --------------  ---------------       -------------  --------------

         Total product
            profit margin                              2               (1)                 30              15
                                          --------------  ---------------       -------------  --------------

     Product profit margin
        after restructuring
        charge:


              Zip                         $           33  $            38       $          84  $           67
              Jaz                                    (32)             (21)                (35)            (24)
              Ditto                                   (9)              (6)                (10)             (7)
              Clik!                                  (17)             (10)                (30)            (18)
              Other                                  (11)              (2)                (17)             (3)
                                          --------------  ---------------       -------------  --------------
         Total product
            profit margin                            (36)              (1)                 (8)             15
                                          --------------  ---------------       -------------  --------------

              Corporate restructuring
                 charge                               (4)               -                  (4)              -
              General corporate expenses             (32)             (59)                (57)           (104)
              Interest income                          1                1                   2               3
              Interest expense                        (1)              (2)                 (4)             (3)
              Other expense                            -                -                  (1)             (1)
                                          --------------  ---------------       -------------  --------------

         Loss before income taxes         $          (72) $           (61)      $         (72) $          (90)
                                          ==============  ===============       =============  ==============
</TABLE>

(6)      RESTRUCTURING COSTS

         During the quarter ended June 27, 1999, the Company  recorded a pre-tax
         restructuring  charge of $41.9 million as a result of steps the Company
         is taking to organize along functional lines and to better position the
         Company for sustained  profitable growth and improved asset management.
         These  actions  included  costs  relating  to the  exit of  facilities,
         headcount  reductions,  the  discontinuance  of  certain  products  and
         development  projects  and other  costs to  consolidate  the  Company's
         magnetic  technology  expertise at its  headquarters in Roy, Utah. This
         consolidation
<PAGE>


         will include closing the Company's  facilities in Milpitas,  California
         and San Diego,  California.  The restructuring  charge was comprised of
         $20.2 million for the  write-off of fixed assets and inventory  related
         to the  discontinuance  of certain  products and development  projects;
         $9.7  million  for work force  reduction  costs;  $4.3  million for the
         write-off or write-down of excess leasehold improvements, furniture and
         fixtures  formerly  utilized in the Milpitas and San Diego  facilities;
         $3.0  million for lease  termination  costs for  facilities  located in
         Milpitas  and San Diego;  and $4.7  million  for work  force  reduction
         costs,  contract cancellation costs and other exit costs to consolidate
         the  Company's   Nomai   operations   in  France  and   Scotland.   The
         restructuring   charge  consisted  of  cash  and  non-cash  charges  of
         approximately   $18  million  and  $24   million,   respectively.   The
         restructuring  charge was  included in the income  statement  under the
         caption  "Restructuring  charge" for the three- and  six-month  periods
         ended  June  27,  1999.  Prior  to  this  period,  there  were  not any
         indications of permanent  impairment of the assets  associated with the
         closure and consolidation of these facilities.

         In connection with the Company's  restructuring,  the Company currently
         expects  a  workforce   reduction  of  approximately  450  regular  and
         temporary  employees,  consisting  primarily of operations  and product
         development  employees located in Milpitas,  San Diego and Roy. None of
         these  employees  had been  terminated  as of June 27, 1999.  Workforce
         reduction  costs and other exit costs  noted above were  determined  in
         accordance with Emerging  Issues Task Force Issue No. 94-3,  "Liability
         Recognition for Certain Employee  Termination  Benefits and Other Costs
         to Exit an Activity." The Company anticipates the implementation of the
         restructuring  plan  will  be  substantially  complete  by  the  end of
         December  1999,  with the  remainder of the plan to be completed by the
         end of June 2000.

         Restructuring   reserves   are  included  in  the   Company's   accrued
         liabilities, inventory and property, plant and equipment as of June 27,
         1999.  The  following  table  represents  the  Company's  restructuring
         activities (in thousands):

<TABLE>
<CAPTION>
                                 June 27, 1999
                                 Restructuring               Adjustments and          Balance
                                        Charge  Utilized   Reclassifications    June 27, 1999
                              ----------------  --------   -----------------    -------------
<S>                           <C>               <C>        <C>                  <C>

Discontinued products (a)     $         20,210         -                   -    $      20,210

Severance and benefits (b)               9,700         -                   -            9,700

Other fixed asset charges (a)            4,300         -                   -            4,300

Lease terminations (b)                   3,000         -                   -            3,000

Other exit costs (b)                     4,699         -                   -            4,699
                              ----------------  --------   -----------------    -------------

Total                         $         41,909         -                   -    $      41,909
                              ----------------  --------   -----------------    -------------
</TABLE>

(a)   Amounts represent primarily non-cash charges
(b)   Amounts represent primarily cash charges

<PAGE>



(7)      OTHER MATTERS

         Significant  Customers - During the three and six months ended June 27,
         1999, sales to Ingram Micro, Inc. accounted for approximately 14.3% and
         12.6%,  respectively,  of consolidated  sales.  During the three months
         ended  June 27,  1999,  sales to Tech Data  Corporation  accounted  for
         approximately  10.4% of consolidated sales. During the three months and
         six months ended June 28, 1998, sales to Ingram Micro,  Inc.  accounted
         for 11.0% and 12.7%,  respectively,  of  consolidated  sales.  No other
         single customer  accounted for more than 10% of the Company's sales for
         these periods.

         Forward  Exchange  Contracts - The Company has  commitments to sell and
         purchase foreign  currencies  relating to forward exchange contracts in
         order to hedge against future currency fluctuations.

         At  June  27,  1999,  outstanding  forward  exchange  sales  (purchase)
         contracts, which all mature in September 1999, were as follows:

<TABLE>
<CAPTION>
                                                     Contracted
                      Currency           Amount    Forward Rate      Spot Rate
             -----------------     ------------   -------------      ---------
             <S>                   <C>           <C>                <C>


             Australian Dollar         (310,000)           0.66           0.66
             British Pound             (700,000)           0.63           0.63
             European Euro           10,040,000            0.96           0.97
             Japanese Yen           825,000,000          120.48         122.05
             Singapore Dollar          (660,000)           1.69           1.70
             Swiss Franc                200,000            1.53           1.55

</TABLE>

         The contracts are revalued at the month-end spot rate. Gains and losses
         on foreign  currency  contracts  intended to be used to hedge operating
         requirements  are  reported  currently  in income.  Gains and losses on
         foreign  currency  contracts  intended  to meet  firm  commitments  are
         deferred  and are  recognized  as part  of the  cost of the  underlying
         transaction  being  hedged.  At June  27,  1999,  all of the  Company's
         foreign   currency   contracts  were  being  used  to  hedge  operating
         requirements.  The Company's  theoretical risk in these transactions is
         the cost of replacing,  at current market rates, these contracts in the
         event of default by the counterparty.


<PAGE>

                               IOMEGA CORPORATION

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

The  Company  reported  sales  of  $348.8  million  and a  net  loss,  before  a
restructuring  charge,  of $19.8 million,  or $(0.07) per diluted share,  in the
second quarter of 1999.  This compares to sales of $393.8 million and a net loss
before special  charges of $33.8 million,  or $(0.13) per diluted share,  in the
second quarter of 1998. In the second  quarter of 1999,  the Company  recorded a
pre-tax  restructuring  charge of $41.9  million,  or $(0.10) per diluted share,
relating to the exit of facilities,  the  discontinuance of certain products and
development projects, headcount reductions, and other cost reduction activities.
The after-tax loss for the second quarter of 1999,  including the  restructuring
charge,  was $47.1  million,  or $(0.17)  per diluted  share.  For the first six
months of 1999,  sales were $735.0 and net loss,  including  the second  quarter
restructuring  charge, was $46.5 million, or $(0.17) per diluted share, compared
to sales of $801.3  million  and a net loss of $58.5  million,  or  $(0.22)  per
diluted share, for the first six months of 1998.

For the second half of 1999,  the Company  anticipates  an  after-tax  return on
sales in the mid-single digits. However, financial results in the second half of
the year will be heavily dependent on the success of new product  offerings,  on
the  results of the  seasonally  strong  fourth  quarter,  and on the  Company's
ability to resolve current Zip drive component constraints.

SALES

Sales for the quarter  ended June 27, 1999  decreased by $45 million,  or 11.4%,
when compared to the corresponding  period of 1998, primarily as a result of the
reduction  of Zip  drive  and  disk  prices  during  the  second  half of  1998,
discontinued  Ditto sales, lower than expected Jaz sales volumes and an increase
in the percentage of Zip drives shipped to the OEM channel,  which generally has
lower average  selling  prices than sales through  other  channels.  Total drive
sales of $179.4 million  decreased by 14.8% as compared to the second quarter of
1998. Total unit drive shipments for the quarter ended June 27, 1999,  increased
by 19.4% as compared to the second  quarter of 1998.  Total disk sales of $162.1
million  decreased by 5.4% as compared to the second quarter of 1998. Total unit
disk  shipments  for the  quarter  ended June 27,  1999,  increased  by 20.8% as
compared to the second quarter of 1998.

Sales of Zip products in the second quarter of 1999 totaled $274.3  million,  or
78.6% of total sales, and represented a 3.6% decrease from the second quarter of
1998.  Zip unit drive  shipments  increased by 27.1% from the second  quarter of
1998, while Zip unit disk shipments  increased by 24.3%. Sales of Zip OEM drives
accounted  for  approximately  57% of total Zip drive  shipments  in the  second
quarter of 1998,  compared to  approximately  50% in the second quarter of 1998.
Sales of Zip drives were  adversely  impacted by supply  constraints  during the
second quarter of 1999 relating to a shortage of a certain Application  Specific
Integrated  Circuit  ("ASIC")  chip,  which is a  component  included in certain
models of the Company's  Zip drives.  The ASIC chip is supplied by a sole source
supplier.  The  Company is working  with the  supplier to  establish  additional
capacity  to help in the  short-term  and is  working  on  establishing  another
supplier for the  long-term.  The Company  expects the chip shortage to continue
through the third quarter of 1999.  The impact of the component  constraints  on
the  fourth  quarter  of  1999  will  depend  on   the  supplier's  success   in
establishing  additional  capacity combined  with  the  level of demand  for the
applicable Zip drives during the second half of 1999.

Jaz product sales in the second quarter of 1999 were $65.6 million,  or 18.8% of
total sales,  representing a 24.4% decrease from the second quarter of 1998. Jaz
unit drive  shipments  decreased  by 23.8% as compared to the second  quarter of
1998, while Jaz unit disk shipments decreased by 23.3%.
<PAGE>

Ditto product sales in the second quarter of 1999 were $6.1 million,  or 1.7% of
total sales, representing a 70.6% decline from the second quarter of 1998. Ditto
unit drive  shipments  decreased  by 87.7% as compared to the second  quarter of
1998,  while Ditto unit disk  shipments  decreased by 46.4%.  In March 1999, the
Company  announced  that it had entered into an agreement to sell certain assets
and rights associated with its Ditto product line. The Company continued to sell
its Ditto finished goods inventory through June 1999, after which, the buyer has
agreed to purchase the Company's remaining finished goods inventory. The Company
will continue to sell Ditto cartridges for a period of time.

Clik! product sales in the second quarter of 1999 were $0.6 million,  or 0.2% of
total sales.  The Company began shipping Clik!  products  in limited  quantities
in December  1998.  The Clik! PC Card drive began shipping in limited quantities
in June 1999.

Sales for the six months  ended June 27, 1999  decreased  by $66.3  million,  or
8.3%, when compared to the  corresponding  period of 1998. Sales of Zip products
totaled $575.8  million,  or 78.3% of total sales,  representing a 4.6% increase
from the corresponding period of 1998. Jaz product sales totaled $128.3 million,
or 17.5% of total sales,  representing a 34.9%  decrease from the  corresponding
period of 1998. Sales of Clik!  products totaled $5.7 million,  or 0.8% of total
sales.  Ditto  product  sales  totaled  $16.2  million,  or 2.2% of total sales,
representing a 68.5% decrease from the corresponding period of 1998.

Geographically,  sales in the Americas  were $232.1  million,  or 66.5% of total
sales, in the second quarter of 1999, as compared to $257.5 million, or 65.3% of
total sales, in the second quarter of 1998.  Sales in Europe were $81.2 million,
or 23.3% of total  sales,  in the second  quarter of 1999,  as compared to $93.2
million,  or 23.6% of total sales, in the second quarter of 1998.  Sales in Asia
were $35.4 million,  or 10.2% of total sales,  in the second quarter of 1999, as
compared to $43.1  million,  or 10.9% of total sales,  in the second  quarter of
1998.

For the first six months of 1999, sales in the Americas were $482.1 million,  or
65.6% of total  sales in the first six  months of 1999,  as  compared  to $555.7
million,  or 69.3% of total  sales,  for the first six months of 1998.  Sales in
Europe were $184.5 million,  or 25.1% of total sales, in the first six months of
1999, as compared to $182.5 million,  or 22.8% of total sales, for the first six
months of 1998. Sales in Asia were $68.3 million, or 9.3% of total sales, in the
first six months of 1999, as compared to $63.1 million,  or 7.9% of total sales,
in the first six months of 1998.



<PAGE>



GROSS MARGIN

The Company's  overall gross margin was 21.7% in the second  quarter of 1999, as
compared to 23.9% in the second quarter of 1998. Overall gross margin percentage
for the first six months of 1999 was 23.1%,  as  compared to 24.5% for the first
six months of 1998.  This  decrease in gross  margin for the second  quarter and
first six months of 1999,  when compared to the  corresponding  periods of 1998,
was due primarily to price  reductions on Zip drives and disks during the second
half of 1998 and to an increase in the  percentage of Zip drives  shipped to the
OEM channel,  which  generally  provides  lower gross margins than sales through
other  channels.  Additionally,  during the second  quarter of 1999, the Company
recorded  reserves  for Jaz excess  fixed  asset  capacity  and Clik!  inventory
valuation reserves of approximately $7 million, or 2.0% of sales.

Future gross margin  percentage will be impacted by the mix between retail sales
and OEM drive sales,  which  generally  provide  lower gross  margins than sales
through other channels. Gross margins for the remainder of 1999 will also depend
on sales  volumes of Zip,  Jaz and Clik!  disks,  which  generate  significantly
higher gross margins than the corresponding drives, and on the mix between disks
and drives,  and between Zip, Jaz and Clik!  products.  The Company is targeting
overall gross margin  percentages to be in the mid to upper twenty percent range
for the second half of 1999. However, there can be no assurance that such margin
percentages will be realized.

SEGMENT PRODUCT PROFIT MARGIN

Zip segment  product  profit margin  decreased by 13.2% in the second quarter of
1999 when compared to the  corresponding  period of 1998  primarily due to price
reductions  on Zip drives and disks  during the second  half of 1998,  component
constraints and an increase in sales of Zip OEM drives, which have lower margins
than drives sold to distributors  and retailers.  These price reductions and mix
changes were partially offset by an increase in volumes of Zip drives and disks.
Jaz  segment  product  profit  margin,  including  the  second  quarter  pre-tax
restructuring  charge,  decreased  by 52.4% in the  second  quarter of 1999 when
compared to the  corresponding  period of 1998 due to a combination of a pre-tax
restructuring  charge of $27.0 million,  price  reductions on Jaz disk and drive
products  during the second half of 1998, a decrease in Jaz drive unit shipments
and Jaz excess fixed asset capacity  reserves recorded during the second quarter
of 1999.  Ditto segment  product  profit  margin,  including the second  quarter
pre-tax restructuring charge,  decreased by 50.0% due to a pre-tax restructuring
charge of $5.6  million,  and a  decrease  in  volumes  of Ditto  drive and disk
products sold in the second quarter of 1999. Clik! segment product profit margin
decreased  by  70.0%  in  the  second  quarter  of  1999  when  compared  to the
corresponding period of 1998 due to limited sales of Clik! products and reserves
recorded during the quarter for the valuation of Clik! inventory.
<PAGE>

Zip segment product profit margin increased by 25.4% for the first six months of
1999 when compared to the  corresponding  period of 1998 due to a combination of
an  increase  in  volumes  of Zip drives and disks and a higher mix of Zip disks
sales to Zip drive sales that were partially offset by price  reductions  during
the second half of 1998. Jaz segment product profit margin, including the second
quarter  pre-tax  restructuring  charge,  decreased  by 45.8%  for the first six
months of 1999 when compared to the  corresponding  period of 1998 due primarily
to a pre-tax  restructuring charge of $27.0 million and a decrease in volumes of
Jaz disk and drive products  shipped during the first six months of 1999.  Ditto
segment   product   profit  margin,   including  the  second   quarter   pre-tax
restructuring  charge,  decreased by 42.9% for the first six months of 1999 when
compared to the  corresponding  period of 1998 due to a combination of a pre-tax
restructuring  charge of $5.6 million,  and a decrease in volumes of Ditto drive
products shipped in the first six months of 1999.  Clik!  segment product profit
margin decreased by $12.0 million for the first six months of 1999 when compared
to the  corresponding  period of 1998 due primarily to reserves  recorded during
1999 for the valuation of Clik! inventory.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling,  general and  administrative  expenses  decreased by $41.6  million and
$79.6 million in the second quarter and first six months of 1999,  respectively,
when  compared  to  the  corresponding  periods  of  1998,  and  decreased  as a
percentage  of sales to 23.7%  and  20.8% in the  second  quarter  and first six
months of 1999, respectively, from 31.6% and 29.0%, respectively, in each of the
corresponding  periods in 1998. Included in selling,  general and administrative
expenses  in the  second  quarter of 1998 was a special  pre-tax  charge of $9.4
million   representing   expenses   associated  with  cost  reduction   measures
implemented  by the  Company  to  improve  financial  performance  and  included
employee severance and outplacement  charges,  cash and non-cash  write-offs for
facility-related  assets and  miscellaneous  cancellation  charges for marketing
programs that were  discontinued.  The Company's  1998 cost  reduction  measures
included  specific  actions to reduce  advertising and other sales and marketing
expenses,  legal  expenses,  information  system costs as well as a reduction in
other discretionary spending and headcount.  Excluding the 1998 charge, selling,
general and administrative expenses decreased by $32.2 million and $70.2 million
and  represented  29.2% and 27.8% of sales in the second  quarter  and first six
months of 1998,  respectively.  The  decrease is due  primarily  to  substantial
marketing  and  advertising  program  expenditures  in the  first  half of 1998.
Management  is  focused  on  maintaining  selling,  general  and  administrative
expenses  in a range  of 15% to 20% of sales  during  the  second  half of 1999.
However,  the Company's  success in achieving this objective  depends in part on
the levels of sales achieved during the second half of 1999, and there can be no
assurance  that the  Company's  restructuring  and other  efforts  to reduce the
percentage of sales represented by selling,  general and administrative expenses
will be successful.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses for the second quarter and first six months of
1999  decreased  by  $7.2  million,  or  23.8%,  and  $9.6  million,  or  18.0%,
respectively,  when compared to the second quarter and first six months of 1998,
and  decreased as a percentage of sales to 6.6% and 6.0%,  respectively,  in the
second quarter and first six months of 1999,  from 7.7% and 6.7%,  respectively,
in the second quarter and first six months of 1998. The decrease in research and
development expenses for the second quarter and first six months of 1999 was due
primarily to  decreased  spending for Clik!  and Jaz  development  in the second
quarter and first six months of 1999,  which was  partially  offset by increased
spending for Zip and new product development in the second quarter and first six
months of 1999.  Management  is targeting the level of spending for research and
development  during  the  second  half of 1999 to be in the range of 3% to 5% of
sales  to  support  planned  new  product   development  and  existing   product
enhancements. However, the Company's success in achieving this objective depends
in part on the levels of sales achieved during the second half of 1999 and there
can  be no  assurance  that  restructuring  and  other  efforts  to  reduce  the
percentage of sales  represented  by research and  development  expenses will be
successful.
<PAGE>

RESTRUCTURING CHARGE

During  the  quarter  ended  June 27,  1999,  the  Company  recorded  a  pre-tax
restructuring charge of $41.9 million as a result of steps the Company is taking
to  organize  along  functional  lines and to better  position  the  Company for
sustained  profitable  growth  and  improved  asset  management.  These  actions
included  costs relating to the exit of facilities,  headcount  reductions,  the
discontinuance  of certain products and development  projects and other costs to
consolidate the Company's magnetic  technology  expertise at its headquarters in
Roy, Utah. This consolidation  will include closing the Company's  facilities in
Milpitas,  California and San Diego,  California.  The restructuring  charge was
comprised  of  $20.2  million  for  the  write-off  of  assets  related  to  the
discontinuance  of certain products and development  projects;  $9.7 million for
work force  reduction  costs;  $4.3 million for the  write-off or  write-down of
excess leasehold  improvements,  furniture and fixtures formerly utilized in the
Company's  facilities  in  Milpitas  and  San  Diego;  $3.0  million  for  lease
termination  costs for  facilities  located in Milpitas and San Diego;  and $4.7
million for work force reduction costs,  contract  cancellation  costs and other
exit costs to consolidate the Company's Nomai operations in France and Scotland.
Prior to this period,  there were not any indications of permanent impairment of
the assets associated with the closure and consolidation of these facilities.

In connection with the Company's restructuring,  the Company currently expects a
workforce  reduction of  approximately  450  employees.  No  employees  had been
terminated as of June 27, 1999.  Workforce  reduction costs and other exit costs
noted above were  determined in accordance with Emerging Issues Task Force Issue
No. 94-3,  "Liability  Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an  Activity."  As a result of work force  reduction and the
write-off of equipment and facilities in connection with the 1999 second quarter
restructuring  plan,  the Company  estimates  that when fully  implemented,  the
restructuring  plan will result in a cost savings of  approximately  $10 million
per quarter beginning in the first quarter of 2000. The Company  anticipates the
implementation of the restructuring  plan will be substantially  complete by the
end of December 1999,  with the remainder of the plan to be completed by the end
of June 2000.

OTHER INCOME AND EXPENSE

The Company  recorded  interest  income of $1.1  million and $2.2 million in the
second quarter and first six months of 1999,  respectively,  as compared to $0.9
million  and $2.6  million in the second  quarter  and first six months of 1998,
respectively.  Interest  expense of $1.5  million and $4.3 million in the second
quarter and first six months of 1999,  respectively,  was  relatively  flat when
compared to  interest  expense of $2.2  million  and $3.4  million in the second
quarter and first six months of 1998, respectively.
<PAGE>

 Also  included in other  income and  expense  were bank  charges, miscellaneous
royalty  income,  gains and losses on disposal  of assets and  foreign  currency
gains and losses.

INCOME TAXES

For the first six months of 1999, the Company  recorded an income tax benefit of
$25.0 million,  representing an effective income tax rate of approximately  35%.
The Company  expects its effective tax rate to remain at  approximately  35% for
the remainder of 1999. However,  differences  between the currently  anticipated
mix and the actual mix of non-U.S. income versus domestic income, along with the
ability of the Company to permanently  invest non-U.S.  earnings  outside of the
U.S. and its ability to meet the  requirements  for  favorable  tax treatment in
certain  jurisdictions outside of the U.S., could impact the Company's effective
tax rate.

The Company has a net deferred  tax asset of $64.6  million as of June 27, 1999,
reflecting the benefit of $165.6 million in future tax  deductions.  Realization
is  primarily  dependent  on  generating  sufficient  taxable  income.  Although
realization is not assured,  management believes it is more likely than not that
all of the net  deferred  tax  asset  will be  realized.  The  amount of the net
deferred  tax asset  considered  realizable,  however,  could be  reduced in the
future if estimates of future taxable income are reduced.

SEASONALITY

The Company's Zip products are targeted  primarily to the personal  computer OEM
and retail consumer markets.  The Company's Jaz products are targeted  primarily
to the distribution and retail consumer market. The Company's Clik! products are
targeted to the retail consumer market and to consumer OEMs. Management believes
the markets for the  Company's  products are generally  seasonal,  with a higher
proportional  share of total  sales  occurring  in the fourth  quarter and sales
slowdowns  commonly  occurring  during  the first  quarter  and  summer  months.
Accordingly, revenues and growth rates for any prior quarter are not necessarily
indicative of the revenues or growth rates to be expected in any future quarter.

LIQUIDITY AND CAPITAL RESOURCES

At June 27, 1999,  the Company had cash and cash  equivalents  of $89.3 million,
working  capital of $198.5  million,  and a ratio of  current  assets to current
liabilities of 1.7 to 1. During the first six months of 1999, the Company used a
total  of $1.0  million  of cash  and  cash  equivalents.  Operating  activities
generated  $74.6  million in cash for the first six months of 1999 compared with
using $133.9  million in the first six months of 1998.  The cash  generated from
operations in the first six months of 1999 was primarily due to a combination of
non-cash adjustments  partially offset by a net loss and a reduction in accounts
receivable,  inventory  and income  taxes  receivable.  The primary uses of cash
during  the first six months of 1999 were the  repayment  upon  maturity  of the
Idanta senior  subordinated  notes,  payments on capitalized lease  obligations,
reductions  in  accounts  payable,  and the  purchase  of  property,  plant  and
equipment.
<PAGE>


Accounts receivable  decreased by $43.9 million,  due primarily to the timing of
sales and  collections  during the  respective  periods.  The  decrease of $22.1
million  in  inventory  was  due  to a  combination  of  improved  supply  chain
management and changes to the Company's procurement and manufacturing  processes
to a demand  pull  model  initiated  during  1998 and the  write-down  of excess
inventory  during the second  quarter of 1999.  The decrease of $12.1 million in
income taxes receivable was due primarily to the Company receiving an income tax
refund of $20.4  million  during the second  quarter of 1999 that was  partially
offset by the creation of an  additional  receivable  of $8.3 million  comprised
primarily of the benefit of the Company's current year net operating loss. These
sources of cash were  partially  offset by a $36.9 million  decrease in accounts
payable,  due primarily to timing of inventory  receipts and related payments to
vendors.

The Company used $39.7 million of cash in investing  activities during the first
six months of 1999,  primarily in the purchase of property,  plant and equipment
and  the  purchase  of  certain  assets  from  SyQuest,  including  intellectual
property,  inventory and fixed assets. Cash used by financing activities totaled
$35.8 million during the first six months of 1999, and included $43.1 million in
repayment upon maturity of the Idanta senior  subordinated notes and payments on
capitalized  lease  obligations  that were  partially  offset by $3.7 million of
proceeds  from the sale of common  stock and $3.5  million of proceeds  from the
issuance of notes payable and capitalized  lease  obligations  during the second
quarter of 1999.

On March 11, 1997, the Company entered into a $200 million Senior Secured Credit
Facility with Morgan  Guaranty Trust Company of New York,  Citibank,  N.A. and a
syndicate of other  lenders.  During 1998 and 1999,  the Company and the lenders
agreed to several amendments to and waivers under the Credit Facility,  the most
recent of which was entered into on June 30, 1999, (the "Credit  Facility").  At
June 27, 1999, the Credit Facility is a $150 million  secured  revolving line of
credit  that  expires on July 14,  2000 and is secured by  accounts  receivable,
domestic  inventory,   domestic  intellectual  property,   general  intangibles,
equipment,  personal  property,  investment  property and a pledge of 65% of the
stock of certain of the Company's  subsidiaries.  Under the Credit Facility, the
Company  may borrow at a base  rate,  which is the higher of prime or the sum of
0.5% plus the Federal funds rate plus a margin of 0.0% to 1.63% depending on the
Company's  earnings  before interest  expense,  income taxes,  depreciation  and
amortization ("EBITDA") and utilization of the Credit Facility, or at LIBOR plus
a margin of 1.25% to 2.75% depending on the Company's  EBITDA and utilization of
the Credit Facility. There were no borrowings outstanding on the Credit Facility
at June 27, 1999.  Borrowing  availability under the Credit Facility is based on
an agreed upon  advance rate on  receivables  and  inventory  not to exceed $150
million.  Total  availability  under the Credit  Facility  at June 30,  1999 was
$122.0 million. Among other restrictions, the Credit Facility treats a change of
control (as  defined) as an event of default and  requires  the  maintenance  of
minimum  levels of  consolidated  tangible net worth,  EBITDA and certain  other
covenants.  On June 15, 1999, the Company amended the Credit Facility to exclude
certain restructuring and other charges taken in the second quarter of 1999 from
the minimum consolidated EBITDA financial covenant and the consolidated tangible
net worth  covenant  for the period ended June 27,  1999.  Further,  on June 30,
1999, the Company  obtained a waiver to the Credit  Facility with respect to the
minimum  consolidated  EBITDA  financial  covenant for the period ended June 27,
1999. Depending on its financial performance in future quarters, the Company may
be required to seek further  covenant  waivers and  amendments  under the Credit
Facility.  There can be no assurance that the Company will be able to obtain any
such waivers or amendments on terms  acceptable to the Company,  if at all. Loss
of the Credit Facility may require the Company to find an alternative  source of
funding,  which could have a material  adverse effect on the Company's  business
and financial results.
<PAGE>

The current and long-term  portions of capitalized  lease  obligations and notes
payable at June 27, 1999 were $4.4 million and $5.1  million,  respectively.  In
July 1998, the Company borrowed a total of $40 million from Idanta Partners Ltd.
and another  entity  affiliated  with David J. Dunn,  Chairman of the  Company's
Board of Directors, pursuant to a series of three senior subordinated notes. The
initial interest rate was 8.7% per annum,  increasing through January 1, 1999 to
12.7% per annum.  The proceeds of these notes were used for the cash purchase of
Nomai.  The Company used  internally  generated funds to repay the principal and
interest associated with the notes, upon their maturity on March 31, 1999.

The Company had $45.5 million of convertible  subordinated  notes outstanding at
June 27,  1999,  which bear  interest  at 6.75% per year and mature on March 15,
2001.

In April 1999,  the Company  completed the purchase of certain assets of SyQuest
Technology,  Inc.  and its  subsidiaries,  ("SyQuest"),  including  intellectual
property, inventory and fixed assets in the U.S., Europe and Malaysia. The total
purchase price of the asset purchase in the U.S. and Europe was $9.2 million and
the  purchase  price of the  Malaysian  assets  was  $2.9  million.  The  assets
purchased are included in the Company's  other current assets and intangibles at
June 27, 1999. The Company is in the process of selling,  disposing or utilizing
the  inventory and fixed assets from the purchase.  No material  obligations  or
liabilities were assumed by the Company.  As part of the agreement,  the Company
released  SyQuest and SyQuest released the Company from all claims in connection
with patent and trademark infringement litigation pending between the parties in
Delaware and in Paris, France.

The Company expects to generate positive cash flow for 1999. The Company expects
that its balance of cash and cash equivalents,  together with current and future
sources  of  available  financing,  will be  sufficient  to fund  the  Company's
operations  during the next twelve  months.  However,  whether the Company  will
achieve a positive cash flow for 1999,  and the precise amount and timing of the
Company's future  financing  needs,  cannot be determined at this time, and will
depend on a number of  factors,  including  cash  flow  from  operations,  which
depends on the success of the Company's  efforts to  consolidate  facilities and
reduce headcount, the market demand for the Company's products, the availability
of critical  components,  the  progress  of the  Company's  product  development
efforts  and the  success of the Company in  managing  its  inventory,  accounts
receivable and accounts payable.
<PAGE>

OTHER MATTERS

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial   Accounting   Standards  No.  133,   "Accounting  for  Derivative
Instruments  and Hedging  Activities"  ("SFAS 133").  SFAS 133  establishes  new
accounting  and reporting  standards for companies to report  information  about
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts  (collectively  referred  to as  derivatives)  and for  hedging
activities.  In June 1999,  the FASB issued  Statement of  Financial  Accounting
Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities
- Deferral of the  Effective  Date of FASB  Statement  No. 133." This  statement
amended  the  effective  date of SFAS 133.  SFAS 133 will now be  effective  for
financial  statements  issued for all fiscal  quarters of fiscal years beginning
after June 15, 2000.  The Company does not expect this  pronouncement  to have a
material impact on the Company's  results of operations,  financial  position or
liquidity.

FACTORS AFFECTING FUTURE OPERATING RESULTS

Because the Company is relying on its Zip, Jaz, Clik! and the recently announced
ZipCD products for the substantial  majority of its sales in 1999, the Company's
future  operating  results  will  depend in large  part on the  success of those
products in the market.  Although the Company  believes there is a market demand
for removable data storage  solutions for personal  computers and other devices,
there can be no assurance  that the Company will be successful  in  establishing
Zip, Jaz, Clik!  and ZipCD products as the preferred  solutions for those market
needs.  The extent to which Zip,  Jaz,  Clik!,  and ZipCD achieve and maintain a
significant market presence will depend upon a number of factors, including: the
price, performance,  quality and other characteristics of the Company's products
and of competing solutions  (existing,  announced or unannounced)  introduced by
other vendors, including, without limitation, the LS-120 (or SuperDisk) (product
co-developed by the consortium of Compaq Computer,  Imation, O.R. Technology and
MKE), the HiFD (product  co-developed  by Sony  Corporation  and Fuji Photo Film
Co., Ltd.), the UHD144 (product in development by Caleb Technology Corporation),
the Orb (product developed by Castlewood Systems,  Inc.), the Pro-FD (product in
development by Samsung  Electro-Mechanics  Co., Ltd.),  the Microdrive  (product
developed by IBM),  the  Memorystick  (product  developed by Sony  Corporation),
various formats of flash memory, CD-R and CD-RW drives,  announced  developments
of rewritable  DVD drives and media,  and announced  products in  development by
Terastor  Corporation;  the success of any third party in creating and marketing
media  intended for use with the Company's  drive  products;  the success of the
Company in meeting targeted  availability  dates for new and enhanced  products;
the success of the Company in establishing  and maintaining OEM arrangements and
meeting OEM quality,  supply and other requirements;  the willingness of OEMs to
promote computer and other products containing the Company's drives; the ability
of the Company to create demand for Zip, Jaz, Clik! and ZipCD,  including demand
from  leading  personal  computer  and other  manufacturers;  the success of the
Company in educating  consumers  about the  existence  and possible uses of Zip,
Jaz, Clik! and ZipCD storage solutions;  the success of the Company's efforts to
make continued  improvements to customer  service and  satisfaction;  the public
perception  of the  Company  and  its  products,  including  statements  made by
industry  analysts  or  consumers  and  adverse  publicity  resulting  from such
statements or from litigation filed against the Company;  and the overall market
demand for  personal  computers  and other  products  with  which the  Company's
products can be used.

<PAGE>



The Company's  business strategy is substantially  dependent on maximizing sales
of its proprietary Zip, Jaz and Clik! disks, which generate significantly higher
margins than the related  drives.  If this  strategy is not  successful,  either
because the Company does not establish a  sufficiently  large  installed base of
Zip,  Jaz and Clik!  drives,  because the sales mix between  disks and drives is
below levels  anticipated  by the Company,  because  another  party  succeeds in
producing or marketing disks that are compatible with any of the Company's drive
products without  infringing the Company's  proprietary  rights or for any other
reason,  the  Company's  sales would be adversely  affected,  and its results of
operations would also be adversely affected.

Sales of Zip products in 1998 and the first six months of 1999  accounted  for a
significant majority of the Company's revenues.  However, these sales may not be
indicative of the  long-term  demand for Zip  products.  Accordingly,  the sales
levels  experienced  by the  Company  in 1998 and the first  six  months of 1999
should not be assumed to be an indication of future sales levels.  In the fourth
quarter  of  1998,  the  Company  introduced  the Zip 250  product.  The  market
acceptance  of the Zip 250 product and its impact on other Zip  products has not
yet been determined and, therefore,  may have an adverse impact on future sales.
In  addition,  the  Company  has  experienced  and may in the future  experience
significant fluctuations in its quarterly operating results.  Moreover,  because
the  Company's  expense  levels  (including  budgeted  selling,   general,   and
administrative  and  research  and  development  expenses)  are based in part on
expectations of future sales levels,  a shortfall in expected sales could result
in a disproportionate  adverse effect on the Company's results of operations and
cash  flow.  For  example,  in  1998,  the  Company's  operating  expenses  as a
percentage of sales fell outside of management's  operating model resulting in a
net operating loss for the year. In addition,  the Company's  stock price,  like
other high-technology  companies' stock prices, could be subject to fluctuations
in response to actual or anticipated variations in operating results, as well as
changes in  analysts'  earnings  estimates,  announcements  of new  products  or
developments  by  the  Company  or its  competitors,  market  conditions  in the
information technology industry as well as general economic conditions and other
factors external to the Company.

The Company's Clik! products are miniaturized  removable-media storage solutions
for use in a variety of portable and handheld electronic devices,  and represent
the Company's first products which are primarily  targeted to digital camera and
other portable  consumer  electronics  manufacturers.  The Company does not have
prior experience in these channels and, accordingly,  there are additional risks
that the  Clik!  products  will  not  achieve  significant  market  presence  or
otherwise be successful. Three different models of the Clik! drive are currently
being sold.  Two of these models,  the Clik!  Drive for Digital  Cameras and the
Clik! Drive Plus, both of which began shipping in limited quantities in December
1998,  are currently  being  marketed as an add-on  storage  solution to digital
cameras that use various  formats of flash  memory.  Market  acceptance of Clik!
products as a storage solution for digital cameras is dependent upon obtaining a
significant  market presence and  establishing  OEM  relationships  with digital
camera  manufacturers who produce digital cameras  incorporating  built-in Clik!
drives. To date, no digital camera  incorporating Clik! as a built-in drives has
been introduced or marketed;  however, the Agfa Gevaert Group, a manufacturer of
digital  cameras and other  digital  imaging  products and systems has announced
plans to manufacture  digital imaging products with Clik!  built-in drives.  The
third model of Clik!  drive,  the Clik! PC Card drive,  which began  shipping in
limited  quantities  in June 1999, is currently  being  marketed to notebook and
sub-notebook  computer  users.  The  impact  of the Clik!  PC Card  drive on the
Company's  other storage  solution has not yet been  determined  and may have an
adverse impact on future sales.
<PAGE>

ZipCD, a CD-ReWritable  ("CD-RW")  drive designed for use as a storage  solution
for personal  computers,  represents  the Company's  first CD-RW product and the
Company's  planned entry into the optical storage market.  Market  acceptance of
the ZipCD product,  which is expected to ship in the second half of 1999, is not
yet known.  In  addition,  the impact of ZipCD on the  Company's  other  storage
solutions has not yet been  determined  and may have an adverse impact on future
sales.  Moreover, the Company's current business strategy for ZipCD is different
from its  strategy  for its  other  products  because  ZipCD  does  not  include
proprietary  media and thus has lower  overall  gross  margins.  Therefore,  the
success of ZipCD will depend on margin  contributions  from the drive  products.
The CD-RW drive market is very  competitive and includes a number of established
participants.  Accordingly,  there are  additional  risks that the ZipCD product
will not achieve significant market acceptance or otherwise be successful.

Management of the Company's  inventory levels has become  increasingly  complex.
The Company's customers frequently adjust their ordering patterns in response to
various factors including:  the Company's  perceived ability to meet demand, the
Company's  and  competitors'  inventory  supply in the retail  and  distribution
channel, timing of new product introductions, seasonal fluctuations, Company and
customer promotions, the consolidation of customer distribution centers, pricing
considerations and the attractiveness of the Company's products as compared with
competing  products.  Customers  may increase  orders during times of shortages,
cancel  orders if the channel is filled  with  currently  available  products or
delay orders in anticipation of new products.  Any excess supply could result in
price reductions and inventory writedowns,  which in turn could adversely affect
the Company's results of operations.

The  Company  has  evolved  from an after  market  business  to a business  that
includes  a  significant  volume  of  OEM  sales.  In an  OEM  business,  a high
proportion of sales are concentrated among a small number of customers. Although
the Company believes its relationships with OEM customers are generally good, as
the  concentration  of sales to OEM customers  continues to evolve, a relatively
small number of major  customers will represent a business risk that loss of one
or more accounts could  adversely  affect the Company's  financial  condition or
operating  results.  The  Company's  customers  are  generally  not obligated to
purchase  any  minimum  volume  and  are  generally  able  to  terminate   their
relationship with the Company at will. If changes in purchase volume or customer
relationships  resulted in decreased demand for the Company's drives, whether by
loss of or delays in orders,  the  Company's  financial  condition  or operating
results could be adversely affected.
<PAGE>

The  Company  continues  to refine  the design of its  products  in an effort to
improve product  performance and reduce  manufacturing  costs. In addition,  the
Company depends on independent parties for the supply of critical components for
its products.  Certain of these  suppliers are or may become  competitors of the
Company.  As a result of these and other  factors,  the Company  may  experience
problems relating to the quality,  reliability and/or availability of certain of
its  products.  For  example,  the Company has  recalled  certain  products  and
experienced  manufacturing  interruptions due to supplier quality problems.  Any
product  availability,  quality  or  reliability  problems  experienced  by  the
Company,  or claims  filed  against the  Company as a result of these  problems,
could have an adverse  effect on the Company's  sales and net income,  result in
damage to the Company's reputation in the marketplace and/or subject the Company
to damage claims from its customers. In addition, component problems, shortages,
quality issues or other factors  affecting the supply of the Company's  products
could provide an  opportunity  for competing  products to increase  their market
share.

All of the factors  described  above for Zip, Jaz, Clik! and ZipCD products are,
or will be, relevant to any other products  currently sold by the Company or new
products introduced by the Company in the future. In addition, the Company faces
development,  manufacturing,  demand and market  acceptance risks with regard to
recently introduced and future products.  The Company's future operating results
will depend in part on its success in introducing enhanced and new products in a
timely and competitively  effective  manner.  Future operating results will also
depend  on the  Company's  ability  to  effectively  manage  obsolescence  risks
associated  with  products  that are  phased  out and its  success in ramping to
volume  production of new or enhanced  products.  Future operating  results will
also  depend on  intellectual  property  and  antitrust  matters  including  the
possibility  that  infringement  claims  asserted  from time to time against the
Company  could require the Company to pay royalties to a third party in order to
continue to market and distribute one or more of the Company's current or future
products,  and the  possibility  that the  Company  would be  required to devote
unplanned  resources to  developing  modifications  to its products or marketing
programs.

Many  components  incorporated  or  used  in the  manufacture  of the  Company's
products are currently  available only from single or sole source suppliers.  In
particular, media used in Zip disks is obtained exclusively from Fuji Photo Film
and certain integrated circuits used in certain drives are obtained  exclusively
from LSI Logic Corporation.  The Company has experienced difficulty in the past,
and may experience difficulty in the future, in obtaining a sufficient supply of
many  key  components  on a timely  basis.  The  Company  continues  to  develop
relationships with qualified manufacturers with the goal of securing high-volume
manufacturing capabilities and controlling the cost of current and future models
of the Company's products;  however,  there can be no assurance that the Company
will be able to obtain a sufficient  supply of  components  on a timely basis or
realize any future cost  savings.  Sales may be adversely  affected for these or
similar reasons in the future.

The  Company  purchases  a  portion  of its  single,  sole  and  limited  source
components  pursuant to purchase orders without guaranteed supply  arrangements.
The  inability  to obtain  sufficient  components  and  equipment,  to obtain or
develop  alternative  sources of supply at competitive  prices and quality or to
avoid manufacturing  delays could prevent the Company from producing  sufficient
quantities  of its  products  to satisfy  market  demand  (or,  in the case of a
component  purchased  exclusively  from  one  supplier,  the  Company  could  be
prevented  from  producing  any quantity of the affected  product(s)  until such
component  becomes  available  from  an  alternative   source),   delay  product
shipments,  increase the Company's  material or manufacturing  costs or cause an
imbalance in the inventory levels of certain components.  Moreover, difficulties
in obtaining sufficient components may cause the Company to modify the design of
<PAGE>


its  products  to  use a more  readily  available  component,  and  such  design
modifications  may result in product  performance  problems.  For  example,  the
Company's  Zip  drive  shipments,  revenue  and  profitability  were  negatively
impacted by an ASIC chip shortage  during the second  quarter of 1999.  The ASIC
chip is  supplied  by a sole  source  supplier.  The  Company  expects  the chip
shortage to  continue  through  the third  quarter of 1999.  Any or all of these
problems  could in turn result in the loss of customers,  provide an opportunity
for competing  products to achieve  market  acceptance  and otherwise  adversely
affect the Company's business and financial results.

The Company's success depends in large part upon the services of a number of key
employees  and the loss of the  services  of one or more of these key  employees
could  have a  material  adverse  effect on the  Company.  Many  members  of the
Company's  senior  management team have been serving in their current  positions
for only a short  period of time,  including  Jodie K.  Glore,  who  joined  the
Company as Chief  Executive  Officer and  President in October  1998,  Philip G.
Husby,  who joined the Company as Chief  Financial  Officer in August 1999,  and
John L.  Conley,  Sr.,  who was promoted to  Executive  Vice  President,  Global
Operations in June 1999. In addition,  a number of senior management  positions,
including,  Executive Vice President, Global Product, Sales and Marketing, Chief
Technology Officer and general counsel, are currently being filled on an interim
basis.  The  Company's  success  will  depend in part on its  ability to attract
highly skilled personnel to fill vacancies in a timely manner and on the success
of the Company's  senior  management  team in learning to work  effectively as a
team. In addition,  the Company's  success will depend in part on its ability to
successfully transition to a functional organization.  There can be no assurance
that  the  Company  will  be  successful  in  attracting  and/or  retaining  key
employees,  or that the transition to a functional  organization will not result
in short-term  disruptions,  or that the transition will eventually  produce the
desired results.

On June 18, 1999,  the Company  announced  plans to  consolidate  facilities and
implement  headcount  reduction in order to  streamline  its efforts to focus on
earnings growth. Management expects that the planned consolidation of facilities
and the reduction of headcount will reduce total  operating  expenses during the
second half of 1999 and future periods.  However, there can be no assurance that
the Company will be  successful in its efforts to reduce  operating  expenses in
future  periods.  The Company is also in the process of  implementing  Six Sigma
quality  initiatives  intended to make  substantial  product and process quality
improvements  and reduce  costs.  However,  there can be no  assurance  that the
Company's  quality  initiatives  will be  successful  in  providing  substantial
product and process improvements and in reducing costs.

A  significant  portion of the  Company's  revenues are  generated in Europe and
Asia. The Company's existing infrastructure outside of the United States is less
mature and developed than in the United States.  Consequently,  future sales and
operating  income  from these  regions are less  predictable  than in the United
States. In addition,  operating expenses may increase as those operations mature
and  increase  in size.  The  Company's  international  sales  transactions  are
generally  denominated  in U.S.  dollars.  Fluctuation  in the value of  foreign
currencies  relative  to the U.S.  dollar  that are not  sufficiently  hedged by
foreign  customers  could  result in lower  sales and have an adverse  effect on
future  operating  results (see  "Disclosures  About Market  Risk"  below).  For
example, management believes that sales in Asia were adversely affected from the
fourth  quarter of 1997 through the second  quarter of 1999 and will continue to
be adversely affected due to a regional economic downturn and the devaluation of
certain Asian currencies  vis-a-vis the U.S. dollar.  The Company cannot predict
with any  certainty the impact that these or other such events could have on its
foreign operations.
<PAGE>

On January 1, 1999,  eleven  countries of the European Union  established  fixed
conversion rates between their existing currencies and adopted the Euro as their
new common  legal  currency.  As of that date,  the Euro has traded on  currency
exchanges,  with  the  legacy  currencies  remaining  as  legal  tender  in  the
participating  countries  for a transition  period  between  January 1, 1999 and
January 1, 2002.  During the  transition  period,  parties  can elect to pay for
goods and  services  and  transact  business  using  either the Euro or a legacy
currency.  Between January 1, 2002 and July 1, 2002, the participating countries
will introduce  Euro bills and coins and withdraw all legacy  currencies so that
they will no longer be available.  The Euro  conversion may affect  cross-border
competition  by  creating  cross-border  price  transparency.   The  Company  is
assessing the  competitiveness  of its  pricing/marketing  strategy in a broader
European  market.  The  Company  is  also  assessing  whether  certain  existing
contracts  may require  modification  in addition to assessing  its  information
technology  systems to allow for  transactions  to take place in both the legacy
currencies and the Euro and the eventual  elimination of the legacy  currencies.
The Company's  currency risk and risk management for operations in participating
countries may be reduced as the legacy currencies are converted to the Euro. The
Company will continue to evaluate issues involving the introduction of the Euro.
Based on the Company's assessment from current information, the Company does not
expect the Euro  conversion to have a material  adverse  effect on the Company's
business or financial condition.  There can be no assurance,  however,  that the
Euro  conversion  will not  have a  material  adverse  effect  on the  Company's
European sales or otherwise adversely affect the Company's business,  results of
operations or financial condition.

Factors  other than those  discussed  above that could  cause  actual  events or
actual results to differ materially from those indicated by any  forward-looking
statements  include the ability of  management to manage  increasing  volumes of
production and an increasingly complex business,  transportation issues, product
and component pricing, competition, technological changes and advances, adoption
of  technology or  communications  standards  affecting the Company's  products,
intellectual property rights, litigation,  general economic conditions,  changes
or slowdowns in overall  market  demand for personal  computer  products and any
difficulties  experienced by the Company as a result of the Year 2000 issue (see
"Year 2000 Readiness" below).





<PAGE>


                               IOMEGA CORPORATION

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


DISCLOSURES ABOUT MARKET RISK

The Company is exposed to various  interest rate and foreign  currency  exchange
rate risks  that  arise in the  normal  course of  business.  The  Company  uses
borrowings  comprised primarily of variable rate debt to finance its operations.
The Company has international  operations  resulting in receipts and payments in
currencies  that  differ  from  the  functional  currency  of the  Company.  The
Company's functional currency is the U.S. dollar.

The Company attempts to reduce foreign currency exchange rate risks by utilizing
financial  instruments,  including derivative  transactions  pursuant to Company
policies.  The  Company  uses  forward  contracts  to  hedge  those  assets  and
liabilities  that, when remeasured  according to generally  accepted  accounting
principles,  impact  the  consolidated  statement  of  operations.  All  forward
contracts entered into by the Company are components of hedging programs and are
entered into for the sole purpose of hedging an existing or anticipated currency
exposure,  not for speculation or trading purposes.  The contracts are primarily
in European currencies, the Singapore dollar and the Japanese yen. The contracts
have maturities  that do not exceed three months.  The Company has a substantial
presence in Malaysia.  In September 1998, the ruling party in Malaysia fixed the
Malaysian Ringgit to the U.S. dollar. The Company  experienced a loss related to
the fixing of the currency.  The Company  recognized  this loss in other expense
for the year ended  December  31,  1998.  The  Company has  material  amounts of
accounts payable denominated in Ringgit. Currently, the foreign currency markets
are closed to hedging alternatives in Ringgit. When the foreign currency markets
re-open for the Ringgit,  the Company plans to re-institute its hedging strategy
for Ringgit exposure.

When  hedging  balance  sheet  exposure,  realized  gains and  losses on forward
contracts  are  recognized in other income and expense in the same period as the
realized gains and losses on remeasurement  of the foreign currency  denominated
assets and liabilities  occur.  All gains and losses related to foreign exchange
contracts are included in cash flows from operating activities in the unaudited,
condensed, consolidated statement of cash flows.

The fair value of the  Corporation's  long-term  debt and forward  contracts are
subject to change as a result of  potential  changes in market rates and prices.
The Company has performed a sensitivity  analysis  assuming a  hypothetical  10%
adverse  movement in foreign  exchange  rates and interest  rates applied to the
forward contracts and underlying exposures described above. As of June 27, 1999,
the  analysis  indicated  that such market  movements  would not have a material
effect on the Company's consolidated  financial position,  results of operations
or cash flows.  Factors that could  impact the  effectiveness  of the  Company's
hedging programs  include  volatility of the currency  markets,  availability of
hedging instruments and the Company's ability to accurately project net asset or
liability positions. Actual gains and losses in the future may differ materially
from the  Company's  analysis  depending  on changes in the timing and amount of
interest  rate and foreign  exchange rate  movements  and the  Company's  actual
exposure and hedges.
<PAGE>


                               IOMEGA CORPORATION

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


YEAR 2000 READINESS

The information  provided below  constitutes a "Year 2000 Readiness  Disclosure"
under the Year 2000 Information and Readiness Disclosure Act of 1998.

Overview. In general, the Year 2000 issue relates to computers and other systems
being unable to distinguish between the years 1900 and 2000 because they use two
digits,  rather  than  four,  to define  the  applicable  year.  The  Company is
addressing the Year 2000 issue in the following areas: (i) hardware and software
products sold by the Company; (ii) the Company's  information  technology ("IT")
systems;  (iii) the Company's  non-IT  systems (i.e.,  machinery,  equipment and
devices that utilize  "built-in"  technology such as embedded  microcontrollers)
and (iv)  third-party  suppliers and customers.  The Company is undertaking  its
Year 2000 review in the following phases:  Awareness  (education and sensitivity
to the Year 2000 issue),  Inventory  (identifying  the  equipment,  processes or
systems which are susceptible to the Year 2000 issue),  Assessment  (determining
the  potential  impact  of Year 2000 on the  equipment,  processes  and  systems
identified  during the  Inventory  phase and  assessing the need for testing and
remediation), Testing/Verification (testing to determine if an item is Year 2000
ready or the degree to which it is deficient) and  Implementation  (carrying out
necessary remedial efforts to address Year 2000 readiness,  including validation
of upgrades,  patches or other Year 2000  fixes).  The Company has formed a Year
2000  Committee  that meets  regularly  and has  responsibility  to oversee  the
implementation of Year 2000 initiatives.
The Year 2000 Committee reports regularly to an executive management committee.

Products.  The Company  has  completed  the review and  testing of its  hardware
products.  Hardware  testing was  conducted  by the  National  Software  Testing
Laboratories  ("NSTL") according to NSTL developed standards or guidelines (NSTL
YMark 2000,  Version  97.08.15).  NSTL has verified  that the Zip,  Jaz,  Ditto,
Bernoulli,  Buz and Clik! hardware products tested are Year 2000 ready when used
in an operating  system and with other products  which  themselves are Year 2000
ready.  Some Bernoulli  drive products were reviewed,  and determined to be Year
2000 ready, by a Company engineer and were not tested by NSTL.

With a few  exceptions  noted below,  the Company has  completed  the review and
testing of its software products. Software utility tools and drivers were tested
internally  by the  Company.  When used in an  operating  system  and with other
products which themselves are Year 2000 ready, the tested software utility tools
and  drivers  have been  found to be Year 2000  ready,  except  for  Findit  and
CopyMachine  software  applications used with Zip and Jaz drives,  and the Ditto
16-bit software applications intended for DOS and Windows 3.1 users. For Windows
95 and higher users,  a 32-bit Year 2000 upgrade is available,  on the Company's
web site  without  charge,  for Findit and  CopyMachine.  The  Company is in the
process of preparing Year 2000 upgrades for the 16-bit software  versions of the
Findit and CopyMachine  intended for DOS and Windows 3.1 users and expects these
upgrades to be available on the Company's web site in the third  quarter,  1999.
No solution is presently  available for the 16-bit software version of the Ditto
software  application intended for DOS and Windows 3.1 users. The 16-bit version
of the Ditto s oftware was provided by a third party who no longer  supports the
<PAGE>



software.  The Company  continues to investigate  the possibility of providing a
Year 2000 upgrade for this software application,  but has not determined whether
an upgrade will be made  available.  Due to the legacy  nature of the  Bernoulli
product,  the Company will not test software  provided with the Bernoulli drive.
Instead,  the Company is internally  testing Company developed  software utility
tools and  drivers  which are Year 2000 ready  which may be used with  Bernoulli
drives as an alternative to originally shipped software.  For software developed
by third parties which was bundled or sold with Bernoulli  drive  products,  the
third party  provider of such  software  should be  contacted  for the Year 2000
readiness of such software products.

The Company has completed its review of Nomai branded  hardware drive  products.
CD-RW drives sold by Nomai were manufactured by third parties who have indicated
that such drive  products  are Year 2000 ready.  NSTL also tested one version of
the Nomai  CD-RW  drive and  determined  it to be Year 2000  ready.  Nomai  also
produced a rigid,  magnetic media drive which has been reviewed,  and determined
to be, Year 2000 ready by a Nomai engineer. Software provided with Nomai branded
CD-RW  drives  was  developed  by a third  party,  who has  indicated  that such
software is Year 2000 compliant.

The  specific  results of hardware  and  software  testing  are  provided on the
Company's  Year 2000 web  pages on its web site  (www.iomega.com).  The  Company
plans to use its web site to  communicate  Year 2000 product  issues that may be
identified in the future.  Notwithstanding  the results of the Company's testing
and remediation efforts, actual backup, restore and rollover results in specific
operating  system  environments  may  vary  depending  on a number  of  factors,
including,  without limitation,  other hardware utilized, the specific operating
system  utilized,  other  software  applications  utilized  and  the  Year  2000
readiness of each. Statements concerning, or references made to, a third party's
Year 2000 statements or claims constitute  "Republications"  of such information
for purposes of the Year 2000 Information and Readiness Disclosure Act, and such
statements or republications  have not be reviewed or verified by the Company as
to their accuracy,  correctness or content. Such information was supplied by the
person or entity  identified in such Year 2000 statement or  republication,  and
the Company is not the source of such statement or republication.

Internal IT  Systems.  During  1998,  the  Company  implemented  new HP computer
hardware and Oracle software for its financial,  accounting,  inventory control,
order  processing,  supply chain  management  and other  management  information
systems. According to the respective vendors, the hardware operating systems and
software  currently  in use by the  Company  are in various  stages of Year 2000
readiness. The respective vendors are providing Year 2000 software upgrades when
Year 2000  deficiencies  are  identified.  In January  1999,  the Company  began
testing the hardware  operating systems and software  applications in use by the
Company to  confirm  Year 2000  readiness.  The  Company  has  identified  other
hardware and applications  software used in its IT systems and is in the process
of  obtaining  Year  2000  compliance  information  from the  providers  of such
hardware  and  applications  software.  The Company  will assess and remedy,  as
deemed  appropriate,  Year 2000 issues it identifies with respect to critical IT
systems utilized by the Company. The Company does not anticipate any significant
Year  2000  issues  with  respect  to its IT  systems  and  therefore  does  not
contemplate any significant contingency planning for its IT systems.
<PAGE>


Internal Non-IT Systems. The Company has substantially  completed  inventorying,
assessing  and testing its major non-IT  systems,  as well as  implementing  any
remedial  actions to the extent  deemed  appropriate.  The  Company  anticipates
completing  its Year 2000 review of its major  non-IT  systems by the end of the
third quarter,  1999. The Company does not anticipate any significant  Year 2000
issues with respect to its non-IT systems and therefore does not contemplate any
significant contingency planning for its non-IT systems.

Material Third-Party  Relationships.  The Company has significant  relationships
with various third parties (many located outside of the U.S.) and the failure of
any of these third parties to achieve Year 2000 compliance could have a material
impact on the Company's  business,  operating  results and financial  condition.
These  third   parties   include   energy  and  utility   suppliers,   financial
institutions,   material  and  product  suppliers,   transportation   providers,
communications vendors,  including value added network vendors and the Company's
significant  customers.  While the  Company  has  received  Year 2000  readiness
statements from its major  third-party  suppliers which in general indicate Year
2000  readiness,   the  Company   continues  in  the  process  of  conducting  a
questionnaire/review  with each major  supplier and vendor to confirm their Year
2000 readiness. By the end of the second quarter, 1999, approximately 65% of the
Company's major suppliers have been reviewed. The  questionnaire/review  process
for suppliers is expected to be completed in the third quarter of 1999.

Costs.  Through the second quarter of 1999, the Company  incurred  approximately
$39  million  in costs to improve  the  Company's  IT systems  and for Year 2000
readiness efforts. Of this amount, 91% represented the costs of transitioning to
new computer  hardware and software  for its  financial,  accounting,  inventory
control,  order  processing,   supply  chain  management  and  other  management
information  systems.  This system  hardware  and software  was  implemented  to
upgrade and improve the Company's IT systems. The implementation of the hardware
and software also resulted in facilitating the Company's Year 2000 readiness for
these  systems.  The balance was expended  for  hardware  and software  testing,
third-party  consulting costs and third-party audits and reviews. The Company is
not separately  tracking the internal costs for its Year 2000 review activities;
such  costs  are  principally  the  related  payroll  costs  for  the  Company's
information  systems group. The Company  anticipates  incurring an additional $4
million  in the  second  half of 1999 in  connection  with Year  2000  readiness
efforts,   including  additional  system  hardware  and  software,   third-party
consulting  fees,  third-party  audits and  reviews  and  product  software  and
hardware testing costs. The Company has set a goal of having  substantially  all
Year 2000 readiness efforts completed by the end of the third quarter of 1999.

Contingency Plans. The Company is preparing contingency plans for critical areas
to address Year 2000 failures if remedial efforts are not fully successful.  The
Company's contingency plans are expected to target the Company's most reasonably
likely  worst  case  scenarios.  Presently,  the  Company  does  not  anticipate
significant  Year 2000  failures  with respect to its products and IT and non-IT
systems, and thus does not contemplate any significant  contingency planning for
these areas.  The Company  believes that its most  reasonably  likely worst case
Year 2000 failure  scenario would be a key supplier of a critical  component who
is unable to timely deliver components to the Company's manufacturing locations.
In such a case,  the Company may be unable to timely  manufacture  product which
would in turn  negatively  impact sale  revenues.  Such a  situation  would also
<PAGE>


include  the  inability  of the local  power  company  to  deliver  power to the
Company's  Penang  manufacturing  site.  Additionally,  if any of the  Company's
logistical  transportation  providers are unable to ship the Company's  finished
goods to  distribution  and  retail  points,  due to such  provider's  Year 2000
failure or a Year 2000  failure in the  underlying  transportation  network (air
traffic centers,  ports of call, custom clearance houses, etc.), then similarly,
the  Company's  sales revenue  would be  negatively  impacted.  To address these
issues  the   Company's   contingency   plans  are   expected   to  include  the
identification of alternate providers for critical components and maintaining an
inventory buffer for critical  components.  The Company has established multiple
accounts  for  alternative  third-party  logistics.  Finally,  the  Company  has
alternative  manufacturing  capacity  at  different  locations  world wide which
should minimize to some degree the adverse impact if any one manufacturing  site
is adversely  affected.  The Company's final  contingency plans will be based in
part on the  results  of  third-party  supplier  audits,  and thus are not fully
developed at this time.  Completion of initial contingency plans is targeted for
the third  quarter of 1999 (which plans will  thereafter be revised from time to
time as deemed appropriate).

General.  To supplement the Company's  efforts  described above, the Company has
engaged  outside IT and legal  advisors  to conduct  independent  reviews of the
Company's Year 2000 plans.

No  assurance  can be given that the Company  will not be  materially  adversely
affected by Year 2000 issues. Although the Company is not currently aware of any
material  operational  issues with  preparing its internal IT and non-IT systems
for the Year 2000, the Company may experience  material  unanticipated  problems
and costs caused by  undetected  errors or defects in its internal IT and non-IT
systems. In addition,  the failure of third parties to timely address their Year
2000 issues  could have a material  adverse  impact on the  Company's  business,
operations  and  financial  condition.  If, for example,  third party  suppliers
become unable to deliver  necessary  components,  the Company would be unable to
timely manufacture products and meet customer order requirements.  Similarly, if
international  shipping and freight forwarders were unable to ship product,  the
Company would be unable to deliver product to sales channels.

Additionally, there can be no assurance that the Company will not be the subject
of lawsuits  regarding the failure of the Company's products (former or present)
in the event they are not Year 2000 ready.  Despite the testing and  remediation
efforts undertaken by the Company,  the Company's products may contain errors or
defects associated with the Year 2000. Known or unknown errors or defects in the
Company's  products  could  result  in delay or loss of  revenue,  diversion  of
development  resources,  damage to the Company's reputation or increased service
and warranty costs, any of which could materially adversely affect the Company's
business,  operating results and financial condition.  In addition,  because the
computer  systems in which the  Company's  products are used  involve  different
hardware, software and firmware components from different manufacturers,  it may
be difficult to determine  which component in a system caused a Year 2000 issue.
As a  result,  the  Company  may be  subjected  to Year  2000  related  lawsuits
independent  of whether its products are Year 2000 ready.  Any Year 2000 related
suits,  if adversely  determined,  could have a material  adverse  affect on the
Company's business, operating results and financial condition.
<PAGE>


The  foregoing   discussion  of  the  Company's  Year  2000  readiness  includes
forward-looking statements,  including estimates of the timeframes and costs for
addressing  the known Year 2000 issues  confronting  the Company and is based on
management's current estimates,  which were derived using numerous  assumptions.
There can be no assurance  that these  estimates  will be achieved.  There are a
number of important  factors that could cause actual events or results to differ
materially  from  those  indicated  by such  forward-looking  statements.  These
factors  include,  but are not limited to, the  availability  of personnel  with
required  remediation skills, the ability of the Company to identify and correct
all  relevant  computer  code and the  success  of third  parties  with whom the
Company  does  business in  addressing  their Year 2000 issues.  Any  statements
contained  herein that are not statements of historical fact may be deemed to be
forward-looking   statements.   Without   limiting  the  foregoing,   the  words
"believes", "anticipates", "plans", "expects", "intends" and similar expressions
are intended to identify forward-looking statements.

Item 3.           Quantitative and Qualitative Disclosures About Market Risk

A discussion  of the  Company's  exposure  to, and  management  of,  market risk
appears in Item 2 of this Form 10-Q under the heading  "Disclosures About Market
Risk".



<PAGE>


 IOMEGA CORPORATION

PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

Except as set forth below,  or in the  Company's  Annual Report on Form 10-K for
the year ended December 31, 1998, in management's opinion, there are no material
pending legal proceedings,  other than ordinary routine litigation incidental to
its business,  to which the Company or any of its  subsidiaries is a party or to
which any of their property is subject.

As previously disclosed in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 and in the Company's  Quarterly  Report on Form 10-Q for
the period  ended  March 28,  1999,  on October 9, 1998,  Hi-Val,  Inc.  filed a
complaint against the Company and other parties,  Hi-Val,  Inc. v. Nomai,  S.A.,
Nomus,  Inc.,  Kevin Scheier and Iomega,  in the Superior  Court of  California,
County of Santa Clara. The claims are related to an alleged  arrangement between
Nomai,  S.A.  and  Hi-Val  for  Hi-Val to  distribute  Nomai's  XHD  cartridges.
Plaintiff  seeks to recover  $26 million in alleged,  unspecified  damages.  The
Court has sustained  Iomega's demurrers to the complaint on May 21, 1999 and the
only  claims  remaining  are  breach of  contract,  tortious  interference  with
contract and tortious  interference  with prospective  economic  advantage.  The
Company intends to vigorously defend against such allegations.

As previously disclosed in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 and in the Company's  Quarterly  Report on Form 10-Q for
the period  ended  March 28,  1999,  on July 28,  1997,  the  Company  initiated
litigation  against SyQuest  Technology,  Inc.  ("SyQuest") in the United States
District  Court in the District of Delaware for  infringing  the Company's  U.S.
Patent  No.  5,644,444,  U.S.  Design  Patent  No.  D378,518  and the  Company's
registered trademark "JET". The complaint sought monetary damages and injunctive
relief enjoining SyQuest from further infringement. The matter was scheduled for
trial in  April  1999;  however,  the  trial  date was  delayed  as a result  of
SyQuest's filing of a voluntary  petition in the United States  Bankruptcy Court
under Chapter 11 of the U.S.  Bankruptcy Code in November 1998. The Company also
filed  complaints on March 6, 1998,  and April 29, 1998,  in the Paris  District
Court  alleging  claims of  copyright  and patent  infringement.  The  Company's
definitive agreement to purchase certain assets of SyQuest, including all of its
intellectual  property, and its inventory and fixed assets in the U.S., for $9.2
million and in Malaysia for $2.9 million closed on April 6, 1999. As part of the
agreement,  the Company  released  SyQuest and SyQuest released the Company from
all claims in  connection  with  patent and  trademark  infringement  litigation
pending between the parties in Delaware and in Paris, France.

As previously disclosed in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 and in the Company's  Quarterly  Report on Form 10-Q for
the period  ended March 28, 1999,  on February 25, 1998,  the Company was served
with a complaint in a purported  class action filed in the Supreme  Court of the
State of New York, entitled Christian Champod v. Iomega Corporation. On July 28,
1999, the Court approved the parties' proposed settlement to the litigation. The
settlement  provides  that,  in exchange  for the  dismissal  and release of all
claims in this case,  (a) the  Company  will  issue a credit of up to $10,  less
certain fees, with respect to each technical  support phone call made during the
class  period for which a charge was  incurred,  (b) the Company will modify its
Ditto  software  to  provide   readability  of  cartridges  created  by  certain
non-Iomega  products and provide the modified  software free of charge,  (c) for
any class member who has a cartridge  for which the modified  software  does not
solve the  readability  problem,  the Company  will  attempt to  translate  such
cartridge into a format readable by the Ditto drive and (d) for any class member
whose cartridge  cannot be translated into a format readable by the Ditto drive,
the class member will have the option of returning  the Ditto drive for a refund
or keeping the drive and receiving up to approximately  $50. The settlement also
provides for the Company to modify current and future packaging materials.

<PAGE>

On July 6, 1999, the Company initiated  litigation against  Castlewood  Systems,
Inc.  ("Castlewood") in the United States District Court in the District of Utah
for  infringing  the Company's  U.S.  Patent No.  4,458,273 and U.S.  Patent No.
5,854,719 and for  infringing and diluting the Company's  registered  trademarks
"Iomega",   "Zip"  and  "Jaz".  The  complaint  requests  monetary  damages  and
injunctive relief enjoining Castlewood from further  infringement.  A trial date
has not been set by the Court.

As previously disclosed in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, on February 10, 1998,  several  purported  class action
complaints  were filed in the United States  District Courts for the District of
Utah and the Southern  District of New York,  against the Company and certain of
its former  officers on behalf of certain  persons who  purchased  the Company's
common  stock  during the period from  September  22, 1997 to January 22,  1998.
These cases were  consolidated in the District of Utah and a consolidated  class
action  complaint,  Karacand  v. Kim B.  Edwards,  Leonard C.  Purkis and Iomega
Corporation,  was filed on July 8, 1998. The Karacand complaint alleges that the
Company and certain of its former officers  violated certain federal  securities
laws and seeks an unspecified  amount of damages.  On June 11, 1999, the Company
prevailed  on its motion to  dismiss in the  Karacand  matter.  Pursuant  to the
Order, the complaint was dismissed with prejudice and the plaintiffs' motion for
leave to amend was denied.  The  plaintiffs  filed a motion for  reconsideration
which was denied by the Court on August 4, 1999.

A separate individual suit, Ora v. Iomega Corporation,  et al., was filed on May
27, 1998,  in Superior  Court of the State of  California  for the County of Los
Angeles.  The Ora  complaint  alleges that the Company and certain of its former
officers violated certain federal and state securities laws and alleges that Mr.
Edwards  breached his duties as a director of the Company.  Management  believes
that the named  defendants have highly  meritorious  defenses to the allegations
made in this  lawsuit.  The Company  intends to vigorously  defend  against such
allegations.

The Company continues to be committed to vigorously protecting and enforcing its
intellectual  property  rights and to attacking  unfair  competition,  including
through the proceedings referenced above.

It is the opinion of management,  after discussions with legal counsel, that the
ultimate  dispositions  of these  lawsuits  and claims  will not have a material
adverse effect on the Company's financial position or results of operations.


Item 2.           Change in Securities and Use of Proceeds

The Company did not sell any equity securities during the second quarter of 1999
that were not registered under the Securities Act of 1933.

As described in more detail under Item 5 of this report,  on July 29, 1999,  the
Board of  Directors  of the  Company  adopted a new  shareholder  rights plan to
replace the Company's 1989  shareholder  rights plan, which expires by its terms
on August 14, 1999.



<PAGE>


Item 5.           Other Events

On  July  29,  1999,  the  Board  of  Directors  of the  Company  adopted  a new
shareholder rights plan to replace the Company's 1989 rights plan, which expires
by its terms on August 14, 1999.  Pursuant to the new plan, the Board declared a
dividend of one Right for each  outstanding  share of the Company's Common Stock
to  stockholders  of record at the close of  business  on August  16,  1999 (the
"Record Date").  Each Right entitles the registered  holder to purchase from the
Company one one-thousandth of a share of Series A Junior Participating Preferred
Stock, $.01 par value per share (the "Preferred  Stock"), at a Purchase Price of
$28.88 in cash,  subject to adjustment.  The description and terms of the Rights
are set  forth in a Rights  Agreement  dated as of July 29,  1999  (the  "Rights
Agreement")  between the Company and American Stock Transfer & Trust Company, as
Rights Agent.

Initially,  the  Rights  will  be  attached  to all  Common  Stock  certificates
representing  shares then outstanding,  and no separate Rights Certificates will
be  distributed.   The  Rights  will  separate  from  the  Common  Stock  and  a
Distribution  Date will occur upon the earlier of (i) 10 business  days (or such
later  date as may be  determined  by the  Board of  Directors  of the  Company)
following the later of (a) the first date of a public announcement that a person
or group of  affiliated  or  associated  persons  (an  "Acquiring  Person")  has
acquired, or obtained the right to acquire,  beneficial ownership of 20% or more
of the  outstanding  shares  of Common  Stock or (b) the first  date on which an
executive  officer of the Company has actual  knowledge that an Acquiring Person
has become such (the "Stock  Acquisition  Date"),  or (ii) 10 business  days (or
such later date as may be  determined  by the Board of Directors of the Company)
following the commencement of a tender offer or exchange offer that would result
in a person or group beneficially  owning 20% or more of such outstanding shares
of  Common  Stock.  Until  the  Distribution  Date  (or  earlier  redemption  or
expiration of the Rights),  (i) the Rights will be evidenced by the Common Stock
certificates  and will be  transferred  with and only  with  such  Common  Stock
certificates,  (ii) new Common Stock  certificates  issued after the Record Date
will contain a notation  incorporating  the Rights  Agreement  by reference  and
(iii)  the  surrender  for  transfer  of  any   certificates  for  Common  Stock
outstanding,  even without such notation,  will also  constitute the transfer of
the Rights associated with the Common Stock represented by such certificate.

The Rights are not exercisable  until the Distribution Date and will expire upon
the close of  business on July 29, 2009 (the  "Final  Expiration  Date")  unless
earlier redeemed or exchanged as described  below. As soon as practicable  after
the Distribution Date, separate Rights Certificates will be mailed to holders of
record of the Common Stock as of the close of business on the Distribution  Date
and,  thereafter,  the separate  Rights  Certificates  alone will  represent the
Rights. Except as otherwise determined by the Board of Directors, and except for
shares of Common  Stock  issued upon  exercise,  conversion  or exchange of then
outstanding options,  convertible or exchangeable securities or other contingent
obligations  to issue  shares,  only shares of Common  Stock issued prior to the
Distribution Date will be issued with Rights.

In the event  that any  Person  becomes  an  Acquiring  Person,  then,  promptly
following the first occurrence of such event,  each holder of a Right (except as
provided  below and in Section 7(e) of the Rights  Agreement)  shall  thereafter
have the right to receive, upon exercise,  that number of shares of Common Stock
of the Company (or, in certain circumstances, cash, property or other securities
of the Company)  which equals the exercise  price of the Right divided by 50% of
the  current  market  price (as  defined in the Rights  Agreement)  per share of
Common Stock at the date of the  occurrence of such event.  However,  Rights are
not exercisable following such event until such time as the Rights are no longer
redeemable  by  the  Company  as  described  below.  Notwithstanding  any of the
foregoing,  following  the  occurrence  of such  event,  all Rights that are, or
(under  certain   circumstances   specified  in  the  Rights   Agreement)  were,
beneficially  owned by any  Acquiring  Person  will be null and void.  The event
summarized in this paragraph is referred to as a "Section 11(a)(ii) Event."
<PAGE>

In the event that, at any time after any Person becomes an Acquiring Person, (i)
the Company is  consolidated  with, or merged with and into,  another entity and
the Company is not the surviving  entity of such  consolidation  or merger or if
the Company is the surviving entity,  but shares of its outstanding Common Stock
are changed or exchanged for stock or  securities  (of any other person) or cash
or any other  property,  or (ii) 50% or more of the Company's  assets or earning
power is sold or  transferred,  each  holder  of a Right  (except  Rights  which
previously have been voided as set forth above) shall  thereafter have the right
to  receive,  upon  exercise,  that  number of  shares  of  common  stock of the
acquiring company which equals the exercise price of the Right divided by 50% of
the current  market price of such common stock at the date of the  occurrence of
the event.  The events  summarized in this paragraph are referred to as "Section
13 Events." A Section  11(a)(ii)  Event and  Section 13 Events are  collectively
referred to as "Triggering Events."

At any time  after the  occurrence  of a Section  11(a)(ii)  Event,  subject  to
certain  conditions,  the Board of  Directors  of the Company may  exchange  the
Rights  (other  than Rights  owned by such  Acquiring  Person  which have become
void),  in whole or in part, at an exchange  ratio of one share of Common Stock,
or one one-thousandth of a share of Preferred Stock (or of a share of a class or
series of the Company's  preferred stock having equivalent  rights,  preferences
and privileges), per Right (subject to adjustment).

The Purchase Price payable,  and the number of units of Preferred Stock or other
securities  or  property  issuable,  upon  exercise of the Rights are subject to
adjustment  from time to time to  prevent  dilution  (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock,  (ii) if holders of the  Preferred  Stock are granted  certain  rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the  then-current  market  price  of the  Preferred  Stock,  or  (iii)  upon the
distribution  to holders of the Preferred  Stock of evidences of indebtedness or
assets  (excluding  regular  periodic  cash  dividends  paid out of  earnings or
retained  earnings)  or of  subscription  rights or  warrants  (other than those
referred to above).  The number of Rights  associated  with each share of Common
Stock is also subject to  adjustment in the event of a stock split of the Common
Stock or a stock  dividend  on the  Common  Stock  payable  in  Common  Stock or
subdivisions,  consolidations or combinations of the Common Stock occurring,  in
any such case, prior to the Distribution Date.

With certain  exceptions,  no adjustment in the Purchase  Price will be required
until  cumulative  adjustments  amount to at least 1% of the Purchase  Price. No
fractional  shares of Preferred  Stock (other than fractions  which are integral
multiples of one  one-thousandth  of a share of Preferred  Stock) will be issued
and, in lieu  thereof,  an  adjustment  in cash will be made based on the market
price  of the  Preferred  Stock on the last  trading  date  prior to the date of
exercise.

Preferred Stock  purchasable upon exercise of the Rights will not be redeemable.
Each share of  Preferred  Stock will be  entitled to  receive,  when,  as and if
declared by the Board of Directors,  a minimum  preferential  quarterly dividend
payment of $10 per share or, if greater,  an  aggregate  dividend of 1,000 times
the dividend  declared per share of Common Stock.  In the event of  liquidation,
the holders of the  Preferred  Stock will be entitled to a minimum  preferential
liquidation  payment of $1,000 per share and will be  entitled  to an  aggregate
payment of 1,000 times the payment made per share of Common Stock. Each share of
Preferred Stock will have 1,000 votes, voting together with the Common Stock. In
the event of any merger,  consolidation  or other  transaction  in which  Common
Stock is changed or exchanged, each share of Preferred Stock will be entitled to
receive 1,000 times the amount received per share of Common Stock.  These rights
are protected by customary antidilution provisions. Because of the nature of the
Preferred  Stock's  dividend,  liquidation  and voting rights,  the value of one
one-thousandth  of a share of Preferred Stock  purchasable upon exercise of each
Right should approximate the value of one share of Common Stock.
<PAGE>

At any time prior to the  earlier of (i) the tenth  Business  Day (or such later
date as may be  determined  by the Board of Directors of the Company)  after the
Stock  Acquisition  Date,  or (ii) the Final  Expiration  Date,  the Company may
redeem the Rights in whole,  but not in part, at a price of $.001 per Right (the
"Redemption  Price"),  payable in cash or stock.  Immediately upon the action of
the Board of  Directors  ordering  redemption  of the  Rights,  the Rights  will
terminate  and the only right of the  holders of Rights  will be to receive  the
Redemption  Price.  The Rights may also be  redeemable  following  certain other
circumstances specified in the Rights Agreement.

Until a Right is exercised,  the holder thereof, as such, will have no rights as
a stockholder of the Company,  including,  without limitation, the right to vote
or to  receive  dividends.  While the  distribution  of the  Rights  will not be
taxable to stockholders or to the Company,  stockholders may, depending upon the
circumstances,  recognize  taxable  income in the event that the  Rights  become
exercisable  for Common  Stock (or other  consideration)  of the  Company or for
common stock of the acquiring company as set forth above.

Any of the provisions of the Rights Agreement (other than the Redemption  Price)
may be amended by the Board of  Directors  of the Company  prior to such time as
the Rights are no longer redeemable.

A copy of the Rights  Agreement has been filed with the  Securities and Exchange
Commission  as an exhibit to the  Company's  Registration  Statement on Form 8-A
filed on August 5, 1999. A copy of the Rights  Agreement  is  available  free of
charge from the Company. This summary description of the Rights does not purport
to be complete  and is  qualified  in its  entirety by  reference  to the Rights
Agreement, which is incorporated herein by reference.

Item 6.           Exhibits and Reports on Form 8-K

(a)      Exhibits.  The exhibits  listed on the Exhibit Index filed as a part of
         this  Quarterly  Report  on  Form  10-Q  are  incorporated   herein  by
         reference.

(b)      Reports  on Form 8-K.  No  reports  on Form 8-K were  filed  during the
         quarter for which this report on Form 10-Q is filed.




<PAGE>



                                   SIGNATURES



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.




                                        IOMEGA CORPORATION
                                        ------------------
                                           (Registrant)



                                        /s/Jodie K. Glore
                                        --------------------------
Dated:   August 10, 1999                Jodie K. Glore
                                        Chief Executive Officer and President



                                        /s/Dan E. Strong
                                        --------------------------
Dated:   August 10, 1999                Dan E. Strong
                                        Vice President and Corporate Controller





















<PAGE>


                                  EXHIBIT INDEX


The following exhibits are filed as part of this Quarterly Report on Form 10-Q:
<TABLE>

Exhibit No.    Description
------------   -----------
<S>            <C>

   4.4         Rights  Agreement,  dated July 29, 1999,  between the Company
               and American  Stock Transfer & Trust Company, as rights agent
               (incorporated  by reference from the Company's Registration
               Statement on Form 8-A filed on August 5, 1999, File No. 1-12333).


  10.13  (g)   Amendment No. 2 to Credit Agreement, dated June 15, 1999.

  10.13  (h)   Waiver of Credit Facility Agreement, dated June 30, 1999.

  10.24        Rights  Agreement,  dated July 29, 1999,  between the Company
               and American  Stock Transfer & Trust Company, as rights agent
               (incorporated  by reference from the Company's Registration
               Statement on Form 8-A filed on August 5, 1999, File No. 1-12333).

  27           Financial Data Schedule (only filed as part of electronic copy).

</TABLE>