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 25, 2000

                         COMMISSION FILE NUMBER 1-12333

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

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

of incorporation or organization)

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

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

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

                                  Yes X    No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of June 25, 2000.

Common Stock, par value $.03 1/3                        270,664,536
     (Title of each class)                           (Number of shares)

                               IOMEGA CORPORATION
                                TABLE OF CONTENTS

                                                                            PAGE

                          PART I - FINANCIAL STATEMENTS

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets at June 25, 2000
              and December 31, 1999.....................................       3

         Condensed Consolidated Statements of Operations for the quarters
              ended June 25, 2000 and June 27, 1999.....................       5

         Condensed Consolidated Statements of Operations for the six months
              ended June 25, 2000 and June 27, 1999......................      6

         Condensed Consolidated Statements of Cash Flows for the six months
              ended June 25, 2000 and June 27, 1999.....................       7

         Notes to Condensed Consolidated Financial Statements...........       8

Item 2.  Management's Discussion and Analysis of Financial

              Condition and Results of Operations.......................      23

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.....      40

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings..............................................      42

Item 2.  Changes in Securities and Use of Proceeds......................      42

Item 6.  Exhibits and Reports on Form 8-K...............................      42

Signatures..............................................................      43

Exhibit Index...........................................................      44

This  Quarterly  Report  on Form  10-Q  contains  a  number  of  forward-looking
statements,  including,  without limitation,  statements  referring to: expected
increases in selling,  general and  administrative  expenses and in research and
development expenses; the impact on gross margins of the sales volumes of Zip(R)
and Jaz(R) disks,  saLEs mix between disks and drives, the sales mix between Zip
100MB and Zip 250MB drives, the sales mix between OEM and aftermarket  channels,
the sales mix  between  the  Company's  products,  future  pricing  actions  and
potential start-up costs of new products; the expected sufficiency of cash, cash
equivalent and temporary  investment  balances,  cash flows from  operations and
future sources of financing;  the impact of new accounting  pronouncements;  the
timing and impact of restructuring  activities and other organizational changes;
expected sales levels due to seasonal demand;  anticipated  hedging  strategies;
and, the possible effects of an adverse outcome in legal  proceedings  described
in Note 8 of Part I. 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,  although not all  forward-looking  statements  contain these words.
There are a number of important  factors  that could cause actual  events or the
Company's  actual  results to differ  materially  from those  indicated  by such
forward-looking statements. These factors include, without limitation, those set
forth under the  caption  "Litigation"  in Note 8 of Part I, under the  captions
"Liquidity  and Capital  Resources"  and  "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 and  "Quantitative
Disclosures  About Market Risk" in Item 3 of Part I of this Quarterly  Report on
Form 10-Q.  The factors  discussed  herein do not reflect the  potential  future
impact of any mergers, acquisitions or dispositions. The Company does not assume
any obligation to update any forward-looking statements made herein.

----------------------------------
Copyright  (C)  2000  Iomega  Corporation.   Iomega,  Zip,  Jaz,  ZipCD,  Clik!,
iomegadirect  and the  stylized  "I" logo arE either  registered  trademarks  or
trademarks of Iomega  Corporation  in the United States and/or other  countries.
Certain other product names,  brand names and company names may be trademarks or
designations of their respective owners.



<PAGE>
<TABLE>


                               IOMEGA CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                     ASSETS

                                 (In thousands)
<CAPTION>

                                                 June 25,          December 31,
                                                     2000                  1999
                                             ------------          ------------
                                              (Unaudited)
<S>
CURRENT ASSETS:                               <C>                   <C>

    Cash and cash equivalents                 $   278,583           $   172,706
    Temporary investments                          75,332                38,209
    Trade receivables, less allowance
      for doubtful accounts of  $10,353
      and $15,908, respectively                   168,716               188,482
    Inventories                                    75,733                94,626
    Income taxes receivable                         7,459                19,910
    Other current assets                           16,834                21,585
                                              -----------           -----------
       TOTAL CURRENT ASSETS                       622,657               535,518
                                              -----------           -----------

PROPERTY, PLANT AND EQUIPMENT, at cost            315,065               365,036
   LESS:  Accumulated depreciation and
          amortization                           (206,183)             (227,336)
                                              -----------           -----------
    NET PROPERTY, PLANT AND EQUIPMENT             108,882               137,700
                                              -----------           -----------

INTANGIBLES, NET                                   27,999                31,743
                                              -----------           -----------

OTHER ASSETS                                        2,447                 2,848
                                              -----------           -----------

                                              $   761,985           $   707,809
                                              ===========           ===========

</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 (Continued)
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                        (In thousands, except share data)

<CAPTION>
                                                  June 25,         December 31,
                                                      2000                 1999
                                               -----------          -----------
                                               (Unaudited)
<S>
CURRENT LIABILITIES:                           <C>                   <C>

   Accounts payable                            $   104,210           $  135,615
   Other current liabilities
     (Note 1)                                      191,977              198,993
   Current portion of capitalized
     lease obligations                               4,444                5,542
   Convertible subordinated notes,
     6.75% due 2001                                 45,505                    -
                                               -----------           ----------
      TOTAL CURRENT LIABILITIES                    346,136              340,150
                                               -----------           ----------

CAPITALIZED LEASE OBLIGATIONS,
NET OF CURRENT PORTION                                 781                1,366
                                               -----------           ----------

CONVERTIBLE SUBORDINATED NOTES,
    6.75%, DUE 2001                                      -               45,505
                                               -----------           ----------

COMMITMENTS AND CONTINGENCIES (NOTE 8)

STOCKHOLDERS' EQUITY:

    Preferred Stock, $0.01 par value; authorized
      4,600,000 shares; none issued                      -                    -
    Series A Junior Participating Preferred Stock;
      authorized 400,000 shares; none issued             -                    -
    Common Stock,  $.03 1/3 par value;  authorized
      400,000,000  shares;  issued 271,474,078 and
      270,831,769 shares at June 25, 2000 and
      December 31, 1999, respectively               9,048                 9,027
    Additional paid-in capital                    295,690               293,627
    Less:  809,542 Common Stock treasury shares,
     at cost                                       (6,088)               (6,088)
RETAINED EARNINGS                                 116,418                24,222
                                              -----------            ----------
       TOTAL STOCKHOLDERS' EQUITY                 415,068               320,788
                                              -----------            ----------

                                              $   761,985            $  707,809
                                              ===========            ==========
</TABLE>

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





<PAGE>
<TABLE>



                               IOMEGA CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)

<CAPTION>
                                                     FOR THE QUARTER ENDED
                                                     ---------------------
                                                  June 25,             June 27,
                                                      2000                 1999
                                              ------------          -----------
                                               (Unaudited)
<S>                                            <C>                  <C>
Sales                                           $  303,639           $  348,781
Cost of sales                                      183,628              273,020
                                               -----------          -----------
    GROSS MARGIN                                   120,011               75,761
                                               -----------          -----------

Operating expenses:

    Selling, general and administrative             69,254               82,828
    Research and development                        15,318               23,085
    Restructuring charge (reversal)                 (2,497)              41,909
                                               -----------          -----------
      TOTAL OPERATING EXPENSES                      82,075              147,822
                                               -----------          -----------

Operating income (loss)                             37,936              (72,061)
Interest income                                      5,406                1,134
Interest expense                                    (1,387)              (1,479)
OTHER INCOME (EXPENSE)                                (789)                  17
                                               -----------          -----------

    Income (loss) before income taxes               41,166              (72,389)
BENEFIT (PROVISION) FOR INCOME TAXES                  (796)              25,336
                                               -----------          -----------

    NET INCOME (LOSS)                          $    40,370          $   (47,053)
                                               ===========          ===========

NET INCOME (LOSS) PER COMMON SHARE:

    Basic                                      $      0.15          $     (0.17)
                                               ===========          ===========
    Diluted                                    $      0.15          $     (0.17)
                                               ===========          ===========

Weighted average common
  shares outstanding                               270,638              269,115
                                               ===========          ===========

Weighted average common
  shares outstanding - assuming dilution           281,351              269,115
                                               ===========          ===========

</TABLE>


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








<PAGE>
<TABLE>


                               IOMEGA CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)

<CAPTION>
                                                   FOR THE SIX MONTHS ENDED
                                                   ------------------------
                                                June 25,               June 27,
                                                    2000                   1999
                                             -----------           ------------
                                             (Unaudited)
<S>                                          <C>                     <C>
Sales                                        $   648,536             $  734,993
Cost of sales                                    400,618                565,496
                                             -----------            -----------
    GROSS MARGIN                                 247,918                169,497
                                             -----------            -----------

Operating expenses:

    Selling, general and administrative          134,500                152,769
    Research and development                      26,448                 43,798
    Restructuring charge (reversal)               (2,497)                41,909
                                             -----------            -----------
      TOTAL OPERATING EXPENSES                   158,451                238,476
                                             -----------            -----------

Operating income (loss)                           89,467                (68,979)
Interest income                                    8,910                  2,226
Interest expense                                  (2,834)                (4,268)
Other expense                                     (1,613)                  (491)
                                             -----------            -----------

    Income (loss) before income taxes             93,930                (71,512)
BENEFIT (PROVISION) FOR INCOME TAXES              (1,734)                25,028
                                             -----------            -----------

    NET INCOME (LOSS)                        $    92,196            $   (46,484)
                                             ===========            ===========

NET INCOME (LOSS) PER COMMON SHARE:

    Basic                                    $      0.34            $     (0.17)
                                             ===========            ===========
    Diluted                                  $      0.33            $     (0.17)
                                             ===========            ===========

Weighted average common
  shares outstanding                             270,543                268,753
                                             ===========            ===========


Weighted average common
  shares outstanding - assuming dilution         281,293                268,753
                                             ===========            ===========

</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>
<CAPTION>
                                                     FOR THE SIX MONTHS ENDED
                                                    --------------------------
                                                  June 25,             June 27,
                                                      2000                 1999
                                                ----------           ----------
                                               (Unaudited)
<S>                                            <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)                               $   92,196          $   (46,484)
Non-Cash Revenue and Expense Adjustments:
      Depreciation and amortization                 39,381               46,142
      Deferred income taxes                              -              (13,037)
      Restructuring charge                               -               21,070
      Bad debts                                     (3,227)               3,761
      Tax benefit from dispositions of
        employee stock                                 843                1,061
      Other                                          4,419                  972
                                               -----------          -----------
                                                   133,612               13,485
Changes in Assets and Liabilities:

      Trade receivables                             22,993               43,902
      Inventories                                   18,893               22,112
      Other current assets                           4,751               (2,923)
      Accounts payable                             (31,405)             (36,880)
      Other current liabilities                     (7,016)              22,813
      Income taxes                                  12,451               12,058
                                               -----------          -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES          154,279               74,567
                                               -----------          -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment          (11,238)             (25,688)
Acquisition of SyQuest assets                            -              (12,093)
Purchase of temporary investments                 (103,701)                   -
Sale of temporary investments                       66,578                    -
    NET DECREASE (INCREASE) IN OTHER ASSETS            401               (1,955)
                                               -----------          -----------
NET CASH USED IN INVESTING ACTIVITIES              (47,960)             (39,736)
                                               -----------          -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from sale of Common Stock                   1,241                3,706
Proceeds from issuance of notes payable                  -                3,532
Payments on notes payable and capitalized
   lease obligations                                (1,683)             (43,061)
                                               -----------          -----------
NET CASH USED IN FINANCING ACTIVITIES                 (442)             (35,823)
                                               -----------          -----------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                             105,877                 (992)
CASH AND CASH EQUIVALENTS AT BEGINNING
  OF PERIOD                                        172,706               90,273
                                               -----------          -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD     $   278,583          $    89,281
                                               ===========          ===========
</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

                                   (Unaudited)


(1)      SIGNIFICANT ACCOUNTING POLICIES

          In  the  opinion  of  the  Company's   management,   the  accompanying
          unaudited,  condensed,  consolidated  financial statements reflect all
          adjustments  (consisting only of normal recurring  adjustments)  which
          are necessary to present fairly the financial  position of the Company
          as of June 25, 2000 and December 31, 1999,  the results of  operations
          for the  quarters and six months ended June 25, 2000 and June 27, 1999
          and cash  flows for the six months  ended  June 25,  2000 and June 27,
          1999.

          The results of  operations  for the quarter and six months  ended June
          25, 2000 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 those estimates.

          PRINCIPLES OF CONSOLIDATION - These unaudited, 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  ("OEMs"), end users, retailers,  distributors
          and value-added  manufacturers.  Some retail and distribution customer
          agreements  have  provisions that allow the customer to return product
          under certain conditions within specified time periods.  Revenue, less
          reserves for returns,  is generally  recognized  upon  shipment to the
          customer.

          In addition to reserves for returns, the Company defers recognition of
          revenue on estimated  excess  inventory in the distribution and retail
          channels.  For  this  purpose,  excess  inventory  is  the  amount  of
          inventory that 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  $31.3
          million and $29.8  million at June 25,  2000 and  December  31,  1999,
          respectively,  and is included in "Other current  liabilities"  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.   When  a  price  decrease  is   anticipated,   the  Company
          establishes  reserves  against gross  accounts  receivable for amounts
          estimated to be reimbursed to the qualifying customers.


<PAGE>


          In addition,  the Company records reserves at the time of shipment for
          estimated volume and other channel rebates.  These reserves for volume
          and other channel rebates and price  protection  credits totaled $29.0
          million and $37.8  million at June 25,  2000 and  December  31,  1999,
          respectively,  and  are  netted  against  accounts  receivable  in the
          accompanying  condensed consolidated balance sheets. During the second
          quarter of 2000,  the  Company  reversed  approximately  $6 million of
          reserves associated with prior Zip drive and media rebate programs due
          to lower than estimated  redemption rates. These programs ended on May
          31, 2000.

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

          CASH AND  CASH  EQUIVALENTS  - For the  purposes  of the  consolidated
          statements  of cash  flows,  cash and  cash  equivalents  include  all
          marketable  securities  purchased  with  maturities  of three or fewer
          months.  Cash  equivalents  consist  primarily of investments in money
          market  mutual funds,  commercial  paper,  auction rate,  money market
          preferred stock investments,  taxable and non-taxable  municipal bonds
          and notes and are recorded at cost, which approximates fair value.

          TEMPORARY INVESTMENTS - Investments with maturities in excess of three
          months are classified as temporary investments.  Temporary investments
          at June 25, 2000 and December 31, 1999 primarily  consist of municipal
          notes, common bonds and paper, government securities, commercial paper
          and corporate notes, bonds and paper. The Company minimizes its credit
          risk associated with temporary  investments by using investment grade,
          highly liquid securities. At June 25, 2000, the Company has classified
          all of its temporary investments as available-for-sale securities. Due
          to the  grade of the  investments,  the  adjusted  cost  basis and the
          market value of the investments  was not materially  different at June
          25,  2000 and no  comprehensive  income or loss was  recorded  for the
          second  quarter of 2000.  At December 31, 1999 the Company  classified
          $18.3  million  of its  temporary  investments  as  available-for-sale
          securities and the remaining $19.9 million as held-to-maturity. Due to
          the  timing  of  purchases  (all  available-for-sale  securities  were
          purchased  after December 28, 1999) and the grade of the  investments,
          no comprehensive income or loss was recorded in 1999.

          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: June 25,
          December 31, 2000 1999
<TABLE>
<CAPTION>
                                                          (In thousands)
     <S>                                      <C>                  <C>
     Raw materials                            $     19,093         $     27,254
     Work-in-process                                 4,209                7,958
     Finished goods                                 52,431               59,414
                                              ------------         ------------

                                              $     75,733         $     94,626
                                              ============         ============
</TABLE>


<PAGE>


          OTHER CURRENT  LIABILITIES - Other current  liabilities consist of the
          following:
<TABLE>
<CAPTION>

                                             June 25,              December 31,
                                                 2000                      1999
                                          -----------              ------------
                                                     (In thousands)
      <S>                                  <C>                      <C>
      Accrued payroll, vacation and bonu   $   20,460                $   13,189
      Deferred revenue                         31,287                    29,832
      Accrued warranty                         17,923                    17,211
      Accrued advertising                      43,979                    36,971
      Accrued restructuring charges             8,111                    17,843
      Purchase commitments                      6,529                    19,734
      Other accrued liabilities                63,688                    64,213
                                          -----------               -----------

                                          $   191,977               $   198,993
                                          ===========               ===========
</TABLE>

          EARNINGS  PER COMMON SHARE - Basic  earnings 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 earnings 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 quarter and six months  ended June
          25, 2000 was  determined  under the  assumption  that the  convertible
          subordinated  notes were  converted  on March 27,  2000 and January 1,
          2000,  respectively.  The  computation  of Diluted EPS does not assume
          exercise or conversion of securities  that would have an  antidilutive
          effect on net income (loss) per common share.

          Following is a  reconciliation  of the  numerator and  denominator  of
          Basic EPS to the  numerator  and  denominator  of Diluted  EPS for all
          periods presented:
<TABLE>
<CAPTION>

                                      Net
                                 Income (Loss)       Shares           Per Share
                                  (Numerator)     (Denominator)        Amount
                                --------------   ---------------    -----------
                                      (In thousands, except per share data)
<S>                              <C>                <C>            <C>
FOR THE QUARTER ENDED:

JUNE 25, 2000

Basic EPS                         $    40,370           270,638     $      0.15
Effect of options                           -             1,497               -
Effect of convertible
  subordinated notes                      753             9,216               -
                                  -----------       -----------     -----------
DILUTED EPS                       $    41,123           281,351     $      0.15
                                  ===========       ===========     ===========

JUNE 27, 1999

Basic EPS                         $   (47,053)          269,115     $     (0.17)
Effect of options                           -                 -               -
Effect of convertible
  subordinated notes                        -                 -               -
                                  -----------       -----------      ----------
DILUTED EPS                       $   (47,053)          269,115      $    (0.17)
                                  ===========       ===========      ==========
</TABLE>

          For the quarter  ended June 27, 1999,  stock  options and  convertible
          subordinated notes were not included in the calculation of Diluted EPS
          as their inclusion would be antidilutive.  For the quarters ended June
          25, 2000 and June 27, 1999, there were outstanding options to purchase
          9,205,564 and  4,444,199  shares,  respectively,  that had an exercise
          price  greater than the average  market price of the common shares for
          the respective quarters.
<TABLE>
<CAPTION>

                                       Net
                                 Income (Loss)       Shares           Per Share
                                  (Numerator)     (Denominator)        Amount
                                --------------   ---------------    -----------
                                      (In thousands, except per share data)
<S>                              <C>                <C>            <C>
FOR THE SIX MONTHS ENDED:

JUNE 25, 2000

Basic EPS                         $    92,196           270,543     $      0.34
Effect of options                           -             1,534               -
Effect of convertible
  subordinated notes                    1,505             9,216           (0.01)
                                  -----------       -----------     -----------
DILUTED EPS                       $    93,701           281,293     $      0.33
                                  ===========       ===========     ===========

JUNE 27, 1999

Basic EPS                         $   (46,484)          268,753     $     (0.17)
Effect of options                           -                 -               -
Effect of convertible
  subordinated notes                        -                 -               -
                                  -----------       -----------     -----------
DILUTED EPS                       $   (46,484)          268,753     $     (0.17)
                                  ===========       ===========     ===========
</TABLE>

          For the six months ended June 27, 1999,  stock options and convertible
          subordinated notes were not included in the calculation of Diluted EPS
          as their  inclusion  would be  antidilutive.  For the six months ended
          June 25, 2000 and June 27,  1999,  there were  outstanding  options to
          purchase  9,166,064 and 4,348,199  shares,  respectively,  that had an
          exercise  price  greater  than the average  market price of the common
          shares for the respective period.

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

          RECENT  ACCOUNTING  PRONOUNCEMENTS  -  In  June  1998,  the  Financial
          Accounting  Standards  Board  (FASB)  issued  Statement  of  Financial
          Accounting Standards No. 133,  "Accounting for Derivative  Instruments
          and Hedging Activities" ("SFAS 133"). SFAS 133, as amended by SFAS 137
          and SFAS 138, is effective  for the  Company's  fiscal year  beginning
          2001.  SFAS 133  establishes  accounting  and reporting  standards for
          derivative  instruments,   including  certain  derivative  instruments
          embedded in other contracts,  and for hedging activities.  It requires
          that the Company recognize all derivative instruments as either assets
          or liabilities in the condensed consolidated balance sheet and measure
          those  instruments  at fair  value.  The  Company  does not expect the
          adoption  of SFAS 133, as  amended,  to have a material  impact on the
          Company's results of operations, financial position or liquidity.

          In December 1999, the Securities and Exchange  Commission issued Staff
          Accounting  Bulletin  No.  101 ("SAB  101")  "Revenue  Recognition  in
          Financial  Statements".  SAB 101 provides guidance on the recognition,
          presentation  and  disclosure of revenue in financial  statements.  In
          June of 2000, the Securities and Exchange  Commission  issued SAB 101B
          which extended the implementation date to the Company's fourth quarter
          of 2000. The Company is currently assessing the impact, if any, of SAB
          101 on its financial statements.

          In May 2000, the FASB's  Emerging  Issues Task Force  ("EITF")  issued
          EITF 00-14,  "Accounting  for Certain  Sales  Incentives".  EITF 00-14
          provides  specific  guidance on the accounting for and presentation of
          sales  incentives  offered  by  companies  to their  customers.  These
          incentives  include discounts,  coupons,  rebates and free products or
          services.  The Company implemented the provisions of EITF 00-14 during
          the SECOND QUARTER OF 2000. The implementation did not have a material
          impact on the Company's financial statements.

(2)      INCOME TAXES

          For the quarter  ended June 25, 2000,  the Company  recorded an income
          tax provision of $16.1 million on pre-tax income, substantially offset
          by a  $15.3  million  decrease  in the  valuation  allowance  for  net
          deferred tax assets.

          The  significant  components  of the Company's  deferred  taxes are as
          follows:
<TABLE>
<CAPTION>

                                      JUNE 25, 2000           DECEMBER 31, 1999
                                      --------------          -----------------
                                                  (In thousands)
<S>                                     <C>                         <C>
     Total deferred tax assets           $    99,314                 $  125,361
     TOTAL DEFERRED TAX LIABILITIES          (49,048)                   (37,347)
                                         -----------                 ----------
     Net deferred tax assets                  50,266                     88,014
     LESS: VALUATION ALLOWANCE               (50,266)                   (88,014)
                                         -----------                 ----------

     TOTAL NET DEFERRED TAXES            $         -                $         -
                                         ===========                ===========
</TABLE>

          During the second quarter of 2000, the Company  decreased its deferred
          tax asset valuation  allowance by  approximately  $15 million,  to $50
          million due to a decrease  in net  deferred  tax  assets.  The Company
          evaluates  the  realizablity  of its  net  deferred  tax  assets  on a
          quarterly  basis. If the net deferred tax assets change in the future,
          if the Company's  profitability changes, or if the valuation allowance
          requirements  change, the valuation allowance may increase or decrease
          which will impact future income tax provisions.

          As of June 25, 2000,  the Company had  approximately  $13.0 million of
          deferred   tax  assets   related  to  foreign   net   operating   loss
          carryforwards,  which  reflected  a  benefit  of  approximately  $30.3
          million  in  future  tax   deductions,   for  which  the  Company  had
          established  a  valuation  allowance.  These  carryforwards  expire at
          various dates beginning in 2004.

          As of June 25, 2000,  the Company had  approximately  $13.4 million of
          deferred   tax  assets   related  to  domestic  net   operating   loss
          carryforwards,  which  reflected  a  benefit  of  approximately  $34.4
          million  in  future  tax   deductions,   for  which  the  Company  had
          established  a  valuation  allowance.  These  carryforwards  expire at
          various dates beginning in 2020.

          Additionally, as of June 25, 2000, the Company had approximately $23.9
          million of domestic deferred tax assets, net of deferred  liabilities,
          which reflected a benefit of approximately $61.3 million in future tax
          deductions.

          As of June 25,  2000,  the  Company  had  provided  approximately  $40
          million in deferred tax liabilities on  approximately  $102 million of
          unremitted  foreign  earnings  expected to be repatriated some time in
          the  future.   U.S.  taxes  have  not  been  provided  for  additional
          unremitted foreign earnings of approximately  $112 million,  which are
          considered  to be  permanently  invested in non-U.S.  operations.  The
          residual U.S. tax liabilities, if such amounts were remitted, would be
          approximately  $44  million.  Cash paid for taxes was $0.4 million and
          $3.1 million,  respectively,  for the quarters ended June 25, 2000 and
          June 27, 1999.

          For the six month period ended June 25, 2000, the Company  recorded an
          income tax provision of $39.5 million on pre-tax income, substantially
          offset by a $37.8 million decrease in the valuation  allowance for the
          net deferred income taxes. Cash paid for income taxes was $1.4 million
          and $4.2 million,  respectively,  for the first six months of 2000 and
          1999.

 (3)     DEBT

          NOTES PAYABLE - The Company  cancelled its $75 million  Senior Secured
          Credit  Facility  with  Morgan  Guaranty  Trust  Company  of New York,
          Citibank,  N.A. and a syndicate  of other  lenders two months prior to
          the Credit  Facility's  scheduled  expiration  date of July 14,  2000.
          There had been no  borrowings  under the Credit  Facility  in over six
          quarters.

          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  through  April 2002.  Principal and interest
          payments  under  the  various   agreements  are  payable   monthly  or
          quarterly.  Interest rates are fixed and range from 7.1% to 10.2%. The
          leases are secured by the underlying  leased  equipment,  software and
          furniture.

          Cash paid for interest was $0.7 and $2.6  million,  respectively,  for
          the quarters ended June 25, 2000 and June 27, 1999, including interest
          on capital leases. Included in interest expense for the second quarter
          of 2000 and 1999 was $0.4 million of amortization of deferred  charges
          associated  with  obtaining the debt. All remaining  deferred  charges
          associated  with the  cancelled  Credit  Facility,  which totaled $0.2
          million, were expensed in the second quarter of 2000.

          For the first six months of 2000 and 1999,  cash paid for interest was
          $2.7 million and $7.3  million,  respectively,  including  interest on
          capital leases.  Included in interest expense for the first six months
          of 2000 and 1999, was $0.9 million and $0.8 million,  respectively, of
          amortization of deferred  charges  associated with obtaining the debt.
          All remaining  deferred  charges  associated with the cancelled Credit
          Facility,  which  totaled $0.2  million,  were  expensed in the second
          quarter of 2000.

 (4)     BUSINESS SEGMENT INFORMATION

         The Company has four reportable  segments based primarily on the nature
         of the  Company's  customers  and  products:  Zip,  Jaz,  ZipCD(TM) and
         Clik!(TM).  The Zip  segment  involves  the  development,  manufacTURE,
         distribution and sales of personal  storage products and  applications,
         including  Zip disk and drive systems to  retailers,  distributors  and
         OEMs throughout the world.  The Jaz segment  involves the  development,
         manufacture,  distribution  and sales of professional  storage products
         and applications,  including Jaz disk and drive systems to distributors
         and  retailers  throughout  the  world.  The  Company's  ZipCD  segment
         involves  the  distribution  and sales of CD-RW  drives  to  retailers,
         distributors and resellers throughout the world and includes ZipCD disc
         and drive systems, which began shipping in limited quantities in August
         1999.  The  Clik!   segment  involves  the  development,   manufacture,
         distribution  and sales of Clik! PC Card drives,  Clik!  OEM drives and
         Clik!  disks for use with  portable  digital  products  such as digital
         cameras,  audio  players,  handheld  personal  computers  and  notebook
         computers to retailers, distributors, OEMs and resellers throughout the
         world. The "Other"  category  includes  products such as Ditto,  floppy
         disks and other Nomai products and other miscellaneous items.

         The accounting policies of the segments are the same as those described
         in  Note  1  "Significant  Accounting  Policies".  Intersegment  sales,
         eliminated in  consolidation,  are not material.  The Company evaluates
         performance  based on product  profit margin for each segment.  Product
         profit margin is defined as sales and other income directly  related to
         a  segment's  operations,  less both fixed and  variable  manufacturing
         costs,  research and  development  expenses  and  selling,  general and
         administrative  expenses  directly  related to a segment's  operations.
         When such costs and  expenses  exceed sales and other  income,  product
         profit margin is referred to as product loss. The expenses attributable
         to corporate activity are not allocated to the operating segments.

         The  information  in the following  table is derived  directly from the
         segments' internal financial  information used for corporate management
         purposes.


<PAGE>
<TABLE>
<CAPTION>


REPORTABLE OPERATING SEGMENT INFORMATION:

                                                               FOR THE QUARTER ENDED                    FOR THE SIX MONTHS ENDED
                                                           June 25,               June 27,           June 25,             June 27,
                                                              2000                   1999               2000                  1999
                                                      ------------            -----------        -----------          ------------
                                                                   (In millions)                           (In millions)
<S>                                                    <C>                   <C>                 <C>                  <C>
   SALES:

       Zip                                             $       237           $        274        $       516           $       576
       Jaz                                                      38                     66                 90                   129
       ZipCD                                                    25                      -                 35                     -
       Clik!                                                     3                      1                  5                     6
       Other                                                     1                      8                  3                    24
                                                       -----------           ------------        -----------           -----------
TOTAL SALES                                            $       304           $        349        $       649           $       735
                                                       ===========           ============        ===========           ===========

   PRODUCT PROFIT MARGIN (LOSS)
   BEFORE RESTRUCTURING CHARGE:

       Zip                                            $         69           $         33        $       158           $        84
       Jaz                                                      12                     (2)                24                    (5)
       ZipCD                                                     1                     (2)                 1                    (3)
       Clik!                                                    (3)                   (17)               (20)                  (30)
       Other                                                    (2)                   (10)                (5)                  (16)
                                                       -----------            -----------        -----------           -----------
   TOTAL PRODUCT PROFIT MARGIN                                  77                      2                158                    30
                                                       -----------            -----------        -----------           -----------

   PRODUCT PROFIT MARGIN (LOSS)
   AFTER RESTRUCTURING CHARGE:

       Zip                                            $        69            $        33         $       158           $        84
       Jaz                                                     13                    (32)                 25                   (35)
       ZipCD                                                    1                     (2)                  1                    (3)
       Clik!                                                   (2)                   (17)                (19)                  (30)
       Other                                                   (2)                   (18)                 (5)                  (24)
                                                      -----------            -----------         -----------           -----------
   TOTAL PRODUCT PROFIT MARGIN (LOSS)                          79                    (36)                160                    (8)
                                                      -----------            -----------         -----------           -----------

   COMMON (WITH RESTRUCTURING ALLOCATED TO PPM):

       Corporate restructuring charge                           -                     (4)                  -                    (4)
       General corporate expenses                             (41)                   (32)                (71)                  (57)
       Interest and other income (expense), net                 3                      -                   5                    (3)
                                                       ----------            -----------         -----------           -----------
INCOME (LOSS) BEFORE INCOME TAXES                     $        41            $       (72)        $        94           $       (72)
                                                      ===========            ===========         ===========           ===========
</TABLE>

(5)      RESTRUCTURING CHARGES

         During the quarter ended June 27, 1999, the Company  recorded a pre-tax
         restructuring  charge of $41.9 MILLION AS A RESULT OF STEPS THE COMPANY
         WAS  TAKING  TO  ORGANIZE   ALONG   FUNCTIONAL   LINES  (for   example,
         manufacturing,  sales, etc.) as opposed to product lines. These actions
         included   the   exit  of   facilities,   headcount   reductions,   the
         discontinuance of certain products and development  projects related to
         enhancements  and accessories  associated with the Jaz product platform
         and consolidation of the Company's magnetic technology expertise at its
         headquarters in Roy, Utah. These actions included closing the Company's
         facilities  in  Milpitas,  California  and San Diego,  California.  The
         restructuring  charge was  comprised of $20.2  million for fixed assets
         and inventory  related to the  discontinuance  of certain  products and
         development projects related to enhancements and accessories associated
         with the Jaz product  platform;  $9.7 million for  workforce  reduction
         costs;  $4.3 million for excess leasehold  improvements,  furniture and
         fixtures  formerly  utilized in the Milpitas and San Diego  facilities;
         $3.0  million for lease  termination  costs for  facilities  located in
         Milpitas and San Diego;  $4.7 million for  workforce  reduction  costs,
         contract cancellation and other exit costs to consolidate the Company's
         operations in France and Scotland.  This restructuring charge consisted
         of cash and  non-cash  charges of  approximately  $18  million  and $24
         million,   respectively.   There  were  no   indications  of  permanent
         impairment of the assets prior to the restructuring actions.

         In connection  with the  Company's  second  quarter 1999  restructuring
         actions,  the Company  terminated 466 regular and temporary  employees,
         consisting  primarily of operations and product  development  employees
         located in Milpitas, San Diego and Roy. The Company pays severance on a
         continuous basis as opposed to a lump sum payment. In addition, several
         of the  employees  were offered  retention  packages into the third and
         fourth  quarters of 1999,  and therefore,  their  severance pay did not
         begin  until  later in 1999.  During  the second  quarter of 2000,  the
         Company reversed $1.6 million of restructuring reserves associated with
         the discontinuance of a development  project.  The excess restructuring
         reserves  were  a  result  of the  Company  negotiating  reductions  in
         purchase  commitments  or  cancellation  charges on inventory and fixed
         assets and higher than expected proceeds received from equipment sales.
         Certain of the facilities in California  have not yet been subleased or
         cancelled.  The Company is continuing to make monthly payments for cash
         flow  purposes.  Certain of the  contract  cancellations  in France are
         under  dispute  and  therefore  have  not  been  settled.  The  Company
         anticipates completing these restructuring actions by the end of 2000.

         Restructuring  reserves are  included in the  Company's  other  current
         liabilities, inventory and property, plant and equipment as of June 25,
         2000.  Utilization  of the second quarter 1999  restructuring  reserves
         during the quarter ended June 25, 2000 is summarized below:


<PAGE>
<TABLE>



                                                                          UTILIZED
                                                Balance           ---------------------------                       Balance
                                            MARCH 26, 2000       CASH           NON-CASH         REVERSALS       JUNE 25, 2000
                                            --------------   ------------       --------        -----------     --------------

                                                                            (In thousands)
        <S>                                    <C>            <C>            <C>             <C>                 <C>
         SECOND QUARTER 1999
         RESTRUCTURING ACTIONS:

         Discontinued Products/Projects:

             Fixed assets (a)                  $     7,699    $        -       $    (6,017)    $    (1,189)     $       493
             Purchase commitments (b)                  716           (24)                -            (400)             292
             Inventory (a)                             532             -              (524)             (8)              -

         Severance and benefits (b)                    990          (562)                -               -              428
         Other fixed asset charges (a)               3,096             -            (2,671)              -              425
         Lease terminations (b)                      1,848          (341)                -               -            1,507

         France/Scotland Consolidation:

             Contract cancellation (b)(c)            1,414             -                 -               -            1,414
             Severance and benefits (b)                 40             -                 -               -               40
             Lease cancellations (a)                   157             -                 -               -              157
             Fixed assets (a)                          217           (82)                -               -              135
             Other exit costs (A)                       35             -                 -               -               35
                                               -----------    -----------      -----------     -----------      -----------

                                               $    16,744    $   (1,009)      $    (9,212)    $    (1,597)     $     4,926
                                               ===========    ===========      ===========     ===========      ===========

         Balance Sheet Breakout:

             Inventory reserves                $       532    $        -       $     (524)     $        (8)     $         -
             Fixed asset reserves                   10,674             -           (8,688)          (1,189)             797
             Liabilities                             5,538        (1,009)               -             (400)           4,129
                                               -----------    ----------       ----------      -----------      -----------
                                               $    16,744    $   (1,009)      $   (9,212)     $    (1,597)     $     4,926
                                                 =========   ===========       ==========      ===========      ===========

          (a) Amounts represent primarily non-cash charges.

          (b) Amounts represent primarily cash charges.

          (c ) Amounts relate to commitments  associated with the  manufacturing
          of floppy drives.
</TABLE>

         During the third quarter ended September 26, 1999, the Company recorded
         a  pre-tax  restructuring  charge  of  $20.5  million  as a  result  of
         restructuring   actions   initiated  to   consolidate   worldwide  disk
         manufacturing and refocus the Clik! product platform on the newer Clik!
         PC Card and OEM drives.  An additional charge of $5.4 million primarily
         for severance  and benefits was taken in the fourth  quarter of 1999 in
         connection with these actions.  These  restructuring  charges  included
         reserves of $10.2  million  relating  to certain  assets and exit costs
         such  as   cancellation   fees   associated   with  the   cessation  of
         manufacturing  in  Avranches,  France;  $11.5  million of inventory and
         fixed asset reserves associated with the older Clik! products; and $2.7
         million for write-offs of intangibles and other miscellaneous  charges.
         These  restructuring  charges consisted of cash and non-cash charges of
         approximately $9 million and $17 million, respectively. There can be no
         assurance  that the  Company  will cease  manufacturing  operations  in
         France without incurring significant legal or other costs that have not
         been accrued for in the restructuring charge. In addition,  the Company
         has been  notified of a tax audit to be conducted in France.  There can
         be no assurance  that the Company will not incur claims or  assessments
         from this audit that have not been accrued.  During the second  quarter
         of 2000,  the Company  reversed $0.9 million of  restructuring  charges
         associated with Clik!  product  streamlining as a result of the Company
         negotiating reductions in purchase commitments.

         In  connection  with  the  Company's  1999  second  half  restructuring
         actions,  the  Company  had a  workforce  reduction  of 123 regular and
         temporary  employees,  consisting  primarily of operations employees in
         Avranches,  France  and  product  development  employees  in  Longmont,
         Colorado.  The  Company  anticipates  that  the  implementation  of the
         restructuring  actions within the United States will be complete by the
         end of  September  2000.  However,  the  legal  requirements  in France
         relating to  workforce  reductions  are very strict and the social plan
         approved  for  the  workforce  can  take  up  to  two  years  to  fully
         administrate.   Therefore,   the  restructuring   reserves  related  to
         manufacturing cessation in France will take longer to utilize.

         Restructuring  reserves are  included in the  Company's  other  current
         liabilities, inventory and property, plant and equipment as of June 25,
         2000. Utilization of the second half 1999 restructuring reserves during
         the quarter ended June 25, 2000 is summarized below:

<TABLE>

                                                                          UTILIZED
                                                Balance           ---------------------------                       Balance
                                            MARCH 26, 2000       CASH           NON-CASH         REVERSALS       JUNE 25, 2000
                                            --------------   ------------       --------        -----------     --------------

                                                                            (In thousands)
        <S>                                    <C>            <C>            <C>             <C>                 <C>

         SECOND HALF 1999
         RESTRUCTURING ACTIONS:

         Clik! Streamlining:

             Fixed assets (a)                 $    2,066       $         -     $      (539)        $         -         $    1,527
             Purchase commitments (b)              1,508                 -             (12)               (900)               596

         Manufacturing Cessation:

             Fixed assets (a)                      2,465                 -            (695)                  -              1,770
             Other assets (a)                        275                 -               -                   -                275
             Other commitments (b)                 2,709              (125)              -                   -              2,584
             Severance and benefits (b)            1,746              (944)              -                   -                802

         SEVERANCE AND BENEFITS (B)                   25               (25)              -                   -                  -
                                              ----------       -----------     -----------         -----------        -----------
                                              $   10,794       $    (1,094)    $    (1,246)        $      (900)       $     7,554
                                              ==========       ===========      ===========         ===========        ===========
         Balance Sheet Breakout:

             Fixed asset reserves (a)         $    4,531       $         -     $    (1,234)        $         -        $     3,297
             Other (a)                                47                 -               -                   -                 47
             Inventory reserves (a)                  228                 -               -                   -                228
             LIABILITIES (B)                       5,988            (1,094)            (12)               (900)             3,982
                                             -----------       -----------     -----------         -----------        -----------
                                             $    10,794       $    (1,094)    $    (1,246)        $      (900)        $    7,554
                                             ===========       ===========     ===========         ===========         ==========

         (a) Amounts represent primarily non-cash charges.
         (b) Amounts represent primarily cash charges.
</TABLE>

(6)      OTHER NON-RESTRUCTURING CHARGES

         During  the  first  quarter  of  2000,   the  Company   recorded  other
         non-restructuring charges of $7.4 million as cost of sales. The charges
         were  comprised of $3.7 million for excess  Clik!  media  manufacturing
         capacity,  $2.8  million to reflect a reduction  in the  estimated  net
         realizable  value of Clik!  PC Card drive  inventory,  $0.6 million for
         excess Clik! PC Card drive manufacturing  capacity and $0.3 million for
         Clik! PC Card drive purchase commitments.


<PAGE>


(7)      OTHER MATTERS

         SIGNIFICANT  CUSTOMERS - DURING THE QUARTER ended June 25, 2000,  sales
         to Ingram Micro, Inc. and Tech Data Corporation accounted for 20.6% and
         12.1% of consolidated sales, respectively, compared to 14.3% and 10.4%,
         respectively,  for the  corresponding  period of 1999.  No other single
         customer  accounted for more than 10% of the Company's  sales for these
         periods.

         During the six months ended June 25, 2000, sales to Ingram Micro,  Inc.
         accounted  for 14.7% of  consolidated  sales  compared to 12.6% for the
         corresponding  period of 1999. 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  25,  2000,  outstanding  forward  exchange  sales  (purchase)
         contracts, which all mature in September 2000, were as follows:

<TABLE>
<CAPTION>

<S>                                 <C>                <C>               <C>
                                                         Contracted        Spot
      Currency                          Amount          Forward rate       Rate
      ----------------------        -------------      --------------    ------
      European Euro                    20,000,000           1.06           1.07
      Japanese Yen                   (422,000,000)        102.78         105.02
      Singapore Dollar                  2,850,000           1.72           1.73
      Swiss Franc                      (1,800,000)          1.63           1.66
</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  25,  2000,  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 counter-party.

(8)      COMMITMENTS AND CONTINGENCIES

         LITIGATION

         As previously disclosed in the Company's Annual Report on Form 10-K for
         the year ended December 31, 1999 and the Company's  Quarterly Report on
         Form 10-Q for the quarter  ended March 26, 2000,  on July 6, 1999,  THE
         COMPANY  INITIATED   LITIGATION   AGAINST  CASTLEWOOD   SYSTEMS,   INC.
         ("CASTLEWOOD"),  IOMEGA CORPORATION V. CASTLEWOOD SYSTEMS, INC., in the
         United States District Court in the District of Utah for infringing the
         Company's U.S. Patent No.  4,458,273 and U.S. Patent No.  5,854,719 and
         for  infringing  and  diluting  the  Company's  registered   trademarks
         "Iomega",   "Zip"  and  "Jaz".  The  complaint   further  alleged  that
         Castlewood had engaged in federal unfair competition, common law unfair
         competition and common law unjust  enrichment.  The complaint  requests
         monetary  damages  and  injunctive  relief  enjoining  Castlewood  from
         further  infringement.  On August 18, 1999,  Castlewood filed an answer
         and  counterclaims,  denying  the  Company's  claims and  requesting  a
         declaratory  judgment  that  the  Company's  patents  are  invalid.  On
         September  9, 1999,  the  Company  filed a reply to the  counterclaims,
         denying  that the patents are  invalid.  On  September  17,  1999,  the
         Company  also  initiated  litigation  against  Castlewood  in the Paris
         District  Court based on claims of copyright  and patent  infringement.
         Additionally,  on September 20, 1999, the Company initiated  litigation
         against Motek, a French retailer of Castlewood's products, in the Paris
         District  Court.  On November  15,  1999,  Castlewood  filed an amended
         answer and  counterclaims,  adding several  affirmative  defenses.  The
         Company  filed a reply to this  amended  answer  and  counterclaims  on
         January 5, 2000.  The court has since denied a motion for a preliminary
         injunction  with respect to the Company's  patent claim,  and granted a
         motion for a  preliminary  injunction  with  respect  to the  Company's
         trademark  claims.  On April  11,  2000,  the  Company  also  initiated
         litigation  against  Castlewood in the United States District Court for
         the District of Utah for  infringement of the Company's U.S. Patent No.
         6,049,444.  The  Company's  complaint  requests  monetary  damages  and
         injunctive  relief  enjoining  Castlewood  from  further  infringement.
         Castlewood's  response to the  complaint is due on or before  September
         15,  2000.  The  Company   continues  to  be  committed  to  vigorously
         protecting  and  enforcing  its  intellectual  property  rights  and to
         attacking unfair competition.

         As previously disclosed in the Company's Annual Report on Form 10-K for
         the year ended December 31, 1999 and the Company's  Quarterly Report on
         Form 10-Q for the quarter ended March 26, 2000, on May 27, 1998,  SCOTT
         D. ORA FILED A COMPLAINT  AGAINST THE  COMPANY AND OTHER  PARTIES.  THE
         ACTION,  CAPTIONED  ORA V.  IOMEGA  CORPORATION,  ET AL.,  was filed in
         Superior Court of the State of California for the County of Los Angeles
         and  alleged  that the  Company  and  certain  of its  former  officers
         violated certain federal and state securities laws and alleged that Kim
         B. Edwards, former Chief Executive Officer and director of the Company,
         breached  his  duties  as  a  director  of  the  Company.  The  Company
         successfully removed the action to the United States District Court for
         the Central  District  of  California.  On February 9, 1999,  the Court
         dismissed  five of the complaints  original seven causes of action.  On
         August  18,  1999,  the Court  dismissed  the  remaining  two causes of
         action,  but gave Ora the opportunity to file an amended complaint with
         respect to those two counts.  On November 1, 1999, Ora filed an amended
         complaint  repleading the two causes of action  dismissed on August 18,
         1999 and  bringing  two new related  conspiracy  causes of action.  The
         amended complaint seeks an unspecified  amount of damages.  On December
         15, 1999, the Company and the individual  defendants  filed a motion to
         dismiss the amended  complaint.  On April 12, 2000, the Court dismissed
         the  amended  complaint  in  its  entirety,  entering  judgment  in the
         Company's favor. On May 7, 2000, the plaintiff filed a notice of appeal
         to the Ninth  Circuit  Court of  Appeals.  The  plaintiff  must file an
         opening appeal brief on August 29, 2000. The Company  intends to defend
         vigorously against this appeal.

         As previously disclosed in the Company's Annual Report on Form 10-K for
         the year ended December 31, 1999 and the Company's  Quarterly Report on
         Form 10-Q for the quarter  ended March 26, 2000, on September 10, 1998,
         A PURPORTED CLASS ACTION LAWSUIT, RINALDI ET AL. V. IOMEGA CORPORATION,
         was filed  against the Company in the Superior  Court of Delaware,  New
         Castle  County.  The suit  alleges that a defect in the  Company's  Zip
         drives causes an abnormal  clicking  noise that may indicate  damage to
         the Zip drive or disks. The plaintiffs sought relief pursuant to claims
         of breach of warranty,  violation of the Delaware  Consumer  Fraud Act,
         and negligent design,  manufacture and failure to warn. On September 3,
         1999,  the  Court  dismissed  the  claims of  breach  of  warranty  and
         violation  of the  Consumer  Fraud Act,  granting  the  plaintiffs  the
         opportunity  to amend the  latter  claim.  On  January  31,  2000,  the
         plaintiffs filed an amended  complaint,  reasserting  their claim under
         the Delaware  Consumer  Fraud Act and on February 28, 2000, the Company
         moved to dismiss this amended  claim.  With respect to this motion,  on
         April 10, 2000,  the Attorney  General of the State of Delaware filed a
         brief in opposition, and, on July 27, 2000, by subpoena, also requested
         documents from the Company  relating to its advertising in Delaware for
         the period  January 1998 through  December  1999. The Court has not yet
         decided  the motion to  dismiss,  and the  Company is in the process of
         responding to the Attorney General's  subpoena.  On April 25, 2000, the
         plaintiffs  moved to further amend their complaint to add an additional
         plaintiff who is a Delaware resident, which amendment the Court allowed
         on May 23, 2000 over the Company's  opposition.  In connection with the
         same matter,  on February 28, 2000, two of the plaintiffs served on the
         Company  a  "Notice  of  Claim"  under  Section  17.46(b)  of the Texas
         Deceptive  Trade Practices Act asserting  allegations  similar to those
         made in connection  with the  plaintiffs'  Delaware  Consumer Fraud Act
         claim (the "Texas Claim").  The Texas Claim purports to be on behalf of
         the two  plaintiffs  and a class of others  similarly  situated  in the
         State of Texas, and demands relief of $150 for each Zip drive purchased
         by a class member, $100 for mental anguish damages to each class member
         and attorneys' fees and costs. Formal litigation in connection with the
         Texas Claim has not been  commenced.  The Company intends to vigorously
         defend against this suit and the Texas Claim. Although the Company does
         not  expect  this suit or the Texas  Claim to have a  material  adverse
         effect on the  Company's  ongoing  business,  results of  operations or
         financial  condition,  an adverse  judgment or settlement  could have a
         material  adverse  effect  on the  operating  results  reported  by the
         Company for the period in which any such adverse judgment or settlement
         occurs.

         As previously disclosed in the Company's Annual Report on Form 10-K for
         the  year  ended  December  31,  1999,  ON  JUNE  15,  1999,  A  PATENT
         INFRINGEMENT LAWSUIT,  VALITEK,  INC. V. IOMEGA CORPORATION,  was filed
         against the Company in the United States District Court for the Eastern
         District of  Pennsylvania.  The suit alleges patent  infringement.  The
         complaint  requests  injunctive  relief  enjoining the Company from the
         alleged  infringement  and  monetary  damages.  The Company  intends to
         vigorously defend against this suit.

         As previously disclosed in the Company's Annual Report on Form 10-K for
         the year ended  December  31, 1999,  on December 29, 1999,  the Company
         filed a request in Geneva,  Switzerland  for  arbitration  against Marc
         Frouin,   Herve  Frouin  and  Marine  Frouin,   the  former   principal
         shareholders of Nomai S.A. ("Nomai"),  which is now a subsidiary of the
         Company. The arbitration request sought indemnification from the former
         shareholders  for breaches of numerous  representations  and warranties
         under the  Stock  Purchase  Agreement  pursuant  to which  the  Company
         acquired Nomai. On July 26, 2000, the Company entered into an agreement
         with the former shareholders settling any claims the Company had or may
         in  the  future  have  against  the  former  shareholders.   Under  the
         settlement  agreement,  the Company  will receive  approximately  CHF 6
         million  (approximately  U.S. $3.6 million as of June 25, 2000),  which
         represented  substantially  all of the amounts  remaining in the escrow
         created at the time of the acquisition. This will be accounted for as a
         reduction of goodwill.

         As previously disclosed in the Company's Annual Report on Form 10-K for
         the year  ended  December  31,  1999,  on  February  18,  2000,  Maitre
         Jean-Jacques  Savenier,  the  Commissaire  a  l'execution  du  PLAn
         (bankruptcy   trustee)   filed  a  complaint   against  the   Company's
         subsidiary,  Nomai. Maitre Jean-Jacques  Savenier claims that Nomai has
         not complied with investment and employment related commitments made by
         Nomai's former management before the Commercial Court in 1997. In 1997,
         Nomai acquired certain assets from RPS Media SA in bankruptcy, with the
         consent  and under the  supervision  of the  Commercial  Court of Albi,
         pursuant to French bankruptcy law provisions.  The action seeks a daily
         penalty against Nomai of FF 100,000 (approximately $15,000) until Nomai
         invests  FF  48,000,000  (approximately  $7.4  million)  and  hires 100
         people. The Company intends to vigorously defend against the lawsuit.

         On May 18, 2000, Conseil & Technique,  Soterem and IDCC (subcontractors
         under a research and  development  contract) filed a lawsuit before the
         Commercial Court of Toulouse,  France against Nomai's former subsidiary
         Albi Media  Manufacturing,  SARL ("AMM").  Iomega's subsidiary Nomai is
         obligated to indemnify for and defend  against the lawsuit  pursuant to
         the  agreement  whereby  Nomai  divested its  ownership of AMM to a new
         owner. Neither Iomega nor Nomai are parties to the lawsuit. The lawsuit
         alleges breach of contract and other claims  relating to a research and
         development  project among AMM and the  plaintiffs.  The lawsuit claims
         total  damages  of 67 million  French  francs.  An  initial  procedural
         hearing  was held in the case in June  2000,  and the next  hearing  is
         scheduled for September 2000.

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

         STOCK OPTION EXCHANGE PROGRAM

         On April 19,  2000,  the  Company's  shareholders  approved an Employee
         Stock Option  Exchange  Program ("the Exchange  Program"),  pursuant to
         which the  Company  has  granted  approximately  1.1  million new stock
         options at an exercise price of $3.59 in exchange for approximately 1.8
         million previously  outstanding stock options which had exercise prices
         above $3.59.  The new options  issued  under the  Exchange  Program are
         subject  to  variable  plan   accounting   in   accordance   with  FASB
         Interpretation  No. 44 "Accounting for Certain  Transactions  Involving
         Stock  Compensation".  Under variable plan  accounting,  the Company is
         required  to  recognize   compensation  expense  in  its  statement  of
         operations for any increase in the market price of the Company's Common
         Stock  above  $4.00  (the  market  price of July 1,  2000  which is the
         effective  date of  FASB  Interpretation  No.  44).  This  compensation
         expense  must be  recorded  on a  quarterly  basis  until the option is
         exercised,  forfeited  or  expires  unexercised.  The impact of the new
         options granted under the Exchange  Program on the Company's  financial
         statements  will  depend on  quarterly  fluctuations  in the  Company's
         Common  Stock  price  and  the  dates  of  exercises,   forfeitures  or
         cancellations  of the new  options  by  employees.  Depending  on these
         factors,   the  Company   could  be  required  to  record   significant
         compensation expense during the next ten years.  Moreover,  because the
         precise  amount of the  compensation  expense will depend on the market
         price of the  Common  Stock at the end of each  quarterly  period,  the
         Company  will  not be  able  to  forecast  in  advance  the  amount  of
         compensation expense that it will incur in any future period.


<PAGE>



ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:

The  Company's  fiscal  calendar  was  recently  approved  for fiscal 2001 which
management  believes  better  aligns  the  Company's  fiscal  quarters  with its
customer's  fiscal  quarters.  The quarters  for 2001 will end on the  following
dates compared to the corresponding dates for 2000:

                                     2001             2000
                                    -----            ------
                  Q1                April 1         March 26
                  Q2                July 1           June 25
                  Q3               Sept. 30         Sept. 24
                  Q4                Dec. 31          Dec. 31

Under the calendar for fiscal 2001,  the first  quarter of 2001 will have 5 more
days than the first  quarter of 2000 and the fourth  quarter of 2001 will have 5
less days than the fourth  quarter of 2000.  The Company  plans to continue  its
practice of releasing earnings on the third Thursday following quarter end.

BUSINESS SEGMENT INFORMATION

The Company has four  reportable  segments based  primarily on the nature of the
Company's  customers and products:  Zip, Jaz,  ZipCD and Clik!.  The Zip segment
involves  the  development,  manufacture,  distribution  and  sales of  personal
storage  products  and  applications,  including  Zip disk and drive  systems to
retailers,  distributors and OEMs throughout the world. The Jaz segment involves
the development,  manufacture,  distribution  and sales of professional  storage
products and applications,  including Jaz disk and drive systems to distributors
and retailers  throughout the world.  The Company's  ZipCD segment  involves the
distribution and sales of CD-RW drives to retailers,  distributors and resellers
throughout  the world and  includes  ZipCD disc and drive  systems,  which began
shipping in limited  quantities in August 1999. The Clik!  segment  involves the
development,  manufacture, distribution and sales of Clik! PC Card drives, Clik!
OEM  drives  and Clik!  disks for use with  portable  digital  products  such as
digital  cameras,  audio  players,  handheld  personal  computers  and  notebook
computers to retailers,  distributors,  OEMs and resellers throughout the world.
The "Other"  category  includes  products such as Ditto,  floppy disks and other
Nomai products and other miscellaneous items.

The accounting  policies of the segments are the same as those described in Note
1  "Significant   Accounting  Policies".   Intersegment  sales,   eliminated  in
consolidation,  are not material.  The Company  evaluates  performance  based on
product  profit  margin for each  segment.  Product  profit margin is defined as
sales and other income  directly  related to a segment's  operations,  less both
fixed and variable  manufacturing  costs,  research and development expenses and
selling,  general and  administrative  expenses  directly related to a segment's
operations.  When such costs and expenses exceed sales and other income, product
profit  margin is referred to as product  loss.  The  expenses  attributable  to
corporate activity are not allocated to the operating segments.

The  information in the following  table is derived  directly from the segments'
internal financial information used for corporate management purposes.


<PAGE>
<TABLE>
<CAPTION>


REPORTABLE OPERATING SEGMENT INFORMATION:

                                                               FOR THE QUARTER ENDED                    FOR THE SIX MONTHS ENDED
                                                           June 25,               June 27,           June 25,             June 27,
                                                              2000                   1999               2000                  1999
                                                      ------------            -----------        -----------          ------------
                                                                   (In millions)                           (In millions)
<S>                                                    <C>                   <C>                 <C>                  <C>
   SALES:

       Zip                                             $       237           $        274        $       516           $       576
       Jaz                                                      38                     66                 90                   129
       ZipCD                                                    25                      -                 35                     -
       Clik!                                                     3                      1                  5                     6
       Other                                                     1                      8                  3                    24
                                                       -----------           ------------        -----------           -----------
TOTAL SALES                                            $       304           $        349        $       649           $       735
                                                       ===========           ============        ===========           ===========

   PRODUCT PROFIT MARGIN (LOSS)
   BEFORE RESTRUCTURING CHARGE:

       Zip                                            $         69           $         33        $       158           $        84
       Jaz                                                      12                     (2)                24                    (5)
       ZipCD                                                     1                     (2)                 1                    (3)
       Clik!                                                    (3)                   (17)               (20)                  (30)
       Other                                                    (2)                   (10)                (5)                  (16)
                                                       -----------            -----------        -----------           -----------
   TOTAL PRODUCT PROFIT MARGIN                                  77                      2                158                    30
                                                       -----------            -----------        -----------           -----------

   PRODUCT PROFIT MARGIN (LOSS)
   AFTER RESTRUCTURING CHARGE:

       Zip                                            $        69            $        33         $       158           $        84
       Jaz                                                     13                    (32)                 25                   (35)
       ZipCD                                                    1                     (2)                  1                    (3)
       Clik!                                                   (2)                   (17)                (19)                  (30)
       Other                                                   (2)                   (18)                 (5)                  (24)
                                                      -----------            -----------         -----------           -----------
   TOTAL PRODUCT PROFIT MARGIN (LOSS)                          79                    (36)                160                    (8)
                                                      -----------            -----------         -----------           -----------

   COMMON (WITH RESTRUCTURING ALLOCATED TO PPM):

       Corporate restructuring charge                           -                     (4)                  -                    (4)
       General corporate expenses                             (41)                   (32)                (71)                  (57)
       Interest and other income (expense), net                 3                      -                   5                    (3)
                                                       ----------            -----------         -----------           -----------
INCOME (LOSS) BEFORE INCOME TAXES                     $        41            $       (72)        $        94           $       (72)
                                                      ===========            ===========         ===========           ===========
</TABLE>

RESULTS OF OPERATIONS

The Company  reported  sales of $304 million and net income of $40  million,  or
$0.15 per diluted  share,  in the second  quarter of 2000,  which  included  $15
million, or $0.05 per diluted share, attributable to a decrease in the Company's
valuation  allowance for net deferred tax assets,  and also included $3 million,
or $0.01 per diluted share, attributable to a reversal of restructuring reserves
previously  recorded.  This  compares to sales of $349 million and a net loss of
$47 million,  or ($0.17) per diluted share, in the second quarter of 1999, which
included a pre-tax  restructuring  charge of $42 million, or ($0.10) per diluted
share.

For the first six months of 2000, the Company reported sales of $649 million and
net income of $92  million,  or $0.33 per  diluted  share,  which  included  $35
million, or $0.13 per diluted share, attributable to a decrease in the Company's
valuation  allowance for net deferred tax assets,  and also included $3 million,
or $0.01 per diluted share, attributable to a reversal of restructuring reserves
previously  recorded.  This  compares to sales of $735 million and a net loss of
$47  million,  or ($0.17) per diluted  share,  for the first six months of 1999,
which  included a pre-tax  restructuring  charge of $42 million,  or ($0.10) per
diluted share.

SALES

Sales for the  quarter  ended June 25,  2000 of $304  million  decreased  by $45
million,  or 13% when  compared to $349 million in the  corresponding  period of
1999.  This  decrease was  primarily a result of reduction in Zip and Jaz sales,
offset in part by sales of ZipCD products.

Zip  product  sales  in  the  second  quarter  of  2000  totaled  $237  million,
representing  a decrease of 14% when  compared  to sales of $274  million in the
corresponding  period of 1999.  Sales of Zip products  represented  78% of total
sales for the  second  quarter  of 2000,  compared  to 79% in the  corresponding
period of 1999.  Zip drive sales of $128 million for the second  quarter of 2000
decreased  by $21  million,  or  15%,  when  compared  to  $149  million  in the
corresponding period of 1999. Zip drive unit shipments decreased by 27% from the
second  quarter of 1999 to the second  quarter of 2000. The decline in Zip drive
revenue is  primarily a result of lower  volumes,  price  reductions  and second
quarter  2000  rebate  programs,  partially  offset by a higher mix of Zip 250MB
sales and a $3 million  reversal of reserves for prior Zip drive rebate programs
due to lower  than  estimated  redemption  rates.  The prior  Zip  drive  rebate
programs  ended on May 31,  2000.  Zip disk sales of $109 million for the second
quarter of 2000 decreased by $16 million,  or 13%, when compared to $125 million
in the  corresponding  period of 1999. Zip disk unit shipments  decreased by 17%
from the second  quarter of 1999 to the second  quarter of 2000.  The decline in
disk  revenue was  primarily a result of lower  volumes and second  quarter 2000
rebate programs,  partially offset by a $3 million reversal of reserves relating
to prior Zip disk rebate programs due to lower than estimated  redemption rates.
The prior Zip disk rebate programs ended on May 31, 2000.

Jaz  product  sales  in  the  second   quarter  of  2000  totaled  $38  million,
representing  a decrease  of 42% from the second  quarter of 1999.  Sales of Jaz
products represented 13% of total sales for the second quarter of 2000, compared
to 19% in the corresponding  period of 1999. Jaz drive unit shipments  decreased
by 44% as compared to the second quarter of 1999,  while Jaz disk unit shipments
decreased by 40%.

ZipCD product sales in the second quarter of 2000 totaled $25 million,  or 8% of
total sales. The Company began shipping ZipCD products in limited  quantities in
August 1999.

Clik!  product  sales  in  the  second  quarter  of  2000  totaled  $3  million,
representing an increase of $2 million from the second quarter of 1999. Sales of
Clik!  products  represented  1% of total  sales in the second  quarter of 2000,
compared to less than 1% in the  corresponding  period of 1999. Clik! drive unit
shipments  increased by 22,000 units as compared to the second  quarter of 1999,
while Clik! disk shipments increased by 50,000 units.

Geographically,  sales in the  Americas  totaled $195  million,  or 64% of total
sales,  in the second  quarter of 2000, as compared to $232  million,  or 67% of
total sales,  in the second quarter of 1999.  This decrease was primarily due to
decreased Zip and Jaz sales,  partially  offset by ZipCD sales.  Sales in Europe
totaled $78 million,  or 26% of total sales,  in the second  quarter of 2000, as
compared to $81 million,  or 23% of total sales,  in the second quarter of 1999.
Sales in Asia totaled $30 million,  or 10% of total sales, in the second quarter
of 2000,  as  compared  to $35  million,  or 10% of total  sales,  in the second
quarter of 1999. This decrease was primarily due to decreased Zip and Jaz sales,
partially offset by increased ZipCD sales.

Sales for the six months  ended June 25, 2000 of $649  million  decreased by $86
million,  or 12%, when compared to $735 million in the  corresponding  period of
1999.  This  decrease was primarily a result of reductions in Zip, Jaz and Ditto
sales, offset in part by sales of ZipCD products.

Zip  product  sales for the  first six  months  of 2000  totaled  $516  million,
representing  a decrease of 10% when  compared  to sales of $576  million in the
corresponding  period of 1999.  Sales of Zip products  represented  79% of total
sales for the first six  months of 2000,  compared  to 78% in the  corresponding
period of 1999. Zip drive sales of $288 million for the first six months of 2000
decreased  by $44  million,  or  13%,  when  compared  to  $332  million  in the
corresponding period of 1999. Zip drive unit shipments decreased by 20% from the
first six months of 1999 to the corresponding period of 2000. The decline in Zip
drive  revenue was primarily a result of lower  volumes,  price  reductions  and
rebate programs and pricing  actions in the first six months of 2000,  partially
offset by a higher mix of Zip 250MB sales and a $3 million  reversal of reserves
relating to prior Zip drive rebate programs as discussed  above.  Zip disk sales
of $226 million for the first six months of 2000  decreased  by $17 million,  or
7%, when compared to $243 million in the corresponding  period of 1999. Zip disk
unit  shipments  decreased by 17% from the first six months of 1999 to the first
six months of 2000.  The decline in disk revenue was primarily a result of lower
volumes  and first six months  2000 rebate  programs,  partially  offset by a $3
million  reversal  of reserves  relating  to prior Zip disk  rebate  programs as
discussed above and an increased mix of higher margin Zip 250MB disks.

Jaz  product  sales  in the  first  six  months  of 2000  totaled  $90  million,
representing a decrease of 30% from the  corresponding  period of 1999. Sales of
Jaz  products  represented  14% of total sales for the first six months of 2000,
compared to 18% in the  corresponding  period of 1999.  Jaz drive unit shipments
decreased by 40% as compared to the corresponding period of 1999, while Jaz disk
unit shipments decreased by 19%.

ZipCD product  sales in the first six months of 2000 totaled $35 million,  or 6%
of total sales. The Company began shipping ZipCD products in limited  quantities
in August 1999.

Clik!  product  sales in the  first  six  months  of 2000  totaled  $5  million,
representing a decrease of $1 million from the corresponding  period of 1999 due
to price reductions.  Sales of Clik!  products  represented  approximately 1% of
total sales in the first six months of 2000 and 1999. Clik! drive unit shipments
increased  by 11,000  units as compared  to the first six months of 1999,  while
Clik! disk shipments increased by 136,000 units.

For the first six months of 2000,  sales in the Americas were $413  million,  or
64% of total sales in the first six months of 2000, as compared to $482 million,
or 66% of total  sales,  for the first six months of 1999.  Sales in Europe were
$174 million, or 27% of total sales in the first six months of 2000, as compared
to $185 million or 25% of total sales,  for the first six months of 1999.  Sales
in Asia were $62  million,  or 10% of total  sales,  in the first six  months of
2000, as compared to $68 million,  or 9% of total sales, in the first six months
of 1999.

GROSS MARGIN

The  Company's  overall  gross  margin was $120  million,  or 40%, in the second
quarter of 2000,  as compared to $76 million,  or 22%, in the second  quarter of
1999.  This  increase in gross margin for the second  quarter of 2000 was due to
increased gross margins for all product lines.  The gross margin  increases were
attributable  to an  increased  mix of higher  margin Zip 250MB  drives (most of
which are sold as higher  margin  aftermarket  products)  and Jaz  disks,  lower
manufacturing and operating costs in all product lines, the reversal of reserves
relating to prior Zip rebate programs as discussed above and contributions  from
the  ZipCD  products.  This  increase  was  partially  offset by  product  price
reductions and second quarter 2000 rebate and pricing programs.

The  Company's  overall  gross  margin for the first six months of 2000 was $248
million, or 38%, compared to $170 million, or 23%, for the corresponding  period
of 1999.  The  increase in gross margin for the first six months of 2000 was due
to increased  gross margins for all product  lines.  The gross margin  increases
were  primarily  attributable  to an  increased  mix of higher  margin Zip 250MB
drives (most of which are sold as higher  margin  aftermarket  products) and Jaz
disks,  lower  manufacturing  and  operating  costs in all product lines and the
reversal of reserves  relating to prior rebate programs as discussed above. This
increase was partially  offset by product price  reductions  and second  quarter
2000 rebate and pricing programs.

Future  gross  margin  percentage  will be  impacted  by the sales  mix  between
aftermarket and OEM channels, as OEM sales generally provide lower gross margins
than sales  through  other  channels,  and by the sales mix of Zip 100MB and Zip
250MB drives and disks. Gross margins for the remainder of 2000 will also depend
on sales volumes of Zip and Jaz disks, which generate significantly higher gross
margins than the corresponding  drives, the mix between disks and drives and the
mix between Zip, Jaz, ZipCD and Clik!  products,  any future pricing  actions or
promotions and potential start-up costs associated with new products.

SEGMENT PRODUCT PROFIT MARGIN

In the second quarter of 2000, Zip segment product profit margin of $70 million,
or 29% of Zip sales,  increased by $37 million,  or 112%,  when  compared to Zip
segment product profit margin of $33 million, or 12% of Zip sales, in the second
quarter of 1999.  This  increase was primarily due to an increased mix of higher
margin Zip 250MB drives, decreased Zip manufacturing and operating expenses, the
reversal of reserves  relating to prior rebate programs as discussed above and a
higher mix of aftermarket sales. The second quarter  improvements were partially
offset by a decrease in  shipments  of higher  margin Zip disks,  lower  overall
volume shipments of drives, price reductions on Zip drives and rebate promotions
on Zip products conducted in the second quarter to stimulate sales.

Jaz segment product profit margin of $12 million, or 31% of Jaz sales, increased
by $14  million  in the  second  quarter of 2000 when  compared  to Jaz  segment
product  loss of $2 million in the second  quarter of 1999.  This  increase  was
primarily due to decreased  manufacturing and operating costs as a result of the
restructuring  actions taken at the end of June 1999,  partially offset by lower
disk and drive volumes.

ZipCD segment product profit margin was $1 million, or 3% of ZipCD sales for the
second  quarter of 2000.  The Company began  shipping  ZipCD products in limited
quantities during August 1999.

Clik!  segment product loss of $3 million decreased by approximately $14 million
in the second quarter of 2000 when compared to Clik! segment product loss of $17
million in the second  quarter of 1999.  This  improvement  was primarily due to
decreased manufacturing and operating costs.

For the first six months of 2000, Zip product profit margin of $158 million,  or
31% of Zip  sales,  increased  by $74  million,  or 87%,  when  compared  to the
corresponding period of 1999. The increase was primarily due to an increased mix
of higher margin Zip 250MB drives, a higher mix of aftermarket sales,  decreased
Zip manufacturing  and operating  expenses and a reversal of reserves related to
prior  rebate  programs as  discussed  above.  The six month  improvements  were
partially  offset by price  reductions  and overall  lower  volume  shipments of
drives and disks.

Jaz segment product profit margin of $23 million, or 27% of Jaz sales, increased
by  $30  million  for  the  first  six  months  of  2000  when  compared  to the
corresponding  period of 1999.  The increase was  attributable  to lower overall
operating expenses, partially offset by lower disk and drive volumes.

ZipCD segment product profit margin was $1 million, or 2% of ZipCD sales for the
first six months of 2000.  The Company began  shipping ZipCD products in limited
quantities during August 1999.

Clik!  segment  product  loss of $20  million  for the first six  months of 2000
decreased by $10 million when compared to the corresponding period of 1999. This
improvement  was primarily due to lower  manufacturing  and operating  expenses,
partially offset by price reductions.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling,  general  and  administrative  expenses  of $69  million for the second
quarter of 2000  decreased by $14 million,  or 16%,  when compared to the second
quarter of 1999, and decreased slightly as a percentage of sales to 23% from 24%
in the second  quarter of 1999. The decrease was primarily  attributable  to the
overall decrease in marketing and sales programs.

Selling,  general and administrative  expenses of $135 million for the first six
months of 2000 decreased by $18 million,  or 12%, when compared to the first six
months of 1999, and remained  relatively  constant as a percentage of sales with
the corresponding period of 1999 at 21%. The decrease was primarily attributable
to the overall decrease in marketing and sales programs.

Management  expects selling,  general and administrative  expenses,  in absolute
dollars,  to increase from second quarter of 2000 levels during the remainder of
2000 due to planned  additional  advertising  and  promotional  expenses  in the
United States, Europe, Asia and Latin America.


<PAGE>


RESEARCH AND DEVELOPMENT EXPENSES

Research and development  expenses of $15 million for the second quarter of 2000
decreased by $8 million,  or 34%, when  compared to the second  quarter of 1999,
and  decreased as a percentage  of sales to 5% from 7% in the second  quarter of
1999. The decrease was attributable to decreased  spending on Jaz, Zip and Clik!
projects.

Research and  development  expenses of $26 million for the six months ended June
25, 2000  decreased by $17 million,  or 40%, when compared to the  corresponding
period of 1999.  Research and development  expenses decreased as a percentage of
sales  to 4%  from  6% in  the  first  six  months  of  1999.  The  decrease  is
attributable to decreased spending on Zip, Jaz and Clik! projects.

Management expects research and development  expenses,  in absolute dollars,  to
increase  from second  quarter of 2000 levels  during the remainder of 2000 as a
result of planned  increases in resources  dedicated to new product  development
and existing product enhancements.

RESTRUCTURING CHARGES

During  the  quarter  ended  June 27,  1999,  the  Company  recorded  a  pre-tax
restructuring  charge of $42 million as a RESULT OF STEPS THE COMPANY WAS TAKING
TO ORGANIZE ALONG FUNCTIONAL LINES (for example, manufacturing,  sales, etc.) as
opposed  to  product  lines.  These  actions  included  the exit of  facilities,
headcount  reductions,  the  discontinuance  of certain products and development
projects related to enhancements and accessories associated with the Jaz product
platform and consolidation of the Company's magnetic technology expertise at its
headquarters  in  Roy,  Utah.  These  actions  included  closing  the  Company's
facilities in Milpitas,  California and San Diego, California. The restructuring
charge was  comprised of $20 million for fixed assets and  inventory  related to
the  discontinuance  of certain  products and  development  projects  related to
enhancements  and  accessories  associated  with the Jaz product  platform;  $10
million  for  workforce   reduction  costs;  $4  million  for  excess  leasehold
improvements,  furniture and fixtures  formerly utilized in the Milpitas and San
Diego facilities;  $3 million for lease termination costs for facilities located
in Milpitas and San Diego; $5 million for workforce  reduction  costs,  contract
cancellation  and other exit costs to  consolidate  the Company's  operations in
France and Scotland.  This  restructuring  charge consisted of cash and non-cash
charges of approximately $18 million and $24 million,  respectively.  There were
no indications of permanent  impairment of the assets prior to the restructuring
actions.

In connection with the Company's second quarter 1999 restructuring  actions, the
Company terminated 466 regular and temporary employees,  consisting primarily of
operations and product development employees located in Milpitas,  San Diego and
Roy. The Company pays  severance on a continuous  basis as opposed to a lump sum
payment.  In addition,  several of the employees were offered retention packages
into the third and fourth  quarters of 1999, and therefore,  their severance pay
did not begin  until  later in 1999.  During  the second  quarter  of 2000,  the
Company  reversed  $2  million of  restructuring  reserves  associated  with the
discontinuance of a development project. The excess restructuring  reserves were
a result of  negotiating  reductions  in purchase  commitments  or  cancellation
charges on inventory and fixed assets and higher than expected proceeds received
from equipment sales.  Certain of the facilities in California have not yet been
subleased or cancelled.  The Company is continuing to make monthly  payments for
cash flow purposes.  Certain of the contract  cancellations  in France are under
dispute and therefore have not been settled. The Company anticipates  completing
these restructuring actions by the end of 2000.

Restructuring  reserves are included in the Company's other current liabilities,
inventory and property,  plant and equipment as of June 25, 2000. Utilization of
the second quarter 1999 restructuring reserves during the quarter ended June 25,
2000 is summarized below:

<PAGE>
<TABLE>



                                                                          UTILIZED
                                                Balance           ---------------------------                       Balance
                                            MARCH 26, 2000       CASH           NON-CASH         REVERSALS       JUNE 25, 2000
                                            --------------   ------------       --------        -----------     --------------

                                                                            (In thousands)
        <S>                                    <C>            <C>            <C>             <C>                 <C>
         SECOND QUARTER 1999
         RESTRUCTURING ACTIONS:

         Discontinued Products/Projects:

             Fixed assets (a)                  $     7,699    $        -       $    (6,017)    $    (1,189)     $       493
             Purchase commitments (b)                  716           (24)                -            (400)             292
             Inventory (a)                             532             -              (524)             (8)              -

         Severance and benefits (b)                    990          (562)                -               -              428
         Other fixed asset charges (a)               3,096             -            (2,671)              -              425
         Lease terminations (b)                      1,848          (341)                -               -            1,507

         France/Scotland Consolidation:

             Contract cancellation (b)(c)            1,414             -                 -               -            1,414
             Severance and benefits (b)                 40             -                 -               -               40
             Lease cancellations (a)                   157             -                 -               -              157
             Fixed assets (a)                          217           (82)                -               -              135
             Other exit costs (A)                       35             -                 -               -               35
                                               -----------    -----------      -----------     -----------      -----------

                                               $    16,744    $   (1,009)      $    (9,212)    $    (1,597)     $     4,926
                                               ===========    ===========      ===========     ===========      ===========

         Balance Sheet Breakout:

             Inventory reserves                $       532    $        -       $     (524)     $        (8)     $         -
             Fixed asset reserves                   10,674             -           (8,688)          (1,189)             797
             Liabilities                             5,538        (1,009)               -             (400)           4,129
                                               -----------    ----------       ----------      -----------      -----------
                                               $    16,744    $   (1,009)      $   (9,212)     $    (1,597)     $     4,926
                                                 =========   ===========       ==========      ===========      ===========

          (a) Amounts represent primarily non-cash charges.

          (b) Amounts represent primarily cash charges.

          (c ) Amounts relate to commitments  associated with the  manufacturing
          of floppy drives.
</TABLE>

During the third  quarter  ended  September  26,  1999,  the Company  recorded a
pre-tax restructuring charge of $21 million as a result of restructuring actions
initiated to  consolidate  worldwide  disk  manufacturing  and refocus the Clik!
product platform on the newer Clik! PC Card and OEM drives. An additional charge
of $5 million  primarily  for  severance  and  benefits  was taken in the fourth
quarter of 1999 in connection with these actions.  These  restructuring  charges
included  reserves of $10 million relating to certain assets and exit costs such
as  cancellation   fees  associated  with  the  cessation  of  manufacturing  in
Avranches,  France; $12 million of inventory and fixed asset reserves associated
with the older Clik! products;  and $3 million for write-offs of intangibles and
other miscellaneous  charges.  These restructuring charges consisted of cash and
non-cash  charges of  approximately  $9 million and $17  million,  respectively.
There can be no assurance that the Company will cease  manufacturing  operations
in France without incurring  significant legal or other costs that have not been
accrued  for in the  restructuring  charge.  In  addition,  the Company has been
notified of a tax audit to be  conducted  in France.  There can be no  assurance
that the Company will not incur claims or assessments  from this audit that have
not been accrued.  During the second  quarter of 2000,  the Company  reversed $1
million of restructuring  reserves associated with Clik! product streamlining as
a result of the Company negotiating reductions in purchase commitments.

In connection  with the Company's 1999 second half  restructuring  actions,  the
Company  had a workforce  reduction  of 123  regular  and  temporary  employees,
consisting  primarily of operations  employees in Avranches,  France and product
development  employees in Longmont,  Colorado.  The Company anticipates that the
implementation  of the  restructuring  actions  within the United States will be
complete by the end of September 2000. However, the legal requirements in France
relating to workforce  reductions  are very strict and the social plan  approved
for the workforce can take up to two years to fully administrate. Therefore, the
restructuring  reserves related to  manufacturing  cessation in France will take
longer to utilize.

Restructuring  reserves are included in the Company's other current liabilities,
inventory and property,  plant and equipment as of June 25, 2000. Utilization of
the second half 1999  restructuring  reserves  during the quarter ended June 25,
2000 is summarized below:

<TABLE>

                                                                          UTILIZED
                                                Balance           ---------------------------                       Balance
                                            MARCH 26, 2000       CASH           NON-CASH         REVERSALS       JUNE 25, 2000
                                            --------------   ------------       --------        -----------     --------------

                                                                            (In thousands)
        <S>                                    <C>            <C>            <C>             <C>                 <C>

         SECOND HALF 1999
         RESTRUCTURING ACTIONS:

         Clik! Streamlining:

             Fixed assets (a)                 $    2,066       $         -     $      (539)        $         -         $    1,527
             Purchase commitments (b)              1,508                 -             (12)               (900)               596

         Manufacturing Cessation:

             Fixed assets (a)                      2,465                 -            (695)                  -              1,770
             Other assets (a)                        275                 -               -                   -                275
             Other commitments (b)                 2,709              (125)              -                   -              2,584
             Severance and benefits (b)            1,746              (944)              -                   -                802

         SEVERANCE AND BENEFITS (B)                   25               (25)              -                   -                  -
                                              ----------       -----------     -----------         -----------        -----------
                                              $   10,794       $    (1,094)    $    (1,246)        $      (900)       $     7,554
                                              ==========       ===========      ===========         ===========        ===========
         Balance Sheet Breakout:

             Fixed asset reserves (a)         $    4,531       $         -     $    (1,234)        $         -        $     3,297
             Other (a)                                47                 -               -                   -                 47
             Inventory reserves (a)                  228                 -               -                   -                228
             LIABILITIES (B)                       5,988            (1,094)            (12)               (900)             3,982
                                             -----------       -----------     -----------         -----------        -----------
                                             $    10,794       $    (1,094)    $    (1,246)        $      (900)        $    7,554
                                             ===========       ===========     ===========         ===========         ==========

         (a) Amounts represent primarily non-cash charges.
         (b) Amounts represent primarily cash charges.
</TABLE>


<PAGE>


INTEREST AND OTHER INCOME/EXPENSE

Interest income of $5 million and $9 million in the second quarter and first six
months of 2000,  respectively,  INCREASED  FROM $1 MILLION AND $2 million in the
second quarter and first six months of 1999,  respectively.  Higher average cash
and investment  balances and higher  interest rates during the second quarter of
2000  resulted  in  an  increase  in  interest   income  when  compared  to  the
corresponding quarter of 1999.

Interest  expense of $1 million  and $3 million  during the second  quarter  and
first six months of 2000, respectively, decreased from $2 million and $4 million
in the second quarter and first six months of 1999, respectively.  In July 1998,
the Company  entered into a debt agreement with Idanta Partners Ltd. and another
entity  affiliated  with  David J.  Dunn,  Chairman  of the  Company's  Board of
Directors,  under which the Company borrowed $40 million pursuant to a series of
three notes. The Company repaid the principal and interest associated with these
notes upon their maturity on March 31, 1999.

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

INCOME TAXES

For the  quarter  ended  June 25,  2000,  the  Company  recorded  an income  tax
provision  of $16  million  on  pre-tax  income,  substantially  offset by a $15
million decrease in the valuation allowance for net deferred tax assets.

During the second quarter of 2000, the Company  decreased its deferred tax asset
valuation  allowance  by  approximately  $15  million,  to $50  million due to a
decrease in net deferred tax assets.  The Company  evaluates the realizablity of
its net deferred tax assets on a quarterly basis. If the net deferred tax assets
change  in  the  future,  if  the  Company's  profitability  changes,  or if the
valuation allowance requirements change, the valuation allowance may increase or
decrease which will impact future income tax provisions.

As of June 25, 2000, the Company had  approximately  $13 million of deferred tax
assets related to foreign net operating loss  carryforwards,  which  reflected a
benefit of  approximately  $30 million in future tax  deductions,  for which the
Company had established a valuation  allowance.  These  carryforwards  expire at
various dates beginning in 2004.

As of June 25, 2000, the Company had  approximately  $13 million of deferred tax
assets related to domestic net operating loss  carryforwards,  which reflected a
benefit of  approximately  $34 million in future tax  deductions,  for which the
Company had established a valuation  allowance.  These  carryforwards  expire at
various dates beginning in 2020.

Additionally,  as of June 25, 2000, the Company had approximately $24 million of
domestic  deferred tax assets,  net of deferred  liabilities,  which reflected a
benefit of approximately $61 million in future tax deductions.

As of June 25,  2000,  the Company  had  provided  approximately  $40 million in
deferred tax  liabilities on  approximately  $102 million of unremitted  foreign
earnings  expected to be repatriated  some time in the future.  U. S. taxes have
not been provided for additional  unremitted  foreign  earnings of approximately
$112  million,  which are  considered  to be  permanently  invested  in non-U.S.
operations.  The residual U.S. tax  liabilities,  if such amounts were remitted,
would be approximately $44 million. Cash paid for taxes was less than $1 million
and $3 million,  respectively, for the quarters ended June 25, 2000 and June 27,
1999.

For the six month period ended June 25, 2000, the Company recorded an income tax
provision  of $40  million  on  pre-tax  income,  substantially  offset by a $38
million  decrease in the valuation  allowance for the net deferred income taxes.
Cash paid for income taxes was $1 million and $4 million,  respectively, for the
first six months of 2000 and 1999.

SEASONALITY

The Company sells its products primarily through computer product  distributors,
retailers and OEMs.  The  Company's  Zip products are targeted  primarily to the
retail  consumer  and  enterprise  markets and to personal  computer  OEMs.  The
Company's  Jaz  products are  targeted  primarily  to the business  professional
market.  The Company's  ZipCD  products are targeted to the retail  consumer and
enterprise markets.  The Company's Clik! products are targeted to the enterprise
market and to various consumer electronics device OEMs.

Management  believes  the  markets  for the  Company's  products  are  generally
seasonal,  with a higher  proportional  share of total  sales  occurring  in the
fourth quarter and sales slowdowns  commonly  occurring during the first quarter
and summer months.  Accordingly,  revenues and growth rates for any prior period
are not necessarily indicative of revenues or growth rates to be expected in any
future period.

LIQUIDITY AND CAPITAL RESOURCES

At June  25,  2000,  the  Company  had  cash,  cash  equivalents  and  temporary
investments  of $354 million  compared to $211 at December 31, 1999, an increase
of $143 million.  At June 25, 2000, $152 million of cash,  cash  equivalents and
temporary  investments was on deposit in foreign  countries  (primarily  Western
Europe),  compared to $32 million at December 31, 1999.  Working capital of $277
million  increased by $82 million when  compared to $195 million at December 31,
1999,  primarily  due to  increases  in cash,  cash  equivalents  and  temporary
investments,  partially offset by the classification of convertible subordinated
notes to current  liabilities.  The Company's ratio of current assets to current
liabilities of 1.8 to 1 increased  slightly compared to 1.6 to 1 at December 31,
1999.

During the six months ended June 25, 2000, cash provided by operating activities
amounted to $154  million.  The  primary  components  were net income,  non-cash
expense adjustments,  reductions in accounts receivable, income taxes receivable
and  inventory,  partially  offset by a decrease in  accounts  payable and other
current liabilities.  This cash was used in part to purchase property, plant and
equipment of $11 million.  The decrease in accounts receivable was due primarily
to the timing of sales and  collections  during the period and the  decrease  in
sales volume  during the period.  The  decrease in inventory  was due to overall
management  of  inventory  levels.  The  decrease  in  accounts  payable was due
primarily to timing of inventory  receipts and related payments to vendors.  The
decrease in other current  liabilities  was due to a combination of decreases in
accrued  restructuring  charges and  purchase  commitments  that were  partially
offset by increases in accrued payroll,  accrued marketing and advertising,  and
various other accrued  liabilities.  The decrease in income taxes receivable was
due  primarily to the receipt of domestic  tax refunds in the second  quarter of
2000.

THE COMPANY  CANCELLED ITS EXISTING $75 million Senior  Secured Credit  Facility
with Morgan Guaranty Trust Company of New York,  Citibank,  N.A. and a syndicate
of other lenders two months prior to the Credit  Facility's  expiration  date of
July 14, 2000.  There had been no borrowings  under the Credit  Facility in over
six quarters.

The current and long-term  portions of capitalized lease obligations at June 25,
2000 were $4 million and $1  million,  respectively.  In July 1998,  the Company
borrowed a total of $40 million from Idanta  Partners  Ltd.  and another  entity
affiliated  with David J. Dunn,  Chairman of the  Company's  Board of Directors,
pursuant to a series of three senior  subordinated  notes. The proceeds of these
notes were used for the cash  purchase  of Nomai.  The Company  used  internally
generated  funds to repay the principal and interest  associated  with the notes
upon their maturity on March 31, 1999.

The Company had $46 million of  convertible  subordinated  notes  outstanding at
June 25,  2000,  which bear  interest  at 6.75% per year and mature on March 15,
2001. These notes have been classified as short-term at June 25, 2000 since they
mature in less than a year.

The Company  believes that its balance of cash,  cash  equivalents and temporary
investments,  together  with cash flow from  operations  and  future  sources of
financing,  will be sufficient to fund the Company's  operations during the next
twelve months. However, cash flow from operations,  investing activities and the
precise amount and timing of the Company's  future  financing  needs,  cannot be
determined  at this time and will depend on a number of factors,  including  the
market  demand  for  the  Company's  products,   the  availability  of  critical
components,  the progress of the Company's product  development  efforts and the
success of the  Company in  managing  its  inventory,  accounts  receivable  and
accounts payable.

OTHER MATTERS

In June 1998, the Financial  Accounting  Standards Board (FASB) issued Statement
of  Financial   Accounting   Standards  No.  133,   "Accounting  for  Derivative
Instruments and Hedging  Activities"  ("SFAS 133"). SFAS 133, as amended by SFAS
137 and SFAS 138, is effective for the  Company's  fiscal year  beginning  2001.
SFAS  133  establishes   accounting  and  reporting   standards  for  derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts,  and for hedging  activities.  It requires that the Company recognize
all  derivative  instruments  as either assets or  liabilities  in the Condensed
Consolidated  Balance Sheet and measure  those  instruments  at fair value.  The
Company does not expect the adoption of SFAS 133, as amended, to have a material
impact on the Company's results of operations, financial position or liquidity.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101") "Revenue Recognition in Financial Statements".  SAB
101 provides guidance on the recognition, presentation and disclosure of revenue
in financial statements. In June of 2000, the Securities and Exchange Commission
issued SAB 101B which extended the  implementation  date to the Company's fourth
quarter of 2000. The Company is currently  assessing the impact,  if any, of SAB
101 on its financial statements.

In May 2000, the FASB's  Emerging  Issues Task Force ("EITF") issued EITF 00-14,
"Accounting for Certain Sales Incentives". EITF 00-14 provides specific guidance
on the accounting for and presentation of sales incentives  offered by companies
to their customers.  These incentives  include discounts,  coupons,  rebates and
free products or services.  The Company implemented the provisions of EITF 00-14
during the second  quarter of 2000. The  implementation  did not have a material
impact on the Company's financial statements.

FACTORS AFFECTING FUTURE OPERATING RESULTS

The Company's future operating  results will depend in large part on the success
of its Zip, Jaz,  ZipCD and Clik!  products in the market.  Although the Company
believes  there is market  demand  for  removable  data  storage  solutions  for
personal computers and other devices, there can be no assurance that the Company
will be successful in establishing  its products as the preferred  solutions for
those market needs.  The extent to which Zip, Jaz,  ZipCD and Clik!  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 rumored,  announced or introduced
by  other  vendors;  the  emergence  of  any  competing  solutions  as  industry
standards; the success of the Company in meeting targeted availability dates for
new and  enhanced  products;  the  success of the  Company in  establishing  and
maintaining  OEM  arrangements  and  meeting  OEM  quality,   supply  and  other
requirements;  the  willingness  of OEMs to promote  computer and other products
containing the Company's drives; the ability of the Company to create demand for
Zip,  Jaz,  ZipCD and  Clik!;  the  success  of the  Company's  efforts  to make
continued  improvements  to  customer  service  and  satisfaction;   the  public
perception  of the  Company  and  its  products,  including  statements  made by
industry  analysts  or  consumers  and  adverse  publicity  resulting  from such
statements or from litigation filed against the Company;  and the overall market
demand for  personal  computers  and other  products  with  which the  Company's
products can be used.

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 results of operations would
be disproportionately adversely affected.

Sales of Zip products have accounted for a significant majority of the Company's
revenues since 1996. However, these sales may not be indicative of the long-term
demand  for Zip  products.  Accordingly,  historic  sales  levels  should not be
assumed to be an indication  of future sales levels.  Sales of Zip drives to OEM
customers  accounted for  approximately  50% of total Zip drive shipments in the
first half of 2000.  The level of future  sales of Zip  drives to OEM  customers
will depend in great part on the Company's ability to further reduce the cost of
Zip  drives  and  on  the  extent  to  which  the   incorporation  of  CD-RW  or
DVD-Recordable drives into OEM products results in a reduction in the demand for
OEM products also incorporating a built-in Zip drive.

The  Company  anticipates  continued  sales  decline  in the  future for the Jaz
product  platform  as a result of  replacement  products  entering  the  market,
including   products   introduced   by  the  Company,   and  changing   customer
requirements.   The  Company  anticipates  introducing  additional  Jaz  product
interfaces and enhancements to support the needs of its customers.  In addition,
the Company continues to make limited  investments to sustain and revitalize the
Jaz business.  The process of managing Jaz and maximizing its  profitability  is
different than managing a growing product platform, and involves maintaining the
size of the product's  infrastructure  and  monitoring  vendor  commitments  and
inventory levels to prevent inventory  write-offs and cancellation  costs. There
can be no  assurance  that the Company  will be  successful  in managing the Jaz
product platform and in maximizing its profitability in the future.

The Company's business strategy for ZipCD is different from its strategy for its
other  products  because the drive does not use  proprietary  media and thus has
lower  overall  margins.  The  Company  purchases  for resale from a third party
manufacturer.  The CD-RW drive market is very  competitive and includes a number
of established  participants.  Accordingly,  there are additional risks that the
ZipCD  product will not achieve  significant  market  acceptance or otherwise be
successful.

The Company's  Clik!  products  represent the Company's first products which are
targeted  to  portable  consumer  electronics  manufacturers  in addition to the
personal  computer  markets.  The  Company  does not have  prior  experience  in
consumer electronics channels; and, accordingly, there are additional risks that
the Clik!  products will not achieve significant market presence or otherwise be
successful.  The Company has introduced four different models of the Clik! drive
in addition to a Clik!  OEM drive.  Three of these models,  the Clik!  drive for
Digital Cameras,  the Clik! Drive Plus and the Clik! Drive for Mobile Computers,
each of which  began  shipping in limited  quantities  in  December  1998,  were
marketed as add-on storage solutions to digital cameras that use various formats
of flash memory.  The Company began shipping the fourth model, the Clik! PC Card
drive,  in limited  quantities  in June 1999,  and is currently  marketing  this
product to notebook and sub-notebook computer users. During the third quarter of
1999, the Company recorded a restructuring charge that included costs to refocus
the Clik!  product  platform  on the newer Clik!  PC Card and OEM drives,  which
began  shipping  in the second  half of 1999.  Additionally,  the  Company  took
charges in the fourth quarter of 1999 totaling $47 million relating to the Clik!
platform to reflect estimates of net realizable value of inventory and equipment
and accruals for related  purchase  commitments,  primarily  associated with the
Clik! PC Card platform. The Company took additional charges of $7 million during
the first quarter of 2000 to reflect a reduction in the estimated net realizable
value of inventory  and  equipment  associated  with the Clik! PC Card drive and
Clik!  media.  After these charges,  net assets and  commitments  related to the
Clik!  platform were approximately $7 million as of June 25, 2000.  Although the
Company is making  significant  efforts to  develop  applications  for the Clik!
platform,  particularly in the digital/audio  market,  and believes the products
have  potential in the  enterprise  and OEM markets,  there is no assurance  the
Company will not take additional charges  associated with the Clik!  platform in
the  future.  Market  acceptance  of Clik!  products as a storage  solution  for
digital audio players, digital cameras and other electronic devices is dependent
upon obtaining a significant  market presence and establishing OEM relationships
with  manufacturers,  who produce digital devices  incorporating  built-in Clik!
drives.

The Company has recently revised its software strategy. In addition to providing
operational  product  support for existing  devices at no additional cost to the
customer,  the Company plans to sell additional  software which can also be used
with the  Company's  products  or other  products.  The  Company  began  selling
downloads  of its Quick  Sync 2  software  from its  website  during  the second
quarter of 2000.  In addition,  the Company is expanding  its product  offerings
into   non-PC   markets   such  as  digital   audio   players,   digital   photo
storage/display,  Internet-based  storage and digital cameras.  The Company does
not have prior experience with these types of products.  Accordingly,  there are
additional  risks  that  these  products  will not  achieve  significant  market
presence or otherwise be successful.

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.

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

The Company's  business  includes a significant  volume of OEM sales.  In an OEM
business,  a high proportion of sales are  concentrated  among a small number of
customers.  Although the Company believes its  relationships  with OEM customers
are generally  good, a relatively  small number of customers  could  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  OEM  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.

The Company believes that in order to compete  successfully  against current and
future  sources of  competition,  it will be  necessary  to  further  reduce the
manufacturing  costs of its  products,  thus  enabling  the  Company to sell its
products  at lower  prices.  During the past  several  years,  the  Company  has
implemented a number of programs, including Six Sigma quality initiatives, which
have  resulted  in  substantial  product and process  quality  improvements  and
reduced costs.  Through these and other  programs,  the Company is continuing to
focus on reducing the manufacturing  costs of its products by: reducing the cost
of  parts  and  components  used  in the  Company's  products  through  improved
inventory management and product design modifications and by taking advantage of
industry-wide  reductions in costs; increasing manufacturing  efficiencies;  and
decreasing  defect  rates.  This is  particularly  true  for the  Company's  OEM
business,  as OEM  customers are  particularly  price  sensitive.  The Company's
ability to reduce  manufacturing  costs may be  adversely  affected if the lower
sales volumes recently  reported by the Company result in less favorable pricing
for components purchased from third parties.

The Company has, and may again in the future,  experience  problems  relating to
the quality,  reliability  and/or  availability of certain of its products.  For
example, the Company has recalled certain products and experienced manufacturing
interruptions  due to quality  problems.  Any product  availability,  quality or
reliability  problems  experienced  by the Company,  or claims filed against the
Company  as a result of these  problems,  could  have an  adverse  effect on the
Company's sales and net income,  result in damage to the Company's reputation in
the marketplace, and subject the Company to damage claims from its customers. In
addition,  component  problems,  shortages,  quality  issues  or  other  factors
affecting the supply of the Company's  products could provide an opportunity for
competing products to increase their market share.

The factors described herein for Zip, Jaz, ZipCD and Clik! products are, or will
be, relevant to any other products currently sold by the Company or new products
introduced  by the  Company  in the  future.  In  addition,  the  Company  faces
development,  manufacturing,  demand and market  acceptance risks with regard to
recently introduced and future products.  The Company's future operating results
will depend in part on its success in introducing enhanced and new products in a
timely and competitively  effective  manner.  Future operating results will also
depend  on the  Company's  ability  to  effectively  manage  obsolescence  risks
associated  with  products  that are  phased  out and its  success in ramping to
volume production of new or enhanced products.

Future  operating  results also depend on  intellectual  property and  antitrust
matters including the possibility that infringement claims asserted from time to
time against the Company  could  require the Company to pay royalties to a third
party in order to continue to market and distribute one or more of the Company's
current or future  products and also includes the  possibility  that the Company
would be required to devote unplanned  resources to developing  modifications to
its products or marketing programs.

The  Company  has  experienced  difficulty  in  the  past,  and  may  experience
difficulty  in the  future,  in  obtaining  a  sufficient  supply  of  many  key
components  on a timely and cost  effective  basis.  At the  present  time,  the
electronics  industry is facing  shortages on various memory devices and passive
components due to strong world-wide demand.  Also, many components  incorporated
or used in the  manufacture  of the Company's  products are currently  available
only from single or sole source  suppliers or from a limited number of suppliers
and are purchased by the Company  without  guaranteed  supply  arrangements.  In
particular,  media used in Zip 250MB disks are  currently  obtained  exclusively
from Fuji Photo Film, certain integrated circuits,  including ASIC chips used in
Zip drives,  are obtained  exclusively from L.S.I.  Logic  Corporation and Texas
Instruments  and HSAs used in Zip  notebook are  obtained  exclusively  from SAE
Magnetics.  There can be no assurance  that the Company will be able to obtain a
sufficient  supply of  components  on a timely  and cost  effective  basis.  The
inability to obtain  SUFFICIENT  COMPONENTS  AND  EQUIPMENT to obtain or develop
alternative  sources of supply at  competitive  prices  and  quality or to avoid
manufacturing  delays  could:  prevent the  Company  from  producing  sufficient
quantities  of its  products  to satisfy  market  demand  (or,  in the case of a
component  purchased  exclusively  from  one  supplier,  the  Company  could  be
prevented  from  producing  any quantity of the affected  product(s)  until such
component  becomes  available  from  an  alternative   source);   delay  product
shipments;  increase the Company's  material or  manufacturing  costs;  cause an
imbalance in the inventory levels of certain components and cause the Company to
modify the design of its  products to use a more  readily  available  component,
which may result in product performance  problems.  Any or all of these problems
could in turn  result  in the loss of  customers,  provide  an  opportunity  for
competing  products to achieve market acceptance and otherwise  adversely affect
the Company's business and financial results.

The  purchase  orders  under  which  the  Company  buys  many of its  components
generally  extend  one to two  quarters  in the future or less based on the lead
times  associated  with the specific  component.  The quantities on the purchase
order are based on estimated sales requirements.  In the case of new products or
products  with  declining  sales,  it can be difficult to estimate  demand.  Any
misestimate of demand could result in excess capacity and purchase commitments.

The Company  has  experienced  increased  difficulties  in hiring and  retaining
employees,  due in part to the Company's financial performance and restructuring
actions.  The  Company's  success  depends in large part upon the  services of a
number of key employees and the loss of the services of one or more of these key
employees could have a material  adverse effect on the Company.  Many members of
the  Company's  senior  management  team  have  been  serving  in their  current
positions for only a short period of time,  including  Bruce R.  Albertson,  who
joined the Company as President and Chief Operating Officer in November 1999 and
assumed the role of President and Chief  Executive  Officer in January 2000. The
Company's  success  will  depend in part on its  ability to  attract  and retain
highly skilled  personnel and on the success of the Company's senior  management
team in learning to work effectively as a team.

During the second and third  quarters of 1999,  the Company  announced  plans to
consolidate manufacturing and other facilities; discontinue certain products and
development  projects;  organize along functional lines and to refocus the Clik!
product  platform.  These actions  specifically  included  closing the Company's
facilities  in  Milpitas,  California  and San  Diego,  California  and  ceasing
manufacturing  operations in Avranches,  France.  There can be no assurance that
the  Company  will  close the  facilities  in the U.S.  and cease  manufacturing
operations in France  without  incurring  significant  legal or other costs that
have not been accrued for in the restructuring charges.

Significant portions of the Company's revenues are generated in Europe and Asia.
The  Company's  existing  infrastructure  outside of the  United  States is less
mature and developed than in the United States.  Consequently,  future sales and
operating  income  from these  regions are less  predictable  than in the United
States. In addition,  operating expenses may increase as those operations mature
and  increase  in size.  The  Company's  international  sales  transactions  are
generally  denominated  in U.S.  dollars.  Fluctuation  in the value of  foreign
currencies  relative  to the U.S.  dollar  that are not  sufficiently  hedged by
foreign  customers  could  result in lower  sales and have an adverse  effect on
future  operating  results  (see  "Disclosures  About Market  Risk"  below).  In
addition,  the Company is continuing to assess  potential issues relating to the
adoption of the Euro.

The Company  intends to expand its  international  operations into Latin America
during  2000 and 2001.  This will  require  the Company to add at least some new
infrastructure in Latin America  resulting in an increase in operating  expenses
that will not  necessarily be offset by an increase in revenue or gross margins.
In addition,  the Latin  America  economy is not as mature as the economy in the
countries  that the Company  currently  does  business.  This could result in an
increased exposure associated with the collectibility of customer accounts.

On April 19, 2000, the Company's  shareholders approved an Employee Stock Option
Exchange  Program (the  "Exchange  Program"),  pursuant to which the Company has
granted  approximately  1.1  million new stock  options at an exercise  price of
$3.59 in exchange for  approximately  1.8 million  previously  outstanding stock
options which had exercise prices above $3.59.  The new options issued under the
Exchange Program are subject to variable plan accounting in accordance with FASB
Interpretation  No. 44  "Accounting  for Certain  Transactions  Involving  Stock
Compensation".  Under  variable  plan  accounting,  the  Company is  required to
recognize  compensation  expense in its statement of operations for any increase
in the market price of the Company's  Common Stock above $4.00 (the market price
of July 1, 2000 which is the effective date of FASB Interpretation No. 44). This
compensation  expense must be recorded on a quarterly  basis until the option is
exercised,  forfeited  or expires  unexercised.  The  impact of the new  options
granted under the Exchange  Program on the Company's  financial  statements will
depend on quarterly  fluctuations  in the  Company's  Common Stock price and the
dates  of  exercises,  forfeitures  or  cancellations  of  the  new  options  by
employees.  Depending on these factors,  the Company could be required to record
significant  compensation expense during the next ten years.  Moreover,  because
the precise amount of the  compensation  expense will depend on the market price
of the common stock at the end of each quarterly period, the Company will not be
able to  forecast  in advance the amount of  compensation  expense  that it will
incur in any future period.

Factors  other than those  discussed  above that could  cause  actual  events or
actual results to differ materially from those indicated by any  forward-looking
statements  include the ability of management to manage  fluctuating  volumes of
production and an increasingly complex business,  transportation issues, product
and component  pricing,  changes in analysts' earnings  estimates,  competition,
technological  changes and advances,  adoption of  technology or  communications
standards  affecting  the  Company's  products,  intellectual  property  rights,
litigation,  general economic conditions, changes or slowdowns in overall market
demand for personal computer products.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:

The Company is exposed to various  interest rate and foreign  currency  exchange
rate risks that arise in the normal  course of business.  The Company  primarily
uses borrowings comprised normally of fixed rate debt to finance its OPERATIONS.
THE COMPANY DID NOT HAVE ANY  SIGNIFICANT  DEBT  OUTSTANDING  AT JUNE 25,  2000,
EXCEPT FOR $46 million in convertible  subordinated notes (fixed rate of 6.75%).
The Company has international  operations  resulting in receipts and payments in
currencies that differ from the U.S. dollar,  which is the Company's  functional
currency. The Company attempts to reduce foreign currency exchange rate risks by
utilizing financial instruments,  including derivative  transactions pursuant to
Company  policies.  The Company uses forward contracts to hedge those net assets
and  liabilities  that,  when  re-measured   according  to  generally   accepted
accounting  principles,  impact the  consolidated  statement of operations.  All
forward contracts entered into by the Company are components of hedging programs
and are entered into for the sole purpose of hedging an existing or  anticipated
currency  exposure,  not for speculation or trading purposes.  The contracts are
primarily in European currencies, the Singapore dollar and the Japanese yen. The
contracts  normally have maturities that do not exceed three months. The Company
has a substantial  presence in Malaysia.  In September 1998, the ruling party in
Malaysia fixed the Malaysian Ringgit to the U.S. dollar. The Company experienced
a loss related to the fixing of the currency.  The Company has material  amounts
of accounts  payable  denominated in Ringgit.  Currently,  the foreign  currency
markets are closed to hedging alternatives in Ringgit. When the foreign currency
markets  re-open for the Ringgit,  the Company plans to re-evaluate  its hedging
strategy for Ringgit exposure.

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

The fair value of the  Corporation's  long-term  debt and forward  contracts are
subject to change as a result of  potential  changes in market rates and prices.
The Company has performed a sensitivity  analysis  assuming a  hypothetical  10%
adverse  movement in foreign  exchange  rates and interest  rates applied to the
forward contracts and underlying exposures described above. As of June 25, 2000,
the  analysis  indicated  that such market  movements  would not have a material
effect on the Company's consolidated  financial position,  results of operations
or cash flows.  Factors that could  impact the  effectiveness  of the  Company's
hedging programs  include  volatility of the currency and interest rate markets,
availability  of hedging  instruments  and the  Company's  ability to accurately
project net asset or liability positions.  Actual gains and losses in the future
may differ  materially from the Company's  analysis  depending on changes in the
timing and amount of interest rate and foreign  exchange rate  movements and the
Company's actual exposure and hedges.


<PAGE>




IOMEGA CORPORATION

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS:

A discussion of the Company's legal  proceedings  appears in Item 1 of this Form
10-Q under Note 8 of the Notes to Consolidated Financial Statements.

ITEM 2.  CHANGE IN SECURITIES AND USE OF PROCEEDS:

The Company did not sell any equity securities during the second quarter of 2000
that were not registered under the Securities Act of 1933.

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/ BRUCE R. ALBERTSON
                                           -------------------------
Dated:   August 8, 2000                    Bruce R. Albertson
                                           Chief Executive Officer and President

                                           /S/ PHILIP G. HUSBY
                                           -------------------------
Dated:   August 8, 2000                    Philip G. Husby
                                           Senior Vice President, Finance and
                                           Chief Financial Officer


<PAGE>



                                  EXHIBIT INDEX

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

EXHIBIT NO.    DESCRIPTION

  3. (i). 1    Restated Certificate of Incorporation of the Company, as amended.

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

<PAGE>