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 28, 1998


                         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) 778-1000
              (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 June 28, 1998.

Common Stock, par value $.03 1/3                                 266,656,080
     (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 28, 1998
              and December 31, 1997....................................       3

         Condensed consolidated statements of operations for the three months
              ended June 28, 1998 and June 29, 1997....................       5

         Condensed consolidated statements of operations for the six months
              ended June 28, 1998 and June 29, 1997 ...................       6

         Condensed consolidated statements of cash flows for the six months
              ended June 28, 1998 and June 29, 1997....................       7

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

Item 2.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations......................      16


                           PART II - OTHER INFORMATION
Item 1.  Legal Proceedings.............................................      28

Item 2.  Changes in Securities and Use of Proceeds.....................      30

Item 5.  Other Information ............................................      31

Item 6.  Exhibits and Reports on 8-K...................................      32

Signatures.............................................................      33

Exhibit Index..........................................................      34

This  Quarterly  Report  on Form  10-Q  contains  a  number  of  forward-looking
statements,   including   statements   relating  to  the   expected   return  to
profitability  in the fourth quarter of 1998;  the  sufficiency of cash and cash
equivalent balances and available sources of financing;  projected effective tax
rates; expected increases in inventory turns; 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 mix between Zip, Jaz and Ditto
products;  anticipated  expenditures  (and the level of such  expenditures  as a
percentage  of sales) for  selling,  general  and  administrative  purposes  and
research and development  activities;  the Company's  plans to reduce  operating
expenses during the remainder of 1998; timetable for introducing Clik! products;
the anticipated  negative  impact on gross margins due to Clik!  start-up costs;
the possible impact on future sales due to potential quality issues or component
shortages; expected gross margin percentages for the remainder of 1998; expected
sales levels due to seasonal demand; effect of Asian economic downturn on future
sales;  expected cash flows in the second half of the year; the possible effects
of an adverse outcome in legal  proceedings  described in Item 1 of Part II; the
Company's  efforts  to  protect  its  intellectual  property  rights;  estimated
additional expenditures associated with the Company's transition to new computer
systems;  and the  anticipated  Year 2000  compliance  of such  systems  and the
Company's  hardware and utility  software  products . 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, and in the
paragraph immediately preceding, the caption "Factors Affecting Future Operating
Results"  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.



<PAGE>

<TABLE>

                               IOMEGA CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                     ASSETS

                                 (In thousands)

                                                 June 28,          December 31,
                                                     1998                  1997
                                              -----------           ----------- 
                                              (Unaudited)
<S>                                           <C>                 <C>
CURRENT ASSETS:
     Cash and cash equivalents                $    68,142         $     159,922
     Temporary investments                              -                36,319
     Trade receivables, net                       143,299               280,182
     Inventories                                  280,411               246,383
     Income tax receivable                         17,985                     -
     Deferred tax assets                           58,116                47,996
     Other current assets                          16,568                11,982
                                              -----------           -----------

         Total current assets                     584,521               782,784
                                              -----------           -----------

PROPERTY, PLANT AND EQUIPMENT, at cost            317,198               272,219
     Less:  Accumulated depreciation and 
             amortization                        (123,483)              (96,550)
                                              -----------           -----------

     Net property, plant and equipment            193,715               175,669
                                              -----------           -----------

OTHER ASSETS                                        7,031                 3,186
                                              -----------           -----------

                                              $   785,267           $   961,639
                                              ===========           ===========

</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)

                                                 June 28,          December 31,
                                                     1998                  1997
                                              -----------         -------------
                                              (Unaudited)
<S>                                           <C>                 <C>
CURRENT LIABILITIES:
     Accounts payable                         $ 123,176           $     257,281
     Accrued payroll, vacation and bonus         19,293                  31,728
     Deferred revenue                            19,785                  42,423
     Income taxes payable                             -                  22,440
     Accrued advertising                         41,545                  32,628
     Other accrued liabilities                   64,846                  52,613
     Current portion of capitalized lease 
      obligations                                 5,059                   5,505
                                              ---------             -----------
         Total current liabilities              273,704                 444,618
                                              ---------             -----------

CAPITALIZED LEASE OBLIGATIONS,
     net of current portion                       1,343                   2,939
                                              ---------             -----------
NOTES PAYABLE                                    60,000                       -
                                              ---------             -----------
DEFERRED INCOME TAXES                                 -                  10,334
                                              ---------             -----------
CONVERTIBLE SUBORDINATED NOTES,
     6.75%, due 2001                             45,683                  45,683
                                              ---------             -----------

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 267,477,329 and 
        262,264,830 shares at June 28, 1998
        and December 31, 1997, respectively        8,915                  8,741
     Additional paid-in capital                  278,352                273,826
     Less:  821,249 and 829,210 Common 
        Stock treasury shares
        at March 29, 1998 and 
        December 31, 1997, respectively, 
        at cost                                   (6,177)                (6,099)
     Deferred compensation                             -                   (336)
     Retained earnings                           123,447                181,933
                                              ----------            -----------

         Total stockholders' equity              404,537                458,065
                                              ----------            -----------

                                              $  785,267          $     961,639
                                              ==========          =============
</TABLE>

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


                               IOMEGA CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

                                                 For the Three Months Ended
                                                 --------------------------
                                                June 28,              June 29,
                                                    1998                  1997
                                                --------              --------
                                                          (Unaudited)
<S>                                             <C>                  <C>
SALES                                           $ 393,831            $  400,162

COST OF SALES                                     299,607               282,703
                                                ---------            ----------
     Gross margin                                  94,224               117,459
                                                ---------            ----------

OPERATING EXPENSES:
     Selling, general and administrative          124,399                60,816
     Research and development                      30,303                17,007
                                                ---------            ----------
         Total operating expenses                 154,702                77,823
                                                ---------            ----------

OPERATING INCOME (LOSS)                           (60,478)               39,636
     Interest and other income (expense), net        (918)                  598
                                                ---------            ----------

INCOME (LOSS) BEFORE INCOME TAXES                 (61,396)               40,234
     Benefit (provision) for income taxes          21,486               (14,025)
                                                ---------            ----------

NET INCOME (LOSS)                               $ (39,910)           $   26,209
                                                =========            ==========

NET INCOME (LOSS) PER COMMON SHARE (Note 1):
     Basic                                      $   (0.15)           $     0.10
                                                =========            ==========
     Diluted                                    $   (0.15)           $     0.09
                                                =========            ==========

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (Notes 1 and 2)                265,464               259,044
                                                =========            ==========

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - Assuming Dilution (Notes 1 and 2)   265,464               282,154
                                                =========            ==========

</TABLE>







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



                               IOMEGA CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)

<TABLE>
                                                   For the Six Months Ended
                                                   ------------------------
                                                 June 28,              June 29,
                                                     1998                  1997
                                                ---------             ---------
                                                          (Unaudited)
<S>                                             <C>                   <C>
SALES                                           $ 801,331             $ 761,506

COST OF SALES                                     604,971               536,768
                                                ---------             ---------
     Gross margin                                 196,360               224,738
                                                ---------             ---------

OPERATING EXPENSES:
     Selling, general and administrative          232,341               115,176
     Research and development                      53,436                31,724
                                                ---------             ---------
         Total operating expenses                 285,777               146,900
                                                ---------             ---------

OPERATING INCOME  (LOSS)                          (89,417)               77,838
     Interest and other income (expense), net        (481)               (2,274)
                                                ---------             ---------

INCOME (LOSS) BEFORE INCOME TAXES                 (89,898)               75,564
     Benefit (provision) for income taxes          31,412               (26,341)
                                                ---------             ---------

NET INCOME (LOSS)                               $ (58,486)            $  49,223
                                                =========             =========

NET INCOME (LOSS) PER COMMON SHARE (Note 1):
     Basic                                      $   (0.22)            $    0.19
                                                =========             =========
     Diluted                                    $   (0.22)            $    0.18
                                                =========             =========

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (Notes 1 and 2)                263,878               258,165
                                                =========             =========

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - Assuming Dilution (Notes 1 and 2)   263,878               281,411
                                                =========             =========


</TABLE>






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


                               IOMEGA CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (In thousands)
<TABLE>
                                                     For the Six Months Ended
                                                     ------------------------
                                                       June 28,        June 29,
                                                           1998            1997
                                                      ---------       ---------
                                                              (Unaudited)
<S>                                                  <C>              <C>
Cash Flows from Operating Activities:
     Net Income (Loss)                               $   (58,486)     $  49,223
     Non-Cash Revenue and Expense Adjustments:
         Depreciation and amortization                    30,218         16,787
         Deferred income tax provision (benefit)         (20,454)         2,692
         Tax benefit from dispositions of employee 
            stock                                          1,954          1,266
         Other                                             2,641            306
     Changes in Assets and Liabilities:
         Trade receivables, net                          136,883        (33,377)
         Inventories                                     (34,028)        21,378
         Other current assets                             (4,199)        16,151
         Accounts payable                               (134,105)         8,511
         Accrued liabilities                             (13,923)        11,659
         Income taxes                                    (40,425)         8,279
                                                     -----------      ---------
             Net cash provided by (used in) operating 
                 activities                             (133,924)       102,875
                                                     -----------      ---------

Cash Flows from Investing Activities:
     Purchase of property, plant and equipment           (49,514)       (27,435)
     Purchase of temporary investments                         -        (11,790)
     Sale of temporary investments                        36,319              -
     Net increase in other assets                         (3,845)           (16)
                                                     -----------      ---------
         Net cash used in investing activities           (17,040)       (39,241)
                                                     -----------      ---------

Cash Flows from Financing Activities:
     Proceeds from sales of Common Stock                   2,914          1,906
     Proceeds from issuance of notes payable              60,000         87,295
     Payments on notes payable and capitalized 
         lease obligations                                (3,265)      (135,799)
     Purchase of Common Stock                               (465)        (1,736)
                                                     -----------      ---------
         Net cash provided by (used in) financing 
             activities                                   59,184        (48,334)
                                                     -----------      ---------

Net Increase (Decrease)  in Cash and Cash 
    Equivalents                                          (91,780)        15,300
Cash and Cash Equivalents at Beginning of Period         159,922        108,312
                                                     -----------      ---------
Cash and Cash Equivalents at End of Period           $    68,142      $ 123,612
                                                     ===========      =========

</TABLE>



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


                               IOMEGA CORPORATION
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd.)

                                 (In thousands)

<TABLE>
                                                    For the Six Months Ended
                                                    ------------------------
                                                     June 28,          June 29,
                                                         1998              1997
                                                    ---------         ---------
                                                           (Unaudited)
<S>                                                  <C>              <C>
Supplemental Schedule of Non-Cash
Investing and Financing Activities:

     Property, plant and equipment financed under
         capitalized lease obligations               $    1,223       $   3,342
                                                     ==========       =========

     Issuance of Common Stock for compensation       $      360       $       -
                                                     ==========       =========

     Conversion of Subordinated Notes to 
         Common Stock                                $        -       $      49
                                                     ==========       =========



</TABLE>






















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


                               IOMEGA CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(1)      SIGNIFICANT ACCOUNTING POLICIES

         In the opinion of the Company's management,  the accompanying 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 28, 1998 and
         December  31,  1997,  the  results  of  operations  for the  three- and
         six-month periods ended June 28, 1998 and June 29, 1997, and cash flows
         for the six-month periods ended June 28, 1998 and June 29, 1997.

         The results of operations  for the three- and  six-month  periods ended
         June 28,  1998 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  - The condensed  consolidated  financial
         statements  include the accounts of Iomega  Corporation  and its wholly
         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.  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 $19.8 million
         and $42.4 million at June 28, 1998 and December 31, 1997, respectively,
         and is  included  in  deferred  revenue in the  accompanying  condensed
         consolidated balance sheets.

         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.

<PAGE>
         

                               IOMEGA CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



         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 $34.7 million and $28.5 million at June 28,
         1998 and  December  31,  1997,  respectively,  and are  netted  against
         accounts receivable in the accompanying  condensed consolidated balance
         sheets.

         Foreign Currency  Translation - For purposes of  consolidating  foreign
         operations,  the Company has determined the functional currency for its
         foreign 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,  option rate  preferred
         stock and 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.  The Company has
         classified  its entire  portfolio of temporary  investments at December
         31, 1997, as held-to-maturity.  These temporary  investments  consisted
         primarily of  commercial  paper and  municipal  bonds.  At December 31,
         1997, all temporary investments had maturities of less than six months.
         There were no temporary investments at June 28, 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>

                                     June 28,          December 31,
                                         1998                  1997
                                  -----------         -------------
<S>                               <C>                 <C>

              Raw materials       $   180,657         $     130,049
              Work-in-process          20,107                18,714
              Finished goods           79,647                97,620
                                  -----------         -------------

                                  $   280,411         $     246,383
                                  ===========         =============


</TABLE>


<PAGE>


                               IOMEGA CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


         Reclassifications  - Certain  reclassifications  were made to the prior
         periods' 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.  Diluted EPS for the three- and six-month
         periods ended June 29, 1997, were determined  under the assumption that
         the convertible  subordinated  notes were converted on January 1, 1997.
         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 are  therefore  not
         added to the weighted average shares outstanding. Net income (loss) per
         common share  amounts and share data have been restated for all periods
         presented  to  reflect  Basic  and  Diluted  EPS  and the  stock  split
         described in Note 2.

         Following is a reconciliation of the numerator and denominator of Basic
         EPS to the  numerator  and  denominator  of Diluted EPS for all periods
         presented (in thousands, except per share data):
<TABLE>
                                    Net Income (Loss)         Shares   Per-Share
                                          (Numerator)  (Denominator)      Amount
<S>                                    <C>             <C>             <C>

         For the Three Months Ended

         June 28, 1998
         Basic EPS                        $  (39,910)        265,464   $  (0.15)
            Effect of options                      -               -
            Effect of convertible 
               subordinated notes                  -               -
                                          ----------       ---------
         Diluted EPS                      $  (39,910)        265,464   $  (0.15)
                                          ==========       =========

         June 29, 1997
         Basic EPS                        $   26,209         259,044   $   0.10
            Effect of options                      -          13,858
            Effect of convertible 
               subordinated notes                501           9,252
                                          ----------       ---------
         Diluted EPS                      $   26,710         282,154   $   0.09
                                          ==========       =========

</TABLE>


<PAGE>


                               IOMEGA CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
                                    Net Income (Loss)         Shares   Per-Share
                                          (Numerator)  (Denominator)      Amount
<S>                                 <C>                <C>             <C>

         For the Six Months Ended

         June 28, 1998
         Basic EPS                        $  (58,486)        263,878   $  (0.22)
            Effect of options                      -               -
            Effect of convertible 
               subordinated notes                  -               -
                                          ----------         -------
         Diluted EPS                      $  (58,486)        263,878   $  (0.22)
                                          ==========         =======


         June 29, 1997
         Basic EPS                        $   49,223         258,165   $   0.19
            Effect of options                      -          13,989
            Effect of convertible 
               subordinated notes              1,002           9,257
                                          ----------         -------
         Diluted EPS                      $   50,225         281,411   $   0.18
                                          ==========         =======

</TABLE>

         Recent  Accounting   Pronouncements  -  In  June  1997,  the  Financial
         Accounting  Standards  Board issued  Statement of Financial  Accounting
         Standards No. 131  "Disclosures  about  Segments of an  Enterprise  and
         Related Information" (SFAS 131). SFAS 131 establishes new standards for
         public companies to report information about their operating  segments,
         products  and  services,  geographic  areas and major  customers.  This
         statement is effective for financial statements issued for fiscal years
         beginning  after  December  15,  1997.  In  June  1998,  the  Financial
         Accounting  Standards  Board 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.  This statement is effective for financial
         statements  issued for all fiscal  quarters of fiscal  years  beginning
         after June 15, 1999.

         The Company plans to adopt SFAS 131 in its December 31, 1998  financial
         statements  and SFAS 133 in its first fiscal  quarter of 2000 financial
         statements and does not expect these  pronouncements to have a material
         impact on the Company's  results of operations,  financial  position or
         liquidity.

(2)      STOCK SPLIT

         In November 1997, the Board of Directors  declared a two-for-one Common
         Stock  split  which was  effected  in the form of a 100%  Common  Stock
         dividend  paid on December  22, 1997 to  stockholders  of record at the
         close of business on December 1, 1997.

         This stock  dividend  was  accounted  for as a stock split and has been
         retroactively  reflected  in the  accompanying  condensed  consolidated
         financial statements. In connection with this stock split, proportional
         adjustments   were  made  to   outstanding   stock  options  and  other
         outstanding obligations of the Company to issue shares of Common Stock.


<PAGE>


                               IOMEGA CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(3)      INCOME TAXES

         Income tax  benefit for the three- and  six-months  ended June 28, 1998
         has been  provided  for at an effective  rate of 35%.  This tax rate is
         based on the Company's  projected  mix of domestic and foreign  pre-tax
         income (loss) for 1998.

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

         Cash paid for income  taxes was $28.0  million for the first six months
         of 1998 and $13.8  million for the corresponding period in 1997.

(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,  the  Company  and the  lenders  have  agreed to  several
         amendments to and waivers  under the Credit  Facility (as most recently
         amended,  effective July 15, 1998, the "Credit  Facility").  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
         (and all of the shares of Nomai owned by the  Company,  up to a maximum
         of 65% of all  issued  and  outstanding  shares  of  Nomai).  Borrowing
         availability  under the amended  Credit  Facility is based on an agreed
         upon  advance  rate on  receivables  and  inventory  not to exceed $150
         million  with a floor of $110  million  through  May  1999.  Under  the
         amended 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 .88% to  1.63%,  for the first  year,  and  thereafter
         between 0.0% and 1.63%  depending on the  Company's  profitability  and
         utilization of the amended Credit  Facility,  or at LIBOR plus a margin
         of 2.0% to 2.75%, for the first year, and thereafter  between 1.25% and
         2.75% depending on the Company's  profitability  and utilization of the
         amended Credit Facility.  Among other restrictions,  the amended 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 and earnings.  The Company had $60 million  outstanding under
         the  Credit  Facility  at June  28,  1998.  The  Company  did not  have
         additional  availability  under the Credit  Facility at June 28,  1998,
         because of facts and  circumstances  that  existed as of June 28, 1998,
         which with time,  in the absence of  amendments,  would have caused the
         Company to be in violation  of certain  covenants.  The amended  Credit
         Facility  resolved  any  violations  of debt  covenants  that  may have
         existed as of June 28, 1998, and provided availability under the Credit
         Facility as of that date.

         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 July 1998 to January  2001.  Principal and
<PAGE>
         
                               IOMEGA CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


         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.

 (5)     OTHER MATTERS

         Significant  Customers - During the three  months and six months  ended
         June 28, 1998, sales to Ingram Micro, Inc.  accounted for approximately
         11.0% and 13.9%, respectively,  of consolidated sales. During the three
         months and six months ended June 29, 1997, sales to Ingram Micro,  Inc.
         accounted for 12.0% and 13.0%, 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  28,  1998  outstanding   forward  exchange  sales  (purchase)
         contracts, which all mature in September 1998, were as follows:
<TABLE>

                                                            Contracted
                  Currency                     Amount     Forward Rate

                  <S>                    <C>              <C> 
                  British Pound           (1,100,000)              .60
                  Dutch Guilder           (1,800,000)             2.02
                  French Franc              (450,000)             6.01
                  German Mark             (6,275,000)             1.79
                  Irish Punt                (250,000)              .72
                  Japanese Yen           795,000,000            139.02
                  Malaysian Ringgit      (11,000,000)             4.07
                  Singapore Dollar        (2,350,000)             1.67
                  Swiss Franc             (1,800,000)             1.49

</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  28,  1998,  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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


(6)      SUBSEQUENT  EVENT

         Effective  July 1, 1998,  Iomega  Corporation  purchased an interest in
         Nomai, S.A., a France-based  manufacturer of removable storage systems,
         from Nomai's  principal  and other major  shareholders,  for 188 French
         francs per share, or approximately  $21 million.  The interest in Nomai
         owned by Iomega as of July 1, 1998 constituted approximately 54% of the
         total shares of Nomai  outstanding on that date.  Iomega also acquired,
         for a purchase price of $3 million,  certain non-infringing  technology
         owned  by Nomai  and used in the  manufacture  of disk  products  Nomai
         claimed to be  compatible  with  certain of the  Company's  Zip and Jaz
         drives. As required by French law, Iomega is conducting a tender offer,
         offering all other  stockholders of Nomai the opportunity to sell their
         shares to Iomega for 188 French francs per share.  The Company's tender
         offer has been  reviewed by French  regulatory  bodies and commenced on
         July 27, 1998. The tender offer will remain open until August 14, 1998.
         The purchase of the Nomai shares,  including any shares  purchased as a
         result of the Company's  pending cash tender offer, will be financed by
         Iomega with senior  subordinated  borrowings  from Idanta Partners Ltd.
         and  another  entity  affiliated  with David J. Dunn,  Chairman  of the
         Board, Iomega  Corporation.  The principal and interest associated with
         these notes are payable on March 31, 1999. The initial interest rate is
         8.7% per annum,  increasing  through  January 1, 1999 to the greater of
         12.7% per annum or the weighted-average interest rate charged under the
         Credit Facility at January 1, 1999 plus 2% per annum.

         The  acquisition  of shares of Nomai  will be  accounted  for by Iomega
         using the purchase  method.  The excess of the purchase  price over the
         estimated fair value of the acquired assets, less liabilities  assumed,
         will be allocated to goodwill and other intangible  assets. The Company
         anticipates  a non-cash  charge in the third quarter of 1998 due to the
         write-off of in-process research and development costs acquired in this
         transaction.  Nomai sales and net loss for the year ended  December 31,
         1997,  were  $24.1  million  and $7.7  million,  respectively.  Nomai's
         results will be consolidated  into the Company's  financial  statements
         beginning in the third quarter of 1998. The amount of minority interest
         reported in the consolidated  financial statements will be dependent on
         the results of the Company's tender offer.






<PAGE>


                               IOMEGA CORPORATION

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


RESULTS OF OPERATIONS

The Company  reported  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.  This  compares  to sales of  $400.2  million  and net  income of $26.2
million,  or $0.09 per  diluted  share,  in the second  quarter of 1997.  In the
second quarter of 1998, the Company  recorded  special  pre-tax  charges of $9.4
million,  or $(.02)  per  diluted  share,  related  to cost  reduction  efforts,
including  employee  severance  and  outplacement  charges,  cash  and  non-cash
write-offs of facility related assets and miscellaneous cancellation charges for
marketing  programs that were  discontinued.  The total  after-tax  loss for the
second quarter of 1998,  including these special  charges,  was $39.9 million or
$(0.15) per diluted share.  For the first six months of 1998,  sales were $801.3
million and net loss,  including the second quarter special  charges,  was $58.5
million,  or $(0.22) per diluted share,  compared to sales of $761.5 million and
net income of $49.2  million or $0.18 per diluted share for the first six months
of 1997.

Management  does not expect the  Company  to return to  profitability  until the
fourth  quarter of 1998.  The Company has  announced  plans to reduce  operating
expenses  during  the  second  half of 1998  through  cost  reduction  measures,
reorganization and efforts to decrease advertising and other sales and marketing
expenses,  legal  expenses,  information  system  costs and other  discretionary
spending.  Management  estimates  that these  planned  reductions  in  operating
expenses will reduce total operating  expenses during the second half of 1998 by
more than $50  million  compared  to the first six months of 1998.  The  planned
reductions  in  operating  expenses do not  include the special  charge from the
second quarter or any non-cash  charges during the third quarter of 1998 related
to the acquisition by the Company of an interest in Nomai.

SALES

Sales for the three months ended June 28, 1998  decreased  by $6.3  million,  or
1.6%, when compared to the  corresponding  period of 1997.  Total drive sales of
$222.5  million  decreased  by 11.3% as compared to the second  quarter of 1997.
Total unit drive shipments for the three months ended June 28, 1998 increased by
18.2% as  compared  to the second  quarter  of 1997.  Total disk sales of $171.4
million increased by 15.4% as compared to the second quarter of 1997. Total unit
disk  shipments  for the three months ended June 28, 1998  increased by 38.7% as
compared to the second quarter of 1997.

Sales of Zip products in the second quarter of 1998 totaled $284.5  million,  or
72.2% of total sales,  representing  a 10.2% increase from the second quarter of
1997.  Zip unit drive  shipments  increased by 34.9% from the second  quarter of
1997, while Zip unit disk shipments  increased by 43.9%. Sales of Zip OEM drives
accounted  for  approximately  50% of total Zip drive  shipments  in the  second
quarter of 1998, compared to approximately 30% in the second quarter of 1997.

 Jaz product sales in the second quarter of 1998 were $86.8 million, or 22.0% of
total sales,  representing a 22.9% decrease from the second quarter of 1997. Jaz
unit drive  shipments  decreased  by 25.3% as compared to the second  quarter of
1997, while Jaz unit disk shipments increased by 4.5%.

<PAGE>

                               IOMEGA CORPORATION

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


Ditto product sales in the second quarter of 1998 were $20.7 million, or 5.3% of
total sales, representing a 28.4% decline from the second quarter of 1997. Ditto
unit drive  shipments  decreased  by 57.6% as compared to the second  quarter of
1997, while Ditto unit disk shipments decreased by 27.5%.

Sales for the six months  ended June 28, 1998  increased  by $39.8  million,  or
5.2%, when compared to the  corresponding  period of 1997. Sales of Zip products
totaled $550.6 million,  or 68.7% of total sales,  representing a 16.7% increase
from the corresponding period of 1997. Jaz product sales totaled $197.1 million,
or 24.6% of total sales,  representing an 11.1% decrease from the  corresponding
period of 1997.

Sales  of  Ditto  products  totaled  $51.5  million,  or  6.4% of  total  sales,
representing a 20.2% decrease from the corresponding period of 1997.

Sales in the  Americas  were $257.5  million,  or 65.3% of total  sales,  in the
second quarter of 1998, as compared to $247.3 million,  or 61.8% of total sales,
in the second quarter of 1997.  Sales in Europe were $93.2 million,  or 23.6% of
total sales,  in the second quarter of 1998, as compared to $107.5  million,  or
26.9% of total sales,  in the second  quarter of 1997.  Sales in Asia were $43.1
million,  or 10.9% of total sales, in the second quarter of 1998, as compared to
$45.4 million, or 11.3% of total sales, in the second quarter of 1997.

Sales in the Americas were $555.7 million,  or 69.3% of total sales in the first
six months of 1998, as compared to $473.8 million,  or 62.2% of total sales, for
the first six months of 1997.  Sales in Europe were $182.5 million,  or 22.8% of
total sales, in the first six months of 1998, as compared to $214.8 million,  or
28.2% of total sales, for the first six months of 1997. Sales in Asia were $63.1
million, or 7.9% of total sales, in the first six months of 1998, as compared to
$72.9 million, or 9.6% of total sales, for the first six months of 1997.

GROSS MARGIN

The Company's  overall gross margin was 23.9% in the second  quarter of 1998, as
compared to 29.4% in the second quarter of 1997. Overall gross margin percentage
for the first six months of 1998 was 24.5%,  as  compared to 29.5% for the first
six months of 1997.  This decrease in gross margin was due primarily to a higher
percentage  of Zip drives  shipped to the OEM channel,  where prices and margins
are lower than drives sold to  distribution  and retail  channels.  In addition,
decreased  prices on Zip and Jaz products,  as compared to the second quarter of
1997,  contributed to the decline in the gross margin  percentage.  Future gross
margin  percentage  will continue to be impacted by the  percentage of OEM drive
sales versus retail and distribution  sales.  Gross margins for the remainder of
1998 will also  depend on sales  volumes  of Zip and Jaz disks,  which  generate
significantly higher gross margins than the corresponding drives, and on the mix
between disks and drives, and between Zip, Jaz and Ditto products. Additionally,
management  expects that the planned  introduction of Clik!  products during the
second half of 1998 will initially  have a negative  impact on gross margins due
to start-up costs  associated with early production  volumes.  In the event of a
delay in the planned commercial  availability of Clik!, such negative impact may
be greater. The Company expects gross margin percentages to be in the mid twenty
percent range for the remainder of 1998. However, there can be no assurance that
the expected results will be realized.

<PAGE>

                               IOMEGA CORPORATION

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


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling,  general and  administrative  expenses  increased by $63.6  million and
$117.2 million in the second quarter and first six months of 1998, respectively,
when  compared  to  the  corresponding  periods  of  1997,  and  increased  as a
percentage  of sales to 31.6%  and  29.0% in the  second  quarter  and first six
months of 1998, respectively, from 15.2% and 15.1%, respectively, in each of the
corresponding  periods in 1997. 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 as
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.  Excluding this charge,  selling,  general and
administrative  expenses  increased  by $54.2  million  and $107.8  million  and
represented  29.2% and 27.8% of sales in the second quarter and first six months
of 1998,  respectively.  The  increase was  primarily  due to a  combination  of
substantial  marketing and  advertising  program  expenditures  in the first and
second  quarters  of 1998,  increased  spending  on  marketing  and  advertising
programs in Europe and Asia in the second quarter of 1998, increased spending on
other,  non-advertising  related sales and marketing activities primarily due to
international  expansion,  increased spending on customer  satisfaction programs
and an increase in other general and administrative  expenses,  comprised mainly
of  information  system  expenditures  and legal fees.  Management is focused on
bringing selling,  general and administrative expenses back to a range of 15% to
20% of sales.  However,  the Company's success in achieving this depends in part
on the levels of sales achieved during the remainder of 1998 and there can be no
assurance that the Company's cost reduction  measures,  reorganization 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
1998  increased  by $13.3  million,  or  78.2%,  and  $21.7  million,  or 68.4%,
respectively,  when compared to the second quarter and first six months of 1997,
and  increased as a percentage of sales to 7.7% and 6.7%,  respectively,  in the
second quarter and first six months of 1998,  from 4.3% and 4.2%,  respectively,
in the second quarter and first six months of 1997. Increased spending for Clik!
development represents  approximately half of the increase. The remainder of the
increase was the result of expenditures related to the continued development and
enhancement  of Zip and Jaz  products.  Management  is  targeting  the  level of
spending for research and development  during the remainder of 1998 to be in the
range of between 3% to 5% of sales to support  planned new  product  development
and existing product  enhancements.  However, the Company's success in achieving
this  depends in part on the levels of sales  achieved  during the  remainder of
1998 and there can be no  assurance  that  efforts to reduce the  percentage  of
sales represented by research and development expenses will be successful.



<PAGE>


                               IOMEGA CORPORATION

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



OTHER INCOME AND EXPENSE

The Company  recorded  interest  income of $0.9  million and $2.6 million in the
second  quarter and first six months of 1998,  as  compared to $1.4  million and
$2.5 million in the second  quarter and first six months of 1997,  respectively.
Slightly lower average cash balances  during the second quarter of 1998 resulted
in a decrease in interest  income when compared to the  corresponding  period of
1997.  Interest  expense was $2.2 million and $3.4 million in the second quarter
and first six months of 1998, respectively, as compared to $1.2 million and $3.7
million in the second  quarter and first six months of 1997,  respectively.  The
increase in interest expense during the second quarter of 1998 was primarily due
to increased average borrowings  outstanding under the Company's credit facility
during the quarter that were partially  offset by the retirement of a promissory
note for the purchase of the  Company's  manufacturing  facility in Malaysia and
the repayment of other term notes during 1997.

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

INCOME TAXES

For the first six months of 1998, the Company  recorded an income tax benefit of
$31.4  million,  representing  an effective  income tax rate of 35%. The Company
expects its effective tax rate to remain at approximately  35% for the remainder
of 1998.  However,  differences  between the currently  anticipated  mix and the
actual mix of foreign income versus domestic  income,  along with the ability of
the Company to permanently  invest foreign  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.

SEASONALITY

The  Company's  Zip products are targeted to the retail  consumer  market and to
personal  computer  OEMs.  The  Company's  Jaz and Ditto  products  are targeted
primarily to the retail consumer market. 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 28, 1998,  the Company had cash and cash  equivalents  of $68.1 million,
working  capital of $310.8  million,  and a ratio of  current  assets to current
liabilities  of 2.1 to 1. During the first six months of 1998,  the Company used
$133.9 million of cash for operating activities.  The primary components of cash
used for operating  activities were the net operating loss,  increased inventory
and reductions in accounts  payable and accrued  liabilities that were partially


<PAGE>

                               IOMEGA CORPORATION

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


offset by decreases in accounts receivable. Inventory increased by $34.0 million
due primarily to lower than  anticipated  sales in the first and second quarters
of 1998.  Inventory turns were 4.3 for the second quarter of 1998 as compared to
7.5 for the  second  quarter  of 1997.  Management  expects  inventory  turns to
increase in future quarters as the Company continues to implement changes to the
Company's  procurement  and  manufacturing  processes  to a demand  pull  model.
However,  there  can be no  assurance  as to the  success  or the  timing of the
expected  increase in  inventory  turns.  Accounts  payable  decreased by $134.1
million,  due primarily to timing of inventory  receipts and related payments to
vendors.  Accrued  liabilities  decreased  by $13.9  million  due  primarily  to
decreases in deferred revenue, accrued payroll and related liabilities that were
partially offset by increases in accrued advertising and accrued special charges
included in other  accrued  liabilities.  Income  taxes  payable  decreased as a
result of the payment of 1997 income taxes and the Company recognizing a benefit
for income taxes that resulted in an income tax receivable as of June 28, 1998.

These uses of cash were  partially  offset by a $136.9  million  decrease in net
accounts  receivable,  due primarily to decreased  sales and the timing of sales
and collections during the respective periods. The Company used $17.0 million of
cash in investing  activities during the first six months of 1998,  primarily in
the purchase of property,  plant and equipment that was partially  offset by the
sale of temporary  investments.  Cash provided by financing  activities  totaled
$59.2 million during the first six months of 1998, and included $60.0 million of
proceeds from borrowings on the Company's Credit Facility,  and proceeds of $2.9
million  from sales of Common  Stock under  employee  stock  option  agreements,
partially  offset  by  $3.3  million  in  net  payments  on  capitalized   lease
obligations.

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, the Company and the lenders have agreed
to several amendments to and waivers under the Credit Facility (as most recently
amended, effective July 15, 1998, the "Credit Facility"). 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  (and all of the  shares  of Nomai  owned by the  Company,  up to a
maximum  of 65% of all  issued  and  outstanding  shares  of  Nomai).  Borrowing
availability  under the  amended  Credit  Facility  is based on an  agreed  upon
advance  rate on  receivables  and  inventory  not to exceed $150 million with a
floor of $110 million through May 1999. Under the amended 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 .88% to 1.63%,  for the first
year,  and  thereafter  between  0.0%  and  1.63%  depending  on  the  Company's
profitability and utilization of the amended Credit Facility, or at LIBOR plus a
margin of 2.0% to 2.75%,  for the first year, and  thereafter  between 1.25% and
2.75%  depending on the Company's  profitability  and utilization of the amended
Credit Facility. Among other restrictions,  the amended 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 and earnings.



<PAGE>


                               IOMEGA CORPORATION

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


The Company had $60 million  outstanding  under the Credit  Facility at June 28,
1998. The Company did not have additional availability under the Credit Facility
at June 28, 1998, because of facts and circumstances that existed as of June 28,
1998,  which with time,  in the  absence of  amendments,  would have  caused the
Company to be in violation of certain  covenants.  The amended  Credit  Facility
resolved any  violations of debt  covenants that may have existed as of June 28,
1998,  and  provided  availability  under the Credit  Facility  as of that date.
Depending on its financial  performance in future  quarters,  the Company may be
required to seek further covenant  waivers under the Credit Facility.  There can
be no  assurance  that the  Company  will be able to obtain any such  waivers on
terms  acceptable to the Company,  if at all. Loss of the Credit  Facility would
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.

The current and long-term  portions of capitalized lease obligations at June 28,
1998 were $5.1 million and $1.3 million, respectively. During the second quarter
of 1997,  the  Company  paid the entire $18  million  obligation,  plus  accrued
interest,  relating to the purchase of its Malaysian  manufacturing facility. In
addition, during the second and third quarters of 1997, the Company paid off all
remaining other term notes relating to equipment purchases.

The Company had $45.7 million of convertible  subordinated  notes outstanding at
June 28,  1998,  which bear  interest  at 6.75% per year and mature on March 15,
2001. Additions to property,  plant and equipment during the first six months of
1998 totaled $50.7  million,  partially  offset by $1.2 million in proceeds from
capital leases.

Subsequent  to June 28, 1998,  the Company  borrowed a total of $40 million from
Idanta Partners Ltd. and another entity affiliated with David J. Dunn,  Chairman
of  the  Board,  Iomega  Corporation,  pursuant  to a  series  of  three  senior
subordinated  notes. The principal and interest  associated with these notes are
payable  on March  31,  1999.  The  initial  interest  rate is 8.7%  per  annum,
increasing  through  January  1, 1999 to the  greater  of 12.7% per annum or the
weighted-average  interest rate charged under the Credit  Facility at January 1,
1999 plus 2% per  annum.  The  proceeds  of these  notes  were used for the cash
purchase of a majority  interest in Nomai,  S.A. a France-based  manufacturer of
removable storage systems, from its principal and other major shareholders,  and
to conduct a cash tender offer for the remaining  shares,  as required by French
law.  In the event that  proceeds  from the notes  exceed the cost of the shares
purchased,  the excess  amount  shall be prepaid upon  expiration  of the tender
offer.

The Company  expects to generate  positive  cash flow for the second half of the
year, before taking in to account Nomai acquisition costs, but anticipates being
cash flow  negative for the year.  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,  the precise amount and timing of the Company's  future
financing needs,  including the funds necessary to repay the senior subordinated
notes due March 31, 1999 related to the Nomai  transaction  cannot be determined
at this  time,  and will  depend on a number of  factors,  including  the market
demand for the Company's products, the availability of critical components,  the


<PAGE>


                               IOMEGA CORPORATION

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


progress  of the  Company's  product  development  efforts,  the number of Nomai
shares acquired in the tender offer, the success of the Company's integration of
Nomai and the  success  of the  Company  in  managing  its  inventory,  accounts
receivable and accounts payable.

OTHER MATTERS

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No.  131  "Disclosures  about  Segments  of an
Enterprise  and  Related  Information"  (SFAS  131).  SFAS 131  establishes  new
standards  for public  companies  to report  information  about their  operating
segments,  products and services,  geographic  areas and major  customers.  This
statement  is  effective  for  financial  statements  issued  for  fiscal  years
beginning  after  December  15, 1997.  In June 1998,  the  Financial  Accounting
Standards  Board  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.  This  statement  is  effective  for
financial  statements  issued for all fiscal  quarters of fiscal years beginning
after June 15, 1999.

The  Company  plans  to adopt  SFAS  131 in its  December  31,  1998,  financial
statements and SFAS 133 in its first fiscal quarter of 2000 financial statements
and does not expect these  statements 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 and Jaz products  for the  substantial
majority of its sales in 1998,  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,  there can be no assurance  that the Company
will be successful in  establishing  Zip and Jaz as the preferred  solutions for
that  market  need.  The  extent to which Zip and Jaz  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 SyJet 1.5 GB, EZ Flyer  230 and  SparQ 1.0 GB  (products  of  Syquest
Technology,  Inc.), the Shark 250 (product of Avatar  Peripherals,  Inc.),  HiFD
(product in development by Sony  Corporation and Fuji Photo Film Co., Ltd.), the
UHD144 (Product in development by Caleb Technology Corporation),  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
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  products  containing  the  Company's
drives;  the ability of the Company to create demand for Zip and Jaz,  including

<PAGE>

                               IOMEGA CORPORATION

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


demand from leading personal  computer and other  manufacturers;  the success of
the Company in educating  consumers about the existence and possible uses of Zip
and Jaz products as storage  devices;  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 consumer  class action suits filed against the Company;  and
the  overall  market  demand for  personal  computers  with which the  Company's
products can be used.

The Company's  business strategy is substantially  dependent on maximizing sales
of its  proprietary  Zip and Jaz  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 and Jaz  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 net income would be
disproportionately adversely affected.

Sales of Zip products in 1997 and the first six months of 1998  accounted  for a
significant majority of the Company's revenues in these periods.  However, these
sales  may  not  be  indicative  of  the  long-term  demand  for  Zip  products.
Accordingly,  the sales  levels  experienced  by the  Company in 1997 and in the
first six months of 1998  should not be  assumed to be an  indication  of future
sales levels.  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 net income and cash
flow.  For  example,  in the first and second  quarters of 1998,  the  Company's
operating  expenses  as a  percentage  of sales  fell  outside  of  management's
operating  model  resulting  in net  operating  losses  for  both  quarters.  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 Corporation.

Inventory  management has become increasingly  complex.  The Company's customers
constantly  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,  and the consolidation of customer distribution  centers.  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.

<PAGE>

                               IOMEGA CORPORATION

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


The Company is in the process of evolving from an aftermarket business to an OEM
business.  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.

During the second quarter of 1998, the Company announced the implementation of a
comprehensive   series  of  cost  reductions   intended  to  improve   financial
performance.  Management  estimates  that these planned  reductions in operating
expenses including efforts to decrease advertising and other sales and marketing
expenses,  legal  expenses,  information  system  costs and other  discretionary
spending will reduce total operating  expenses during the second half of 1998 by
more than $50 million compared to the first six months of 1998.  However,  there
can be no assurance that the Company's cost reduction  measures,  reorganization
and other efforts to reduce operating  expenses will be successful.  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.

The Company expects to record a non-cash charge in the third quarter of 1998 due
to the write-off of  in-process  research and  development  costs related to the
acquisition  by the Company of an interest in Nomai.  The amount of the non-cash
charge has not yet been determined. The Company is conducting a tender offer, as
required by French law, for the shares of Nomai which it does not yet own. . The
results of the tender offer will impact the  Company's  third  quarter  non-cash
charge related to the write-off of in-process research and development costs and
the amount of goodwill recorded and amortized and will also affect the amount of
cash  expended  to acquire a majority  interest  in Nomai.  The Company is aware
that, beginning July 27, 1998, the day on which Iomega's tender offer commenced,
a broker representing one or more parties,  began purchasing shares of Nomai for
189  French  francs  per  share (or 1 French  franc  more  than the  Company  is
offering).  A certain minority shareholder in Nomai has objected to the purchase
price  offered by Iomega in its legally  mandated  tender offer and has inquired
about the fairness to Nomai of the Technology  Assignment  Agreement between the
Company and Nomai. Nomai was not profitable for the year ended December 31, 1997
or for the first six  months of 1998 and there can be no  assurance  that  Nomai
will return to profitability in the future. Nomai's results will be consolidated
with Iomega's results  beginning in the third quarter of 1998. It is anticipated
that the Nomai results will have a negative impact on the Company's consolidated
results of operations for at least the remaining quarters of 1998.

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


<PAGE>


                               IOMEGA CORPORATION

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


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.  For example,  management  believes that sales in Asia
were  adversely  affected  during the  fourth  quarter of 1997 and the first six
months of 1998 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.

The  Company  continues  to refine the design of its Zip and Jaz  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 Zip and Jaz 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,  in the second quarter of
1997 the  Company  recalled  a limited  number of its Jaz disks and in the third
quarter  of 1997 the  Company  experienced  manufacturing  interruptions  due to
supplier  quality  problems.  Any product  availability,  quality or reliability
problems experienced by the Company or consumer class action suits 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 achieve market acceptance.

All of the factors  described  above for Zip and Jaz  products  are, or will be,
relevant to Clik!.  In addition to such factors,  demand from digital camera and
other consumer  electronics  manufacturers will affect the extent to which Clik!
achieves a  significant  market  presence.  The  Company  will be entering in to
additional or alternate sales channels with the introduction of Clik!  products.
Because the Company does not have prior experience in these new channels,  there
are  additional  risks  that  the  Company  or the  Clik!  products  will not be
successful.

In addition  to the risks  surrounding  existing  products,  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. For example,  the Company's Jaz 2 GB
product,  originally  scheduled for shipment in the fourth  quarter of 1997, did
not ship  until  February  1998 and thus had a  material  adverse  effect on the
results of  operations  for the fourth  quarter of 1997 and the first quarter of
1998.  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


<PAGE>

                               IOMEGA CORPORATION

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


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.

The Company's success will depend in large part upon the services of a number of
key  employees.  The loss of the services of one or more of these key  employees
could have a material adverse effect on the Company.  The Company's success will
also depend in  significant  part upon its ability to continue to attract highly
skilled  personnel to fill a number of vacancies.  Effective March 24, 1998, Kim
B. Edwards  resigned as President  and Chief  Executive  Officer of the Company.
James E. Sierk,  a member of the Company's  Board of Directors,  has assumed the
role of  President  and Chief  Executive  Officer  while the Company  conducts a
search for a new President and Chief Executive Officer.  Effective June 5, 1998,
Leonard C. Purkis resigned as Senior Vice President, Finance and Chief Financial
Officer. Dan E. Strong, Vice President and Corporate Controller, has assumed the
role of interim Chief Financial  Officer while the Company conducts a search for
a new Senior Vice President, Finance and Chief Financial Officer. The Company is
also seeking to fill other key management  vacancies.  There can be no assurance
that  the  Company  will  be  successful  in  attracting  and/or  retaining  key
employees.

The  Company is  currently  in the  process  of  transitioning  to new  computer
hardware and software for its financial,  accounting,  inventory control,  order
processing,  supply chain management and other management  information  systems.
The successful  implementation  of these new systems is crucial to the efficient
operation of the Company's business.  There can be no assurance that the Company
will implement its new systems in an efficient and timely manner or that the new
systems  will be adequate to support the  Company's  operations.  Problems  with
installation  or initial  operation of its new systems  could cause  substantial
difficulties in operations planning, financial reporting and management and thus
could  have a  material  adverse  effect on the  Company's  business,  financial
condition and results of  operations.  In addition to  addressing  the Company's
increased computing needs, the Company's transition to new computer hardware and
software  systems will  achieve  Year 2000  compliance  for these  systems.  The
Company has incurred  approximately $30 million related to the transition to the
new  computer  hardware  and  software  systems of which  approximately  50% was
capitalized and  approximately  50% was expensed.  The Company estimates it will
incur an additional $10 million for this transition of which  approximately  50%
will be capitalized and approximately 50% will be expensed.

In  general,  the Company  expects to resolve  Year 2000  issues  affecting  its
internal use software  (including  embedded  systems  contained in the Company's
buildings,   plant,   equipment  and  other   infrastructure)   through  planned
replacement or upgrades of its software applications and hardware with a goal of
having all applicable internal systems Year 2000 compliant by the end of 1998.

In addition to addressing Year 2000 compliance for its own internal use systems,
the Company is addressing other "Year 2000 issues" on several  different fronts.
The Company is in the process of assessing all Iomega-branded  products for Year
2000  compliance.  The  Company  has  assigned a team to monitor  and  determine
product compliance. The Company believes that Iomega-branded hardware and device
drivers will not be adversely  affected by, or have an adverse effect upon, Year
2000 compliant  computer  systems with respect to Year 2000 issues.  The Company

<PAGE>


                               IOMEGA CORPORATION

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


has had or is in the process of having a third party agency test and verify that
the Company's  Zip, Jaz and Ditto drive  products are Year 2000  compliant  with
computer hardware products that are also Year 2000 complaint.  In addition,  the
Company has completed internal testing on currently shipping Zip and Jaz utility
software.  The Company's  testing indicates Year 2000 compliance for all Zip and
Jaz utility software with one exception for which the Company expects to have an
upgrade  available  on the  Company's  website in the second  half of 1998.  The
Company  does not plan to charge  users for  obtaining  the  upgraded  software.
Testing on the  Company's  Ditto  utility  software has not yet been  completed.
Additionally,  the Company has requested Year 2000 compliance certification from
each of its major vendors and suppliers for their hardware or software  products
and for their internal business applications and processes.  Achieving Year 2000
compliance is dependent on many factors, some of which are not completely within
the  Company's  control.  Should either the  Company's  internal  systems or the
internal systems of one or more significant vendors, suppliers or customers fail
to achieve Year 2000 compliance,  the Company's business,  results of operations
or financial condition could be adversely affected. In addition, there can be no
assurance that the Company will not become the subject of lawsuits regarding the
failure of any of the  Company's  products  (former or  present) to be Year 2000
compliant.  Any such  suits,  if  adversely  determined,  could  have a material
adverse  affect on the  Company's  business,  results of  operation or financial
condition.

Other  factors  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,  intellectual  property  rights,  litigation  (see "Legal
Proceedings"),  general economic  conditions and changes or slowdowns in overall
market demand for personal computer products.






<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,  1997 and  Quarterly  Report on Form 10-Q for the
period  ended March 29, 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.

On June 29, 1998,  the Company  announced  that it had entered into a definitive
settlement  agreement  with  Nomai  S.A.  ("Nomai"),  a French  manufacturer  of
removable storage systems,  settling all litigation,  in several  jurisdictions,
between  Iomega and Nomai and their  respective  affiliates.  The litigation was
described  in the  Company's  Annual  Report  on Form  10-K for the  year  ended
December 31, 1997 and  Quarterly  Report on Form 10-Q for the period ended March
29, 1998. Nomai initiated settlement  discussions with Iomega during 1998. Based
on information  learned through  continuing  worldwide  litigation,  including a
trial held in London during June 1998,  Nomai  concluded there was a substantial
risk that a court may rule  against  it. In the  settlement,  Nomai  agreed that
Iomega's  patents,  trademarks,  copyrights  and  trade  secrets  are  valid and
enforceable  and that it had  reproduced  certain Iomega  protected  software in
reverse  engineering  work  for  use  in the  manufacture  of its  XHD  and  DUO
cartridges without authorization from Iomega.  Accordingly,  Nomai agreed not to
license,  manufacture or market  anywhere in the world its XHD or DUO cartridges
without  authorization  from  Iomega,  or any other  products  that may infringe
Iomega's intellectual property at issue in the litigation.

During the course of settlement  discussions,  Nomai and Iomega began to discuss
the  potential  benefits  of an  investment  in Nomai by Iomega,  including  the
possible  acquisition  of Nomai.  These  discussions  led to the Stock  Purchase
Agreement and Technology  Assignment  Agreement also announced on June 29, 1998.
Under the Technology Assignment Agreement,  which closed on July 1, 1998, Iomega
acquired,  for  a  purchase  price  of  $3.0  million,   certain  non-infringing
technology used by Nomai in the manufacture of the XHD and DUO cartridges. Nomai
has agreed to stop  manufacturing and selling these cartridges.  Under the Stock
Purchase  Agreement,  which  also  closed on July 1,  1998,  Iomega  acquired  a
majority interest in Nomai, from its principal and other major shareholders, for
188 French francs per share, or approximately US$21 million in the aggregate. On
July 27, 1998,  following review of the offer by French regulatory  authorities,
Iomega  commenced a tender offer, as required by French law,  offering all other
shareholders of Nomai the opportunity to sell their shares to Iomega. The tender
offer purchase  price is 188 French francs per share.  The Company is aware that
trading  in shares of Nomai was  suspended  on the  Bourse in Paris from June 29
until July 27,  1998,  and that  beginning  on July 27,  1998, a broker has been
purchasing  shares of Nomai for 189 French Francs per share as discussed  above.
The  Company's  tender  offer for Nomai shares is scheduled to remain open until
August 14, 1998.

Pursuant to the comprehensive settlement agreement between Nomai and Iomega, all
legal actions  between the companies  and/or their  affiliates  have either been
dismissed  or are expected to be dismissed  shortly,  following  approval by the
local court of the proposed dismissal.  The European  Commission,  which has not
yet acted on competition law claims filed by Nomai in October and December 1997,
has been apprised of the  settlement.  Nomai has withdrawn it complaints and has
requested the European  Commission to terminate the  proceedings.  The principal
court proceedings covered by the settlement are as follows:
<PAGE>

Iomega  Corporation v. Nomai S.A. filed in the Paris District Court on March 25,
1997 and on September  30,  1997;  Nomai S.A. v. Iomega  International  S.A. and
Iomega  Corporation  filed in the District Court of Hamburg on October 13, 1997;
Nomus,  Inc.,  and Nomai S.A. v. Iomega  Corporation  filed in the United States
District Court for the Northern  District of California on October 15, 1997, and
amended  counterclaims  in such action  filed by Iomega on December  17, 1997; a
confidential  complaint  submitted by Nomai S.A.  against Iomega  Corporation on
October 15, 1997, to the European Commission in Brussels;  Iomega Corporation v.
Mac and More Limited,  Nomai S.A. and Marc-Andre Frouin filed in the London High
Court of Justice Chancery  Division on October 29, 1997, and Iomega  Corporation
v. Nomai S.A.  filed in the London  High Court of Justice  Chancery  Division on
March 9, 1998;  Iomega  Corporation  v. Nomai S.A.  filed in the Paris  District
Court on November 12, 1997, (with respect to Nomai's  so-called "DUO" product in
development  that  purports to be  compatible  with Iomega Jaz  drives);  Iomega
Corporation v Triangel  Computer GmbH filed in the Dusseldorf  District Court on
November  19, 1997;  Iomega  Corporation  v.  Prutting  (MediaCom)  filed in the
Mannheim  District Court on November 12, 1997;  Iomega  Corporation v. Speirings
Computers & Supplies B.V. and Nomai S.A.  filed in the Amsterdam  Regional Court
on December 24, 1997, and  counterclaims  in such action filed by the defendants
on January 28, 1998;  Nomai S.A. v. Misco  Germany,  Inc. filed in the Frankfurt
District Court on January 16, 1998 and Iomega  Corporation v. Nomai S.A., et al.
filed in the Federal  Court of Australia  Victoria  District,  Registry  General
Division on March 6, 1998.

Two related suits filed by Iomega against boeder Deutschland GmbH, a distributor
of Nomai's XHD product, in the Frankfurt District Court on December 11, 1997 and
February  6,  1998,  also have been  resolved.  The first  action  was  resolved
pursuant to an agreement  between the parties  following the Court's  grant,  in
part, of Iomega's request for a preliminary  injunction  against boeder.  In the
second  action,  the Court issued a preliminary  injunction  and assessed  costs
against boeder. Boeder did not appeal the substance of the injunction and Iomega
believes that the Court of Appeals of Frankfurt's July 15, 1998 ruling rejecting
boeder's  appeal of the  assessment  of costs  against  boeder has resolved this
action.

The Company continues to be committed to vigorously protecting and enforcing its
intellectual property rights and to attacking unfair competition.

During 1997,  a consumer  class-action  suit against the Company,  Cox v. Iomega
Corporation, filed in the Chancery Court of the State of Delaware in and for New
Castle County on July 16, 1997,  relating to technical support,  was settled and
the  settlement was approved by the Chancery Court on April 3, 1998. The Company
has also  responded  to inquiries  received  from the Federal  Trade  Commission
relating to certain rebate and  registration  card programs and certain  product
advertisements.  The Company is engaged in discussions with the Commission staff
concerning  alleged  violations by the Company of the FTC Act and the Mail Order
Rule and is  attempting  to reach a resolution  with the  Commission  that would
avoid the necessity of litigating  these matters.  In the event such discussions
do not lead to a mutually acceptable resolution,  management of the Company does
not believe an adverse outcome in any resulting litigation would be material.

Beginning  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 officers
on behalf of certain persons who purchased the Company's common stock during the
period from  September 22, 1997 and January 22, 1998.  These cases have now been
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

<PAGE>

on July 8, 1998. 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  Karacand  complaint  alleges  that the Company and
certain of its  officers  violated  certain  federal  securities  laws;  the Ora
complaint  alleges that the Company and certain of its officers violated certain
federal and state  securities  laws and alleges  that Mr.  Edwards  breached his
duties as a director of the Company.  Both complaints seek an unspecified amount
of  damages.   Management   believes  that  the  named  defendants  have  highly
meritorious  defenses to the allegations  made in these lawsuits and the Company
intends to vigorously defend against such allegations.

Item 2.           Change in Securities and Use of Proceeds

The Company did not sell any equity securities during the second quarter of 1998
that were not registered under the Securities Act of 1933.

On June 4, 1998,  the  Company's  Board of  Directors  adopted a series of bylaw
provisions  relating  to the  conduct of  stockholder  meetings.  The  following
summary of the material  terms of the new bylaws is qualified in all respects by
reference to the full text of the bylaw  provisions  included in the copy of the
Company's bylaws filed as an exhibit to this Quarterly Report.

         Existing  Section 1.8  ("Voting and Proxies")   was  amended  to  allow
         proxies to be in any form  permitted by Delaware law.

         A new Section 1.11 ("Conduct of Meeting") was adopted,  authorizing the
         Board of  Directors  and the  officer  of the  Company  presiding  at a
         stockholder meeting to adopt rules,  regulations and procedures for the
         conduct of the  meeting.  The new bylaw also  provides a procedure  for
         closing the polls at meetings.

         A new Section 1.12 ("Nomination of Directors") was adopted,  creating a
         notice  provision  to be followed if a  stockholder  wishes to nominate
         someone for election to the Board and setting out time  periods  during
         which any such nominations must be made.

Under the new bylaw, to be timely,  a  stockholder's  notice must be received by
the Secretary at the principal executive offices of the Company as follows:  (a)
in the case of an election of  directors at an annual  meeting of  stockholders,
not less than 70 days nor more than 90 days  prior to the first  anniversary  of
the preceding year's annual meeting;  provided,  however, that in the event that
the date of the annual  meeting is advanced by more than 20 days,  or delayed by
more than 70 days,  from such  anniversary  date, to be timely,  a stockholder's
notice must be so  received  not earlier  than the  ninetieth  day prior to such
annual  meeting  and not later  than the close of  business  on the later of the
seventieth  day prior to such annual  meeting or the tenth day following the day
on which public  announcement  of the date of such annual meeting is first made;
or  (b) in the  case  of an  election  of  directors  at a  special  meeting  of
stockholders,  not earlier than the ninetieth day prior to such special  meeting
and not later  than the close of  business  on the later of the  seventieth  day
prior to such special meeting or the tenth day following the day on which public
announcement of the date of such special meeting is first made.

The  stockholder's  notice to the Secretary is required to set forth:  (a) as to
each proposed  nominee (i) such person's  name,  age,  business  address and, if
known,  residence address,  (ii) the principal  occupation or employment of such
person,  (iii) the class and number of shares of stock of the Company  which are
beneficially  owned by such person,  and (iv) any other  information  concerning
such  person  that  must be  disclosed  as to  nominees  in proxy  solicitations
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(or any  successor  provision  thereto);  (b) as to the  stockholder  giving the

<PAGE>

notice (i) the name and address,  as they appear on the Company's books, of such
stockholder  and (ii) the class and  number of shares of the  Company  which are
beneficially  owned by such stockholder;  and (c) as to the beneficial owner, if
any,  on whose  behalf the  nomination  is made (i) the name and address of such
beneficial  owner and (ii) the class and number of shares of the  Company  which
are  beneficially  owned by such  person.  In  addition,  to be  effective,  the
stockholder's  notice must be accompanied by the written consent of the proposed
nominee to serve as a director if elected.  The Company may require any proposed
nominee to furnish such other  information  as may reasonably be required by the
Company to determine  the  eligibility  of such  proposed  nominee to serve as a
director.

         A new  Section  1.13  ("Notice  of  Business  at Annual  Meeting")  was
         adopted,  creating a notice  provision to be followed if a  stockholder
         wishes to present business (other than the election of directors) at an
         annual  meeting of  stockholders  and setting out time  periods  during
         which any such notice must be given.

Under the new bylaw, to be timely,  a  stockholder's  notice must be received by
the Secretary at the principal executive offices of the Company not less than 70
days nor more  than 90 days  prior to the  first  anniversary  of the  preceding
year's annual meeting; provided, however, that in the event that the date of the
annual  meeting  is  advanced  by more than 20 days,  or delayed by more than 70
days, from such anniversary  date, to be timely, a stockholder's  notice must be
so received not earlier than the ninetieth day prior to such annual  meeting and
not later than the close of business on the later of the seventieth day prior to
such  annual  meeting  or the  tenth  day  following  the  day on  which  public
announcement of the date of such meeting is first made.

The  stockholder's  notice to the  Secretary is required to set forth as to each
matter the stockholder  proposes to bring before the annual meeting: (a) a brief
description of the business  desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address,  as they appear on the Company's  books, of the  stockholder  proposing
such  business,  and the name and address of the  beneficial  owner,  if any, on
whose  behalf the  proposal  is made,  (c) the class and number of shares of the
corporation  which are  beneficially  owned by the  stockholder  and  beneficial
owner,  if  any,  and (d)  any  material  interest  of the  stockholder  or such
beneficial  owner,  if any, in such  business.  Any  stockholder  proposal which
complies  with  Rule  14a-8 of the  proxy  rules  (or any  successor  provision)
promulgated under the Securities Exchange Act of 1934, as amended,  and is to be
included in the Company's  proxy statement for an annual meeting of stockholders
shall be deemed to comply with the requirements of Section 1.13.

Item 5.           Other Information

Stockholder Proposals for 1999 Annual Meeting

As set forth in the Company's  Proxy  Statement  for its 1998 Annual  Meeting of
Stockholders,  stockholder  proposals submitted pursuant to Rule 14a-8 under the
Exchange Act for inclusion in the Company's  proxy materials for its 1999 Annual
Meeting of Stockholders  must be received by the Secretary of the Company at the
principal offices of the Company not later than November 11, 1998.

In addition,  as described in more detail under Item 2 of this Quarterly Report,
the  Company's  bylaws  require  that the  Company  be given  advance  notice of
stockholder  nominations for election to the Company's Board of Directors and of
other matters which stockholders wish to present for action at an annual meeting
of stockholders (other than matters included in the Company's proxy statement in
accordance with Rule 14a-8). The required notice must be given within prescribed

<PAGE>

time frames,  which  generally  are  calculated  by reference to the date of the
Company's last annual meeting. The Company's 1998 Annual Meeting of Stockholders
was held on April 21, 1998.  Assuming that the Company's  1999 Annual Meeting of
Stockholders  is held  during the period from April 1, 1999 to June 30, 1999 (as
it is expected to be), in order to comply with the time periods set forth in the
Company's bylaws,  appropriate notice would need to be provided to the Secretary
of the Company at its  principal  place of business no earlier  than January 21,
1999 and no later than February 10, 1999. The advance  notice  provisions of the
Company's  bylaws  supersede  the  notice   requirements   contained  in  recent
amendments to Rule 14a-4 under the Exchange Act.

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/ James E. Sierk
Dated:   August 11, 1998                 James E. Sierk
                                         President and Chief Executive Officer



                                         /s/ Dan E. Strong
Dated:   August 11, 1998                 Dan E. Strong
                                         Vice President and Corporate Controller
                                         and Acting Chief Financial Officer














<PAGE>



                                  EXHIBIT INDEX


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

<TABLE>

Exhibit No.      Description
<S>              <C>    


3.(ii).1         By-laws of the Company, as Amended.

10.14(f)         Amended and Restated Credit Agreement dated July 15, 1998.

10.20            1998 Bonus Plan

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


</TABLE>