---

# UNITED STATESSECURITIES
AND EXCHANGE COMMISSION

                                                        WASHINGTON, D.C. 20549

---

# FORM 10-Q

## [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                                         EXCHANGE ACT OF 1934

## FOR THE QUARTERLY PERIOD ENDED MARCH 28, 2004

## OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                                         EXCHANGE ACT OF 1934
 For the Transition Period from............to...............

## COMMISSION FILE NUMBER 1-12333

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

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

10955 Vista Sorrento Parkway, San Diego, CA 92130(Address of principal executive offices)

(858) 314-7000(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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).     Yes    X      
No

Indicate the number of shares outstanding of each of the issuer's classes of common stock
as of April 30, 2004.

|Common Stock, par value $.03 1/3(Title of each class) | 51,528,453(Number of shares)
|----------------------------------------------------- | ----------------------------

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# IOMEGA CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS

`Page

Special Note Regarding Forward-Looking Statements..................................................       2

                                            PART I - FINANCIAL STATEMENTS

Item 1.  Financial Statements (Unaudited)

         Condensed Consolidated Balance Sheets at March 28, 2004
             and December 31, 2003.................................................................       3

         Condensed Consolidated Statements of Operations for the Quarters
             Ended March 28, 2004 and March 30, 2003...............................................       5

         Condensed Consolidated Statements of Cash Flows for the Quarters
             Ended March 28, 2004 and March 30, 2003...............................................       6

         Notes to Condensed Consolidated Financial Statements......................................       7

Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations...................................................      24

Item 3.  Quantitative and Qualitative Disclosures About Market Risk................................      53

Item 4.  Controls and Procedures...................................................................      55

                                             PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.........................................................................      56

Item 2.  Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities..........      56

Item 6.  Exhibits and Reports on Form 8-K..........................................................      56

Signatures.........................................................................................      57

Exhibit Index......................................................................................      58`

---

Copyright © 2004
Iomega Corporation. All rights reserved. Iomega, the stylized i
logo, Zip, REV, Boot and Run, HotBurn, Active Disk, Iomega Automatic Backup,
Iomega Sync, ioLink and IoClub are either
registered trademarks or trademarks of Iomega Corporation in the United States
and/or other countries. All other trademarks referenced herein
are the property of their respective owners.

1

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## SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form
10-Q contains a number of forward-looking statements, including, without
limitation, statements referring to: plans to introduce during the second half
of 2004 (most likely the fourth quarter of 2004) a small-form factor removable
flexible magnetic storage device (DCT) expected to have a capacity
of about 1.2 to 1.5 gigabyte (GB), where gigabyte equals 1 billion
bytes; goals to recruit original equipment manufacturer (OEM)
customers for DCT technology and REV products; plans for follow on REV products;
expected quarterly expense levels on DCT development; plans to mitigate the
continued decline in the Companys core Zip Products business; the
potential need for additional restructuring or other charges in the future; the
expectation of future outsourcing initiatives; the expected profitability or
lack of profitability on certain product lines; the expected sales volume or
lack of sales volume on certain product lines; cash consumption during 2004
arising from the 2003 and 2001 restructuring actions; the Companys
continued belief that it can grow its Network Storage Systems business and that
the business can be at break even or slightly profitable by the second half of
2004; the timeframe to achieve profitability on REV products, DCT technology and
overall Company profitability; the Companys belief that its balance of
unrestricted cash, cash equivalents and temporary investments is sufficient to
operate the business and fund the investments required for REV products and DCT
technology for the next two or more years; expected schedule for the
Companys information technology system upgrade; the schedules for new REV
products with FireWire®, SCSI and S-ATA interfaces; plans concerning the
availability of PocketZip and Jaz disks and other plans concerning product
lines; the expectation of continuing to lower product procurement costs; the
goal to improve the procurement and commodity business processes to maximize
profitability on sourced branded products; the impacts of expensing stock option
grants; the factors affecting future gross margins; expected sales levels due to
seasonal demand; the expectation that the Company can obtain sufficient product
and components thereof to meet business requirements; anticipated hedging
strategies; and the possible effects of an adverse outcome in legal proceedings,
including the resolution of the adverse judgments in the Nomai litigation, as
described in Note 5 of the notes to condensed consolidated financial statements
in Part I. Any other 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
captions Application of Critical Accounting Policies,
Liquidity and Capital Resources, Factors Affecting Future
Operating Results and Quantitative and Qualitative Disclosures About
Market Risk included under Managements Discussion and Analysis
of Financial Condition and Results of Operations in Items 2 and 3 of Part
I of this Quarterly Report on Form 10-Q and those set forth in Note 5 of the
notes to condensed consolidated financial statements in 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. In addition, any
forward-looking statements represent the Companys estimates only as of the
day this quarterly report was first filed with the Securities and Exchange
Commission and the Company specifically disclaims any obligation to update
forward looking statements, even if its estimates change.

2

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# IOMEGACORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)

`March 28,            December 31,
                                                                               2004                    2003
                                                                        -------------------   -------------------
                                                                             (Unaudited)
Current Assets:
    Cash and cash equivalents                                                 $  76,401             $ 122,591
    Restricted cash                                                                 200                   200
    Temporary investments                                                        73,471                46,140
    Trade receivables, less allowance for doubtful accounts
       of $2,833 and $2,899, respectively                                        32,436                37,234
    Inventories                                                                  24,520                23,745
    Deferred income taxes (Note 1)                                               14,619                16,938
    Other current assets                                                          7,876                 7,553
                                                                              ---------             ---------
       Total Current Assets                                                     229,523               254,401
                                                                              ---------             ---------

Property and Equipment, at Cost                                                 136,035               136,205
Accumulated Depreciation and Amortization                                      (118,223)             (120,152)
                                                                              ---------             ---------
       Net Property and Equipment                                                17,812                16,053
                                                                              ---------             ---------

Goodwill                                                                         11,691                11,691
Other Intangibles, Net                                                            4,006                 4,525
Other Assets                                                                         70                    71
                                                                              ---------             ---------
    Total Assets                                                              $ 263,102             $ 286,741
                                                                              =========             =========`

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

3

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# IOMEGA
CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS EQUITY
(In thousands, except share data)

`March 28,             December 31,
                                                                                 2004                    2003
                                                                           -------------------   -------------------
                                                                                (Unaudited)
Current Liabilities:
    Accounts payable                                                             $  37,180             $  38,000
    Other current liabilities (Note 1)                                              68,845                81,339
    Income taxes payable (Note 1)                                                    2,594                 3,531
                                                                                 ---------             ---------
       Total Current Liabilities                                                   108,619               122,870
                                                                                 ---------             ---------

Other Long-Term Liabilities                                                            528                 1,471

Deferred Income Taxes (Note 1)                                                      20,662                24,512

Commitments and Contingencies (Notes 4 and 5)

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, $0.03 1/3 par value - authorized 400,000,000
       Shares, issued 54,957,627 and 54,931,209 shares,
       respectively                                                                  1,835                 1,834
    Additional paid-in capital                                                      77,389                77,120
    Less: 3,429,174 and 3,428,590 Common Stock treasury
       shares, respectively, at cost                                               (33,791)              (33,791)
    Retained earnings                                                               87,860                92,725
                                                                                 ---------             ---------
       Total Stockholders' Equity                                                  133,293               137,888
                                                                                 ---------             ---------
         Total Liabilities and Stockholders' Equity                              $ 263,102             $ 286,741
                                                                                 =========             =========`

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

4

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# IOMEGA
CORPORATION AND SUBSIDIARIES  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

`For the Quarter Ended
                                                                          ----------------------------------
                                                                           March 28,             March 30,
                                                                              2004                 2003
                                                                          ---------------     --------------
                                                                                      (Unaudited)
Sales                                                                     $ 84,126                 $ 106,182
Cost of sales                                                               59,776                    69,072
                                                                          --------                 ---------
Gross margin                                                                24,350                    37,110
                                                                          --------                 ---------

Operating Expenses:
    Selling, general and administrative                                     23,195                    23,340
    Research and development                                                 6,465                     8,588
    Restructuring charges (reversal)                                           546                       (78)
    Bad debt expense (credit)                                                  124                    (1,982)
                                                                          --------                 ---------
       Total Operating Expenses                                             30,330                    29,868
                                                                          --------                 ---------

Operating income (loss)                                                     (5,980)                    7,242
Interest income                                                                371                     1,866
Interest expense and other income and expense, net                              59                        22
                                                                          --------                 ---------

Income (loss) before income taxes                                           (5,550)                    9,130
Benefit (provision) for income taxes                                           685                    (3,817)
                                                                          --------                 ---------
Net income (loss)                                                         $ (4,865)                $   5,313
                                                                          ========                 =========


Net income (loss) per basic and diluted common share                      $  (0.09)                $    0.10
                                                                          ========                 =========

Weighted average common shares outstanding                                  51,527                    51,265
                                                                          ========                 =========

Weighted average common shares outstanding -                                51,527                    51,298
                                                                          ========                 =========
    assuming dilution`

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

5

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

`For the Three Months Ended
                                                                              -------------------------------
                                                                               March 28,            March 30,
                                                                                 2004                  2003
                                                                              ----------           ----------
   Cash Flows from Operating Activities:                                                (Unaudited)
       Net income (loss)                                                        $ (4,865)           $   5,313
       Non-Cash Revenue and Expense Adjustments:
          Depreciation and amortization                                            2,071                3,608
          Deferred income tax provision (benefit)                                 (1,531)               3,149
          Stock compensation expense                                                 189                   27
          Amortization of premium on temporary investments                             8                  822
          Bad debt expense (credit)                                                  124               (1,982)
          Other                                                                      113                    4
                                                                                --------            ---------
                                                                                  (3,891)              10,941
       Changes in Assets and Liabilities:
          Restricted cash                                                              -                3,600
          Trade receivables                                                        4,674               24,143
          Inventories, net                                                          (775)               5,427
          Other current assets                                                      (323)               1,822
          Accounts payable                                                          (820)             (22,774)
          Other current liabilities                                              (11,036)              (8,310)
          Accrued restructuring                                                   (1,458)                (455)
          Income taxes                                                              (937)                (918)
                                                                                --------            ---------
             Net cash (used in) provided by operating activities                 (14,566)              13,476
                                                                                --------            ---------

   Cash Flows from Investing Activities:
       Purchases of property and equipment                                        (3,351)              (1,810)
       Purchases of temporary investments                                       (116,941)            (215,396)
       Sales of temporary investments                                             89,602              136,724
       Net change in other assets and other liabilities                             (942)                (617)
                                                                                --------            ---------
          Net cash used in investing activities                                  (31,632)             (81,099)
                                                                                --------            ---------

   Cash Flows from Financing Activities:
       Proceeds from sales of Common Stock                                             8                  168
                                                                                --------            ---------
          Net cash provided by financing activities                                    8                  168
                                                                                --------            ---------
   Net Decrease in Total Cash and Cash Equivalents                               (46,190)             (67,455)
   Total Cash and Cash Equivalents at Beginning of Period                        122,591              241,519
                                                                                --------            ---------
   Total Cash and Cash Equivalents at End of Period                             $ 76,401            $ 174,064
                                                                                ========            =========`

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

6

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# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

## (1)
Significant Accounting Policies

In the opinion of the
Companys management, the accompanying condensed consolidated financial
statements reflect all adjustments of a normal recurring nature which are
necessary to present fairly the financial position of the Company as of March
28, 2004 and December 31, 2003 and the results of operations and cash flows for
the three months ended March 28, 2004 and March 30, 2003.

The results of operations
for the quarter ended March 28, 2004 are not necessarily indicative of the
results to be expected for the entire year or for any future period.

These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes included in the Companys
latest Annual Report on Form 10-K.

Principles of Consolidation

These condensed
consolidated financial statements include the accounts of Iomega Corporation and
its wholly-owned subsidiaries after elimination of all material intercompany
accounts and transactions. All entities of the Company have been consolidated.

Pervasiveness of Estimates

The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of sales and expenses during the reporting
periods. Areas where significant judgments are made include, but are not limited
to: revenue recognition, price protection and rebate reserves, marketing program
accruals, allowance for doubtful accounts, inventory valuation reserves and tax
valuation allowances. Actual results could differ materially from these
estimates.

Reclassifications

Certain reclassifications
were made to the prior periods condensed consolidated financial statements
and notes to condensed consolidated financial statements to conform to the
current period presentation. The Company has made reclassifications between its
various tax accounts in its prior year balance sheet and tax note related to its
foreign withholding taxes and offsetting adjustments related, in part, to the
tax consequences of a $75 million intercompany dividend. The Companys
business segment presentation has been changed to reflect how management
currently evaluates its business. All prior year business segment information
has been restated to be consistent with the current year presentation and these
reclassifications are discussed in Note 3.

7

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# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (1)
Significant Accounting Policies (Continued)

Revenue Recognition

The Companys
customers include original equipment manufacturers (OEMs),
retailers, distributors, value added resellers (VARs), catalogs,
private label and end users. Typically, retail and distribution customer
agreements have provisions that allow the customer to return product under
certain conditions within specified time periods. Sales, less reserves for
estimated returns, are generally recognized upon shipment and passage of title
to the customer. The Company has established reserves for estimated returns,
which are reflected as a reduction of sales and trade receivables in the
condensed consolidated financial statements. The reserves for estimated returns
totaled $2.6 million and $3.1 million at March 28, 2004 and December 31, 2003,
respectively.

In addition to reserves for
estimated returns, the Company defers recognition of sales on estimated excess
inventory in the distribution, retail and catalog channels. For this purpose,
excess inventory is the amount of inventory that exceeds the channels
four-week requirements as estimated by management. OEM and VAR customers are not
considered to have excess inventory as they usually do not carry more than four
weeks of inventory. The distribution, retail and catalog channels
four-week requirements are estimated based on inventory and sell-through amounts
reported to the Company by the Companys key customers, who make up the
majority of the Companys sales in these channels. No adjustment is made
for those customers that do not report inventory and sell-through information.
The Company defers estimated sales and cost of sales, associated with estimated
excess channel inventory in its condensed consolidated financial statements.

The Company sells various
extended warranty plans for its Network Attached Storage (NAS)
servers, some of which are bundled with certain NAS servers. The service periods
of the extended warranty plans are up to three years. The Company defers revenue
from the sale of extended warranty plans and recognizes the sales ratably over
the respective life of the warranty once the extended warranty has been
registered with the Company by the end-user.

The margin on deferred
sales related to the estimated excess channel inventory and NAS extended
warranties totaled $7.5 million and $8.7 million at March 28, 2004 and December
31, 2003, respectively and is included in other current liabilities
in the condensed consolidated balance sheets.

Price Protection and Rebate Reserves

The Company has agreements
with some of its customers which, in the event of a price decrease, allow those
customers (subject to limitations) a credit equal to the difference between the
price originally paid and the new decreased price on units in the
customers inventories on the date of the price decrease not to exceed the
number of units shipped to the customer for a specified time period prior to the
price decrease. When a price decrease is anticipated, the Company establishes
reserves against gross trade receivables with the corresponding reduction in
sales for estimated amounts to be reimbursed to qualifying customers. In
addition, the Company records reserves at the time of shipment for estimated
volume rebates and other estimated rebates given to consumers at the time of
purchase from channel partners for which sales have been recognized.

8

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# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (1)
Significant Accounting Policies (Continued)

Reserves for volume and
other rebates and price protection totaled $16.9 million and $18.7 million at
March 28, 2004 and December 31, 2003, respectively and are netted against trade
receivables in the condensed consolidated balance sheets.

Cash and Cash Equivalents

For the purposes of the
condensed consolidated statements of cash flows, cash and cash equivalents
include all marketable securities purchased with maturities of three or fewer
months. Cash equivalents at March 28, 2004 and December 31, 2003 consisted
primarily of investments in repurchase agreements, corporate obligations,
certificates of deposit, money market funds and U.S. agencies.

Temporary Investments

Investments purchased with
maturities in excess of three months are classified as temporary investments.
Temporary investments at March 28, 2004 and December 31, 2003 consisted
primarily of corporate notes and bonds and paper, U.S. treasuries, certificates
of deposit, U.S. agencies, asset-backed securities and mortgage-backed
securities. None of the Companys temporary investments has an effective
maturity greater than 24 months and at March 28, 2004, the average duration of
the Companys temporary investments was just over 12 months, as compared to
just under 14 months at December 31, 2003. At March 28, 2004, the Company had
$11.9 million and $48.1 million of debt security investments that will mature
within one year and will mature between one to two years, respectively. The
balance of temporary investments at March 28, 2004 is comprised of U.S.
treasuries and certificates of deposit. The Company minimizes its credit risk
associated with temporary investments by purchasing investment grade, liquid
securities. The Company has classified all of its temporary investments as
available-for-sale securities.

Inventories

Inventories include
material costs and inventory related overhead costs and are recorded at the
lower of cost (first-in, first-out) or market and consist of the following:

`March 28,       December 31,
                                                     2004             2003
                                                  ---------       ------------
                                                        (In thousands)
         Raw materials                             $  2,450         $  3,875
         Finished goods                              22,070           19,870
                                                   --------         --------
                                                   $ 24,520         $ 23,745
                                                   ========         ========`

The Company evaluates the
carrying value of inventory on a quarterly basis to determine if the carrying
value is recoverable at estimated selling prices (including known future price
decreases). The Company includes product costs and direct selling expenses in
its analysis of inventory realization. To the extent that estimated selling
prices do not exceed such costs and expenses, valuation reserves are established
against inventories. In addition, the Company generally considers inventory
which is not expected to be sold within the next nine months, as forecasted by
the Companys material requirements planning systems, as excess and thus
appropriate reserves are established through a charge to cost of sales.

9

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# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (1)
Significant Accounting Policies (Continued)

Other Current Liabilities

Other current liabilities
consist of the following:

`March 28,     December 31,
                                                                     2004            2003
                                                                   ---------     ------------
                                                                        (In thousands)
Accrued marketing (a)                                              $  8,399       $  8,588
Margin on deferred sales                                              8,123          9,953
Accrued payroll, vacation, bonus and profit sharing                   7,302         10,104
Accrued restructuring charges                                         6,704          8,162
Accrued warranty                                                      4,664          5,225
Accrued excess purchase commitments                                   3,332          4,744
Other accrued liabilities (b)                                        30,321         34,563
                                                                   --------       --------
                                                                   $ 68,845       $ 81,339
                                                                   ========       ========`

| | (a) | Includes accruals for marketing  development  funds committed to the Company's  various channel partners,  and promotional and
advertising accruals.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Includes accruals for royalties,  licensing agreements,  self-insurance  liabilities,  litigation,  professional fees, forward
foreign exchange contracts, employee relocation costs, VAT, sales and other taxes and other miscellaneous liabilities.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net Income (Loss) Per Common Share

Basic net income (loss) per
common share (Basic EPS) excludes dilution and is computed by
dividing net income (loss) by the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per common share
(Diluted EPS) reflects the potential dilution that could occur if
stock options or other contracts to issue common stock were exercised or
converted into common stock. The computation of Diluted EPS does not assume
exercise or conversion of securities that would have an anti-dilutive effect on
net loss per common share. In periods where losses are recorded, common stock
equivalents would decrease the loss per share and therefore are not added to the
weighted average shares outstanding.

10

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# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (1)
Significant Accounting Policies (Continued)

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

`Net
                                                           Income (loss)        Shares          Per Share
                                                            (Numerator)      (Denominator)        Amount
                                                            ------------     -------------       -------
                                                                 (In thousands, except per share data)
         For the Quarter Ended:
         March 28, 2004:
         Basic EPS                                           $ (4,865)          51,527           $ (0.09)
           Effect of options and restricted stock                   -                -                 -
                                                             --------           ------           -------
         Diluted EPS                                         $ (4,865)          51,527           $ (0.09)
                                                             ========           ======           =======

         March 30, 2003:
         Basic EPS                                           $  5,313           51,265           $  0.10
           Effect of options                                        -               33                 -
                                                             --------           ------           -------
         Diluted EPS                                         $  5,313           51,298           $  0.10
                                                             ========           ======           =======`

Stock options and unvested
restricted shares for the quarter ended March 28, 2004 were not included in the
calculation of Diluted EPS as their inclusion would have been anti-dilutive. For
the quarters ended March 28, 2004 and March 30, 2003, there were outstanding
options to purchase 1,110,055 and 1,456,037 shares, respectively, that had an
exercise price greater than the average market price of the common shares for
the respective quarters and at March 28, 2004, there were also 19,507 shares of
restricted common shares granted under the Management Incentive Plan that were
not yet vested. For the quarter ended March 30, 2003, the outstanding options
that had an exercise price greater than the average market price of the common
shares would have had an anti-dilutive effect on EPS and were therefore excluded
from the Diluted EPS calculation above.

Stock Compensation Expense

The Company has various
stock-based compensation plans (stock option plans, a restricted stock plan and
an employee stock purchase plan (ESPP)). Under the ESPP, employees
can purchase the Companys Common Stock at a discount.

Effective January 1, 2003,
the Company adopted the fair value recognition provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation (SFAS 123). The Company selected the
prospective method, which was one of the three transition methods allowed by
SFAS No. 148, Accounting for Stock-Based Compensation  Transition
and Disclosure, to transition to the fair value method of measuring
stock-based compensation expense. Under the prospective method, only those
employee stock options that are granted or modified after January 1, 2003 are
expensed as compensation.

11

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# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (1)
Significant Accounting Policies (Continued)

On July 17, 2003, the
Companys Board of Directors declared a one-time cash dividend of $5.00 per
share to stockholders of record as of the close of business on September 15,
2003. As required by the Companys 1997 Stock Incentive Plan, a
modification to reflect the one-time cash dividend of $5.00 per share was made
on October 2, 2003 to the approximately 1.7 million stock options outstanding at
that time under this plan. The outstanding options were adjusted by reducing
their exercise prices by an amount equal to the dividend (but in no event below
$0.03 1/3 per share), effective as of October 2, 2003 and an additional charge
of $1.2 million for the fair value of modifying the vested options was recorded
in the fourth quarter of 2003.

The Board of Directors has
recommended to the Companys stockholders that they vote, at the 2004
Annual Meeting of Stockholders to be held on May 25, 2004, to approve amendments
to the Companys 1995 Director Stock Option Plan and 1987 Stock Option Plan
permitting a similar adjustment to be made to options outstanding under those
plans. Unless such stockholder approval is obtained, no adjustment will be made
to the options outstanding under those two plans. However, since the value of
the options was decreased as a result of the declared dividend, this was
determined to be a deemed modification of the stock options on
October 2, 2003. Since these options have been considered modified, they are
being accounted for under the fair value method of SFAS 123.

As a result of these
actions, as of October 2, 2003, all of the Companys outstanding stock
options are being accounted for under the fair value method of SFAS 123.

Stock compensation expense
for the restricted stock plan, which was approved by stockholders during the
second quarter of 2003, has been accounted for under SFAS 123, with the fair
value of the restricted stock being recognized over the vesting period of the
restricted stock. The fair value of the discount associated with the ESPP is
being expensed in accordance with SFAS 123.

12

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (1)
Significant Accounting Policies (Continued)

The following table
illustrates the effect on net income (loss) and per share data if the fair value
based method had been applied to all outstanding and unvested awards in 2003
(the fair value based method was applied to all outstanding and unvested awards
in 2004).

`For the Quarter Ended
                                                             -------------------------------------
                                                             March 28, 2004         March 30, 2003
                                                             --------------         --------------
                                                             (In thousands, except per share data)

     Net income (loss) as reported                              $ (4,865)              $ 5,313
                                                                ========               =======
       Add: Stock compensation expense included
         in reported net income (loss), net of
         related tax effects                                          91                    16
       Less: Total stock compensation expense
         determined under fair value method for
         all awards, net of related tax effects                      (91)                 (336)
                                                                --------               -------
     Pro forma net income (loss)                                $ (4,865)              $ 4,993
                                                                ========               =======

     Basic EPS - As reported and pro forma                      $  (0.09)              $  0.10
                                                                ========               =======
     Diluted EPS - As reported and pro forma                    $  (0.09)              $  0.10
                                                                ========               =======`

Accrued Warranty

The Company accrues for
warranty costs based on estimated warranty return rates and estimated costs to
repair. The Company uses a statistically-based model to estimate warranty
accrual requirements. The statistical model, used to project future returns, is
based upon a rolling monthly calculation that computes the number of units
required in the warranty reserve and is based upon monthly sales, actual returns
and statistically projected return rates. Generally, if a product is subject to
failure or likely to fail, the product fails early in the usage cycle. Actual
warranty costs are charged against the warranty reserve. Factors that affect the
Companys warranty liability include the number of units sold, historical
and anticipated rates of warranty returns and repair cost. The Company reviews
the adequacy of its recorded warranty liability on a quarterly basis and records
the necessary adjustments to the warranty liability.

Changes in the
Companys warranty liability during all periods presented were as follows:

`For the Quarter Ended
                                           ---------------------------------------
                                           March 28, 2004           March 30, 2003
                                           --------------           --------------
                                                        (In thousands)

  Balance at beginning of period              $ 5,225                   $ 8,035
    Accruals/additions                          1,132                     2,410
    Claims                                     (1,693)                   (3,243)
                                              -------                   -------
  Balance at end of period                    $ 4,664                   $ 7,202
                                              =======                   =======`

13

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (1)
Significant Accounting Policies (Continued)

Guarantees

During the third quarter of
2003, the Company entered into a limited guarantee with a component supplier
whereby the Company agreed to provide a guarantee of payments for purchases by a
contract manufacturer of the component suppliers product. The contract
manufacturer incorporates the component suppliers product into Iomega
branded DVD products. The Company has guaranteed purchases of the component
suppliers product by the contract manufacturer for up to $3 million. All
purchase orders placed by the contract manufacturer must be countersigned or
approved by a Company representative in advance of the transaction. This
guarantee will remain in effect until the Company is no longer selling the
component suppliers product under the Iomega brand or until the component
supplier extends a credit facility to the contract manufacturer that does not
require a guarantee by the Company. The Company entered into this guarantee to
facilitate the purchase of product by the contract manufacturer directly from
the component supplier. The Company is only obligated to make payments under
this guarantee in the event that the contract manufacturer is in material
payment default. However, if the contract manufacturer defaults on payment to
the component supplier, the Company would be entitled to withhold any related
amounts due from the Company to the contract manufacturer. The component
supplier has presently granted a $2 million line of credit to the contract
manufacturer. Accordingly, the current potential exposure to the Company under
the guarantee is $2 million. The Company has recorded a $30 thousand liability
to reflect the fair value of this guarantee. The fair value was based on the
estimated market value of a similar stand-alone letter of credit.

## (2) Income Taxes

For the quarter ended March
28, 2004, the Company recorded an income tax benefit of $0.7 million on a
pre-tax loss of $5.6 million. The income tax benefit for the first quarter was
reduced by a $1.6 million increase in the valuation allowance for net deferred
tax assets as a result of a decrease in the first quarter of 2004 in the
available foreign cash which could be repatriated to utilize net operating loss
carryforwards (NOLs) and other deferred tax assets. The resulting
effective tax benefit rate for the first quarter of 2004 was 12%. The $1.6
million increase in the valuation allowance for net deferred tax assets accounts
for a 28% reduction of the effective benefit tax rate. This compares to an
income tax provision of $3.8 million on pre-tax income of $9.1 million resulting
in an effective tax rate of 42% for the first quarter of 2003.

On April 22, 2004, in
conjunction with releasing its first quarter 2004 pre-tax results, the Company
announced that it was conducting an analysis of its net tax assets and
associated valuation reserves. That analysis has been completed and the Company
concluded that foreign withholding taxes which were previously presented as
income taxes receivable should be reclassified and reported as deferred tax
assets on the consolidated balance sheets. The amount reclassified on
the December 31, 2003 condensed consolidated balance sheet was $8.5 million. The
Company further concluded that no net adjustment was required to the fourth
quarter 2003 tax provision as a result of certain fourth quarter 2003 offsetting
adjustments related, in part, to the tax consequences of a $75 million
intercompany dividend required to fund the one-time $5 per share cash dividend
paid to shareholders on October 1, 2003 and that no adjustments to the tax
provisions were required in any other prior period.

14

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (2) Income Taxes (Continued)

Deferred tax assets and
liabilities are determined based on the differences between the financial
reporting and tax bases of assets and liabilities. They are measured by applying
the enacted tax rates and laws in effect for the years in which such differences
are expected to reverse. The significant components of the Companys
deferred tax assets and liabilities are as follows:

`March 28,     December 31,
                                                                                 2004           2003
                                                                           -------------    ------------
                                                                                   (In thousands)
              Deferred Tax Assets (Liabilities):
              Current Deferred Tax Assets:
                  Trade receivable reserves                                    $   4,461       $   5,193
                  Inventory reserves                                               4,329           3,753
                  Accrued expense reserves                                         8,988          10,911
                  Other                                                               83              53
                                                                               ---------       ---------
              Total current deferred tax assets                                   17,861          19,910
                                                                               ---------       ---------

              Non-Current Deferred Tax Assets:
                  Fixed asset reserves                                               313             370
                  Tax credit carryforwards                                        30,613          29,839
                  Accelerated depreciation and amortization                        4,063           4,522
                  U.S. and foreign loss carryforwards                             30,208          34,141
                  Other                                                            1,523           1,938
                                                                               ---------       ---------
              Total non-current deferred tax assets                               66,720          70,810
                                                                               ---------       ---------
              Total deferred tax assets                                           84,581          90,720
                                                                               ---------       ---------

              Non-Current Deferred Tax Liabilities:
                  Tax on unremitted foreign earnings                             (61,353)        (69,701)
                  Purchased goodwill                                              (4,782)         (4,824)
                                                                               ---------       ---------
              Total non-current deferred tax liabilities                         (66,135)        (74,525)
                                                                               ---------       ---------
              Current valuation allowance                                         (3,242)         (2,972)
              Non-current valuation allowance                                    (21,247)        (20,797)
                                                                               ---------       ---------
                     Net deferred tax liabilities                              $  (6,043)      $  (7,574)
                                                                               =========       =========

              As Reported on the Balance Sheet:
                  Current deferred tax assets                                  $  14,619       $  16,938
                                                                               =========       =========
                  Non-current deferred tax liabilities                         $ (20,662)      $ (24,512)
                                                                               =========       =========`

The realizability of the
deferred tax assets is evaluated quarterly in accordance with SFAS No. 109,
Accounting for Income Taxes, which requires that a valuation
allowance be established when there is significant uncertainty as to the
realizability of the deferred tax assets.

15

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (2) Income Taxes (Continued)

The following table summarizes the Company's U.S.
 and foreign loss and tax credit carryforwards:

`March 28,
                                                                      2004         Expiration Dates
                                                                  -------------    ----------------
                                                                  (In Thousands)
U.S. and Foreign Loss Deferred Tax Assets:
    Federal NOLs (1)                                                $ 9,351        2021 to 2024
    State NOLs                                                        8,591        2004 to 2023
    Foreign NOLs                                                     11,836        2004 to indefinite
    Capital losses                                                      430        2005
                                                                   --------
                                                                   $ 30,208
                                                                   ========

Tax Credit Deferred Tax Assets:M
    Foreign tax credits                                            $ 19,838        2004 to indefinite
    Research credits                                                  9,585        2007 to 2023
    Alternative minimum tax credits                                   1,190        Indefinite
                                                                   --------
                                                                   $ 30,613
                                                                   ========

(1) NOLs = Net Operating Loss Carryforwards`

At March 28, 2004, the Company
had $9.4 million of deferred tax assets related to U.S. federal net NOLs, which
reflect a tax benefit of approximately $27 million in future U.S. federal tax
deductions. At March 28, 2004, the Company had $8.6 million of deferred tax
assets related to state NOLs, which reflect a tax benefit of approximately $215
million in future state tax deductions. The difference in the amount of future
federal and state tax deductions related to the NOLs is largely the result of
differences between federal and state NOL carryback rules which have allowed the
use of federal NOLs in instances where state NOLs could not be utilized.

Net deferred tax
liabilities for the Company at March 28, 2004 were $6.0 million. As of March 28,
2004, deferred tax liabilities for estimated U.S. federal and state taxes of
$61.4 million have been accrued on unremitted foreign earnings of $166 million.
U.S. taxes have not been provided for unremitted foreign earnings of $10.5
million as these earnings are considered to be permanently invested in non-U.S.
operations.

## (3) Business
Segment Information

The Company has five
reportable segments based primarily on the nature of the Companys
customers and products: Zip Products, Sourced Branded Products (comprised of the
former Optical Products segment as well as portable and desktop hard disk drives
(HDD), Iomega Mini and Micro Mini USB and external floppy disk
drives which were all previously reported in the Other Mobile and Desktop
Storage Products segment), Other Mobile and Desktop Storage Products (which no
longer includes HDD, Iomega Mini and Micro Mini USB and external floppy disk
drives), Network Storage Systems and New Technologies.

16

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (3) Business Segment Information (Continued)

The Zip Products segment involves
the distribution and sale of Zip drives and disks to retailers, distributors,
resellers and OEMs throughout the world. The Zip Products segment is approaching
the end of its life cycle and is experiencing significant declines in both sales
and product profit margins.

The Companys Sourced
Branded Products segment involves the worldwide distribution and sale of
products that the Company sources (purchases) from other companies and resells
under the Iomega brand. These products include CD-RW drives, DVD rewritable
drives (which began shipping in limited quantities in the first quarter of
2003), HDD, Iomega Mini and Micro Mini USB drives and external floppy disk
drives (which began shipping in the first quarter of 2003).

The Other Mobile and
Desktop Storage Products segment includes: Jaz and PocketZip disks; Peerless
drive systems; Iomega software products such as Iomega Automatic Backup software
and other miscellaneous products, most of which have been discontinued. Jaz,
PocketZip and Peerless drives were discontinued in 2002, though the Company
continues to sell the respective disks to support the installed drive base of
these products. Jaz and PocketZip were previously reported as a separate
segment.

The Network Storage Systems
segment consists primarily of the development, distribution and sale of NAS
servers targeted toward small and medium-sized businesses and enterprise
workgroups. The Network Storage Systems segment also includes the distribution
and sale of third-party Tape drive products which the Company began selling in
immaterial amounts during the third quarter of 2003. The Company is exiting the
Tape drive products market as a result of the Companys reorientation in
the fourth quarter of 2003 of its Network Storage Systems segment product
offerings. The Company was unsuccessful in generating significant sales in the
high-end of the targeted NAS server market and as a result of this difficulty,
in the fourth quarter of 2003, the Company decided to reorient its NAS product
lines and exit the high-end of the targeted NAS server market and focus on the
entry-level and certain models of the mid-range of the targeted market where the
Company expects to better leverage its small- to medium-sized business customer
base and channel customers, including existing VARs already focused on these
customers.

The New Technologies
segment includes the research and development of two new high capacity removable
storage devices, including a removable hard disk storage system referred to by
the REV trademark that has a native capacity of 35GB and up to 90GB
compressed and a small-form factor removable flexible magnetic storage device
(referred to as Digital Capture Technology or DCT) that is expected
to have a capacity of about 1.2 to 1.5GB. At March 28, 2004, there had been no
sales associated with New Technologies. REV TM products began selling
in April 2004.

The Company evaluates
performance based on product profit margin (PPM) for each segment.
PPM is defined as sales and other income related to a segments operations,
less both fixed and variable product costs, research and development expenses,
selling expenses and amortization related to a segments operations. When
such costs and expenses exceed sales and other income, PPM is referred to as
product loss. The accounting policies of the segments are the same as those
described in Note 1. Intersegment sales, eliminated in consolidation, are not
material. The expenses attributable to general corporate activity are not
allocated to the product segments.

17

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (3) Business Segment Information (Continued)

The information in the
following table was derived directly from the segments internal financial
information used for corporate management purposes. All 2003 amounts have been
reclassified to match the 2004 presentation.

## Reportable
Operating Segment Information:

`For the Quarter Ended
                                                                --------------------------
                                                                March 28,        March 30,
                                                                   2004            2003
                                                                ---------        ---------
                                                                      (In thousands)
Sales:
Mobile and Desktop Storage Products:
  Zip Products                                                  $ 44,220         $ 73,309
  Sourced Branded Products                                        35,127           27,333
  Other Mobile and Desktop Storage Products                        1,387            3,260
                                                                --------         --------
    Total Mobile and Desktop Storage Products                     80,734          103,902
Network Storage Systems                                            3,392            2,280
                                                                --------         --------
    Total sales                                                 $ 84,126         $106,182
                                                                ========         ========

PPM (Product Loss):
Mobile and Desktop Storage Products:
  Zip Products                                                  $ 18,167         $ 29,356
  Sourced Branded Products                                           473              (42)
  Other Mobile and Desktop Storage Products                          966            1,618
                                                                --------         --------
    Total Mobile and Desktop Storage Products                     19,606           30,932
Network Storage Systems                                             (811)          (4,044)
New Technologies                                                  (8,390)          (4,858)
                                                                --------         --------
    Total PPM                                                     10,405           22,030

Common Expenses:
  General corporate expenses                                     (15,839)         (14,866)
  Restructuring reversal (charges)                                  (546)              78
  Interest and other income, net                                     430            1,888
                                                                --------         --------
    Income (loss) before income taxes                           $ (5,550)        $  9,130
                                                                ========         ========`

18

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (4)
Restructuring Charges and Reversal

The Company currently has
restructuring reserves under two different restructuring actions, the 2001
restructuring actions and the 2003 restructuring actions. The following table summarizes the reserve
balances related to each of these actions:

`March 28,      December 31,
                                                      2004             2003
                                                    ---------      ------------
                                                          (In Thousands)

Other Current Liabilities:
  2003 Restructuring Actions                         $ 2,060         $ 3,564
  2001 Restructuring Actions                           4,644           4,598
                                                     -------         -------
     Total                                           $ 6,704         $ 8,162
                                                     =======         =======

Fixed Asset Reserves:
  2003 Restructuring Actions                         $   516         $   597
  2001 Restructuring Actions                             266             299
                                                     -------         -------
     Total                                           $   782         $   896
                                                     =======         =======`

During the first quarter of
2004, the Company recorded pre-tax restructuring charges of $0.5 million related
to lease expenses for facilities vacated in 2001 as part of the restructuring
actions initiated during 2001, which the Company has been unable to sublease. During
the first quarter of 2003, severance and benefit reserves of $0.1 million were
reversed as part of the restructuring actions initiated during 2001, due to the
original estimates being higher than what was utilized.

2003 Restructuring Actions

The Company recorded $14.5
million of charges in 2003 for the 2003 restructuring actions including $6.5
million for severance and benefits for 199 regular and temporary personnel
worldwide, or approximately 25% of the Companys worldwide workforce, $3.0
million to exit contractual obligations, $2.6 million to reimburse a strategic
supplier for its restructuring expenses, $1.8 million for lease termination
costs and $0.6 million related to excess furniture.

Of the $14.5 million
recorded in 2003 for the 2003 restructuring actions, $5.0 million was charged to
cost of sales with the remaining $9.5 million being shown as restructuring
expenses as a component of operating expenses. The $5.0 million charged to cost
of sales included $2.6 million to reimburse a strategic supplier for its
restructuring expenses and $2.4 million to exit a third-party Zip disk
manufacturing agreement. This $5.0 million was charged to the Zip Products
segment and the remaining $9.5 million was not allocated to any of the business
segments. Of the $14.5 million restructuring charges, all but the $0.6 related
to excess furniture will be paid in cash. As of March 28, 2004, the Company has
made $11.8million in cash payments related to the 2003 restructuring
actions, of which $1.5 million was disbursed during the first quarter of 2004.

19

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (4)
Restructuring Charges and Reversal (Continued)

Of the 199 individuals
worldwide whose positions were identified for elimination in the third quarter
of 2003, 7 employees worked on a transition basis into the first quarter of
2004, with 6 additional employees being scheduled to work on a transition basis
through the second quarter of 2004 and 3 more employees being scheduled to work
on a transition basis into the third quarter of 2004. The $6.5 million severance
and benefits costs recognized during 2003 included the costs associated with
those employees whose positions were eliminated during 2003 and the ratable
recognition of the severance and benefits costs to be paid to the employees who
remained in transition into 2004. The Company anticipates that the total
separation payments or liability for the 199 employees notified during 2003 will
be $6.6 million. During the first quarter of 2004, the Company recorded $0.3
million of expense related to the ratable recognition of the severance and
benefits costs to be paid to the employees who remained in transition into 2004.
However, during the first quarter of 2004, the Company also released $0.3
million of outplacement reserves as employee usage of outplacement resources was
less than originally estimated. An additional $0.1 million of severance and
benefits costs related to the 9 employees who are on transition into the second
and third quarters of 2004 will be recognized ratably over their respective
future transition periods. None of these remaining charges will be allocated to
any of the business segments. Other than these additional severance charges, the
Company does not anticipate recording any other expenses related to the 2003
restructuring actions.

Remaining restructuring
reserves in the amount of $2.1 million and $0.5 million are included in the
Companys other current liabilities and fixed asset reserves, respectively,
as of March 28, 2004. Utilization of and other activity relating to the 2003
restructuring charges during the quarter ended March 28, 2004 are summarized
below:

`Balance             Utilized            Additions     Balance
                                                          -------------------
                                           12/31/03         Cash     Non-Cash     (Reversals)    03/28/04
                                           --------       --------   --------     -----------    --------
                                                                  (In thousands)
2003 Restructuring Actions:
Severance and benefits                     $ 1,323        $   (756)    $   -          $ 2        $   569
Contract cancellations                         500            (500)        -            -              -
Lease termination costs                      1,741            (250)        -            -          1,491
Furniture                                      597               -       (81)           -            516
                                           -------        --------     -----          ---        -------
                                           $ 4,161        $ (1,506)    $ (81)         $ 2        $ 2,576
                                           =======        ========     =====          ===        =======

Balance Sheet Breakout:
  Other current liabilities                $ 3,564        $ (1,506)    $   -          $ 2        $ 2,060
  Fixed asset reserves                         597               -       (81)           -            516
                                           -------        --------     -----          ---        -------
                                           $ 4,161        $ (1,506)    $ (81)         $ 2        $ 2,576
                                           =======        ========     =====          ===        =======`

As of March 28, 2004, the remaining
severance and benefits are associated with the 9 employees who are on transition
until the second and third quarters of 2004. Lease payments are being made on a
continuous monthly basis and of these facilities, the last lease expires at the
end of 2006 and the Company is trying to sublease these facilities. The Company
is in the process of showing the furniture to potential buyers and anticipates
disposing of the furniture during 2004.

20

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (4)
Restructuring Charges and Reversal (Continued)

2001 Restructuring Actions

During the third quarter of
2001, the Company recorded pre-tax restructuring charges of $33.3 million. The
$33.3 million of restructuring charges recorded in the third quarter of 2001
included $17.4 million associated with exiting lease facilities - of which $9.8
million related to leasehold improvements, furniture and information technology
asset write-downs and $7.6 million was associated with lease termination costs -
and $15.9 million related to the reduction of 1,234 regular and temporary
personnel worldwide, or approximately 37% of the Companys worldwide
workforce.

During the first quarter of
2003 severance and benefit reserves of $0.1 million were reversed due to the
original estimates being higher than what was utilized. During the first quarter
of 2004, the Company recorded an additional $0.5 million for the Ireland
facility due to continuing depressed real estate market conditions in Ireland.

Remaining restructuring
reserves in the amount of $4.6 million and $0.3 million are included in the
Companys other current liabilities and fixed asset reserves, respectively,
as of March 28, 2004. Utilization of and other activity relating to the 2001
restructuring reserves during the quarter ended March 28, 2004 are summarized
below:

`Balance           Utilized                        Balance
                                                          -------------------
                                             12/31/03      Cash      Non-Cash     Additions     03/28/04
                                             --------     ------     --------     ---------     --------
                                                               (In thousands)
2001 Restructuring Actions:
North America Reorganization:
  Lease cancellations                         $ 3,274     $ (310)     $   -         $   -       $ 2,964
  Leasehold improvements and
    furniture                                     299          -        (33)            -           266
                                              -------     ------      -----         -----       -------
                                                3,573       (310)       (33)            -         3,230
                                              -------     ------      -----         -----       -------

Europe Reorganization:
  Lease cancellations                           1,324       (188)         -           544         1,680
                                              -------     ------      -----         -----       -------
                                              $ 4,897     $ (498)     $ (33)        $ 544       $ 4,910
                                              =======     ======      =====         =====       =======

Balance Sheet Breakout:
  Other current liabilities                   $ 4,598     $ (498)     $   -         $ 544       $ 4,644
  Fixed asset reserves                            299          -        (33)            -           266
                                              -------     ------      -----         -----       -------
                                              $ 4,897     $ (498)     $ (33)        $ 544       $ 4,910
                                              =======     ======      =====         =====       =======`

As of March 28, 2004, the remaining
leasehold improvements are associated with subleased facilities and cannot be
disposed of until the related subleases expire. The last sublease will expire in
March 2006. Lease payments are being made on a continuous monthly basis and the
Company is still trying to sublease one of the facilities where the lease does
not expire until 2009.

21

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (5)
Commitments and Contingencies

Litigation

Except as set forth below,
in managements opinion, there are no material legal proceedings to which
the Company or any of its subsidiaries is a party or to which any of their
property is subject. The Company is involved in other lawsuits and claims
generally incidental to its business. It is the opinion of management that the
ultimate disposition of the lawsuit and claim discussed below will not have a
material adverse effect on the Companys ongoing business or financial
condition.

Nomai S.A.
(Nomai) is a French subsidiary of the Company that was acquired
during the third quarter of 1998. Nomai has been a party to certain litigation
matters arising from: (1) Nomais acquisition of certain assets of RPS
Media S.A. (RPS) in bankruptcy in 1997 and its organization of Albi
Media Manufacturing, SARL (AMM) as a subsidiary to operate such
assets and (2) Nomais subsequent disposition of AMM in September 1999.

Three French entities,
Conseil & Technique (C&T), Soterem and IDCC, filed a lawsuit in 2000
against AMM, Nomais former subsidiary, before the Commercial Court of
Toulouse for lost profits related to a terminated R&D project, the so-called
Magic Project. That case was dismissed in June 2002, for failure to
prosecute. In January 2004, the Company learned that claims related to the
termination of the Magic Project were refiled by C&T, with Nomai, Iomega
International S.A. and an Iomega International S.A. employee among the
defendants. The amount at issue was approximately 12,400,000 Euros
(approximately $14.9 million USD using foreign exchange rates as of April 30,
2004). During the first quarter of 2004, the Company reached a settlement with
C&T, which involved the payment of an immaterial sum and the refiled lawsuit
was dismissed. Other parties may pursue claims arising from the Magic Project
and, in that event, the Company would vigorously defend any such claim.

## (6) Other
Matters

Other Intangible Assets

At March 28, 2004, the
Company had $4.0 million in net other intangible assets, all of which are
subject to amortization. During the quarter ended March 28, 2004, amortization
expense was $0.5 million. Amortization expense for each of the next five fiscal
years is anticipated to be approximately $1.5 million for the remainder of 2004,
$2 million in 2005, $0.5 million in 2006 and zero thereafter. As of March 28,
2004, the weighted-average useful life of the Companys intangible assets
is approximately 2 years.

`March 28,      December 31,
                                                      2004             2003
                                                    ---------      ------------
                                                         (In thousands)
Other Intangible Assets:
  Gross value                                       $ 11,791         $ 11,791
  Accumulated amortization                            (7,785)          (7,266)
                                                    --------         --------
    Net intangible assets                              4,006         $  4,525
                                                    ========         ========`

22

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

## (6) Other
Matters (Continued)

Significant Customers

During the quarter ended
March 28, 2004, sales to Ingram Micro, Inc. and Tech Data Corporation accounted
for 18% and 13% of consolidated sales, respectively. Ingram Micro, Inc. and Tech
Data Corporation accounted for 16% and 11% of consolidated sales, respectively,
for the quarter ended March 30, 2003. No other single customer accounted for
more than 10% of consolidated sales for these periods.

Forward Exchange Contracts

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 exposure or expected exposure,
not for speculation or trading purposes. At March 28, 2004, outstanding forward
exchange buy/(sell) contracts, which all mature in May 2004, were as follows
(rates are quoted as other currency unit per one United States dollar):

`Contracted     Month - End
                                                     Forward        Forward
                                    Amount            Rate            Rate
                                  -----------      ----------     -----------

      British Pound                  (400,000)       0.5537          0.5537
      European Currency Unit      (11,850,000)       0.8262          0.8262
      Singapore Dollar                400,000        1.6888          1.6888
      Swiss Franc                  (4,800,000)       1.2817          1.2817`

23

---

# IOMEGA
CORPORATION AND SUBSIDIARIES

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

## Overview

Iomega designs and markets
products that help customers protect, secure, capture and share their valuable
digital information. The Company has organized its products into three broad
business categories to align with its customers and products: a) Mobile and
Desktop Storage Products, b) Network Storage Systems and c) New Technologies.
Mobile and Desktop Storage Products include: Zip drives and disks; Sourced
Branded Products including CD-RW and DVD rewritable drives, portable and desktop
hard disk drives (HDD), Iomega Mini and Micro Mini USB drives and
external floppy disk drives; and Other Mobile and Desktop Storage Products
includes Jaz and PocketZip disks, Peerless drive systems and other miscellaneous
products, most of which have been discontinued and various software titles.
Network Storage Systems consists of a selection of Network Attached Servers
(NAS) servers with capacities of 160 gigabytes (GB),
where 1 gigabyte equals 1 billion bytes, to 1 terabyte (TB), where 1
terabyte equals 1 trillion bytes. The Companys New Technologies include
the development expenses associated with two new magnetic storage technologies,
a removable hard disk storage system, referred to by the REV
trademark, that has a native capacity of 35GB and a compressed capacity of up to
90GB and a small-form factor removable flexible magnetic storage device
(DCT) that is expected to have a capacity of about 1.2 to 1.5GB. At
March 28, 2004, there had been no sales associated with New Technologies. REV
products began selling in April 2004. The Company has experienced some setbacks
in its DCT development schedule and, as further discussed below, is exploring
various options related to the DCT technology.

During the first quarter of
2004, the Company reported a net loss of $4.9 million, or $0.09 per share, on
sales of $84.1 million which compares to net income in the first quarter of 2003
of $5.3 million, or $0.10 per diluted share, on sales of $106.2 million. Sales
in the first quarter of 2004 decreased compared to the first quarter of 2003
primarily from the continuing decline of the Zip product business, partially
offset by higher Sourced Branded Product sales. The net loss for the first
quarter of 2004 included pre-tax restructuring charges of $0.5 million, related
to lease cancellation charges in Europe associated with the 2001 restructuring
actions and included a $1.6 million increase in the valuation allowance for net
deferred tax assets as a result of a decrease in the first quarter of 2004 in
the available foreign cash which could be repatriated to utilize net operating
loss carryforwards (NOLs) and other deferred tax assets. Net income
for the first quarter of 2003 was favorably impacted by $6.0 million of net
pre-tax legal settlements and $0.1 million of pre-tax restructuring reserve
releases related to severance accruals recorded in prior periods that were no
longer needed for the 2001 restructuring actions.

For the first quarter of
2004, the Company had an operating loss of $6.0 million, compared to an
operating profit of $7.2 million for the first quarter of 2003. The operating
loss for 2004 included $0.5 million of restructuring charges, related to lease
cancellation charges in Europe associated with the 2001 restructuring actions.
Operating income for the first quarter of 2003 included $6.0 million of net
favorable legal settlements and $0.1 million of restructuring reserve releases
related to severance accruals recorded in prior periods that were no longer
needed for the 2001 restructuring actions.

During 2003, the Company
implemented plans to restructure its operations and has recorded net
restructuring charges of $14.5 million related to this plan and anticipates
recording another $0.1 millionof restructuring charges in the remainder
of 2004, for the severance and benefits of employees who are on transition.
Substantially all of the 2003 restructuring charges are expected to be cash
charges. During the first quarter of 2004, $2.0 million of cash was paid for
both the 2003 and 2001 restructuring actions. The Company anticipates paying
approximately $4 million during the remainder of 2004 in cash for both the 2003
and 2001 restructuring actions.

24

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Overview
(Continued)

During the first quarter of
2004, Zip product sales declined at a slower rate than was expected. However,
the Company anticipates Zip product sales will continue to decline and
management does not believe that the lower rate of decline experienced in the
first quarter of 2004 represents a new trend. Zip product margins will most
likely decrease in the future due to higher per unit costs resulting from
meeting minimum volume commitments as the Zip product segment completes its
lifecycle.

During the first quarter of
2004, the decrease in Zip product sales was partially offset by higher Sourced
Branded product sales when compared to the first quarter of 2003, as the Company
introduced new Sourced Branded products to leverage the Iomega brand such as the
Iomega 8x Super DVD drive, the Iomega 8x QuickTouch Video burner drive, the 52X
CD-RW/DVD-ROM drive, the Combo 52X CD-RW/DVD-ROM 7-in-1 card reader drive and
the Iomega Micro Mini USB 2.0 drive. During 2004, the Company plans to continue
introducing new sourced branded products. Sourced Branded product margins are
expected to decline as the Company plans to moderate its margin goals in order
to gain greater retail penetration in the U.S.

Network Storage Systems
sales increased during the first quarter of 2004 compared to the first quarter
of 2003 and gross margins were positive during the first quarter of 2004
compared to negative margins in the first quarter of 2003. However, Network
Storage Systems still had a product loss at the PPM level for the first quarter
of 2004. The Company continues to believe that it can grow the Network Storage
Systems business and that this business can be at break even or slightly
profitable by the second half of 2004. There can, however, be no assurances as
to whether this will be achieved.

The Company launched its
new REV products in April 2004 and is positioning REV products as a tape drive
replacement product for both the entry and mid-range segments of the tape drive
market where TravanTM, DDSTM, DAT 72, VXA®, AIT and
DLT/VS80 are currently utilized. The Company will continue to spend considerable
resources generating awareness of this new product and thus does not expect REV
products to be profitable before the fourth quarter of 2004.

The Company is continuing
to develop the DCT technology and plans to do so as long as market research
shows significant consumer interest in the DCT technology as a PC peripheral
device for data storage, backup and archiving among laptop users. However, the
Company has experienced some setbacks in its DCT development schedule and has
been unsuccessful in securing original equipment manufacturer (OEM)
commitments for the DCT technology. In light of these challenges, the Company is
exploring various options for the DCT technology, including the launch of an
Iomega branded PC peripheral device in the second half of 2004 (most likely the
fourth quarter of 2004) or the sale, licensing or discontinuance of the DCT
technology. If the Company were to decide to discontinue the DCT technology, the
Company would incur material write-offs and other charges. The Company expects
to make a decision regarding the DCT technology during the second quarter of
2004.

The Company does not
believe that it will be able to generate a quarterly operating profit unless and
until its new REV products and DCT technology are successfully launched and
become profitable. In the meantime, it is imperative that the Company continue
to control its costs and improve operating efficiencies to minimize losses.
Management anticipates that REV products should be profitable by the fourth
quarter of 2004, but the DCT technology, assuming that the development
continues, is not expected to be profitable during 2004. Additionally, the
Companys overall gross margins are expected to continue to decline as
higher margin Zip product sales are displaced with lower margin sales from
Sourced Branded products.

25

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Overview
(Continued)

At March 28, 2004, the
Companys total cash, cash equivalents and temporary investment balance was
$150.1 million (see the Liquidity and Capital Resources discussion for more
detail on the tax impacts of repatriating the foreign cash). The Company
believes this total cash is sufficient to operate the business and fund the
investments required for REV products and DCT technology for the next two or
more years.

On April 22, 2004, in
conjunction with releasing its first quarter 2004 pre-tax results, the Company
announced that it was conducting an analysis of its net tax assets and
associated valuation reserves. That analysis has been completed and the Company
concluded that foreign withholding taxes which were previously presented as
income taxes receivable should be reclassified and reported as deferred tax
assets on the consolidated balance sheets. The amount reclassified on
the December 31, 2003 condensed consolidated balance sheet was $8.5 million. The
Company further concluded that no net adjustment was required to the fourth
quarter 2003 tax provision as a result of certain fourth quarter 2003 offsetting
adjustments related, in part, to the tax consequences of a $75 million
intercompany dividend required to fund the one-time $5 per share cash dividend
paid to shareholders on October 1, 2003 and that no adjustments to the tax
provisions were required in any other prior period.

## Application of
Critical Accounting Policies

The Companys
discussion and analysis of its financial condition and results of operations are
based upon the Companys condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these condensed consolidated
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent asset and liabilities at the date of the financial statements and the
reported amounts of sales and expenses during the reporting periods. Areas where
significant judgments are made that are highly uncertain at the time the
estimate is made and are susceptible to material changes from period to period
include revenue recognition, price protection and rebate reserves, marketing
program accruals, allowance for doubtful accounts, inventory valuation reserves
and tax valuation allowances. Actual results could differ materially from these
estimates. For a more detailed explanation of the judgments included in these
areas, refer to the Companys Annual Report on Form 10-K for the year ended
December 31, 2003.

26

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Business
Segment Information

The Company has five reportable
segments based primarily on the nature of the Companys customers and
products: Zip Products, Sourced Branded Products (comprised of the former
Optical Products segment as well as HDD, Iomega Mini and Micro Mini USB and
external floppy disk drives which were all previously reported in the Other
Mobile and Desktop Storage Products segment), Other Mobile and Desktop Storage
Products (which no longer includes HDD, Iomega Mini and Micro Mini USB and
external floppy disk drives), Network Storage Systems and New Technologies.

The Zip Products segment
involves the distribution and sale of Zip drives and disks to retailers,
distributors, resellers and OEMs throughout the world. The Zip Products segment
is approaching the end of its life cycle and is experiencing significant
declines in both sales and product profit margins.

The Companys Sourced
Branded Products segment involves the worldwide distribution and sale of
products that the Company sources (purchases) from other companies and resells
under the Iomega brand. These products include CD-RW drives, DVD rewritable
drives (which began shipping in limited quantities in the first quarter of
2003), HDD, Iomega Mini and Micro Mini USB drives and external floppy disk
drives (which began shipping in the first quarter of 2003).

The Other Mobile and
Desktop Storage Products segment includes: Jaz and PocketZip disks; Peerless
drive systems; Iomega software products such as Iomega Automatic Backup software
and other miscellaneous products, most of which have been discontinued. Jaz,
PocketZip and Peerless drives were discontinued in 2002, though the Company
continues to sell the respective disks to support the installed drive base of
these products. Jaz and PocketZip were previously reported as a separate
segment.

The Network Storage Systems
segment consists primarily of the development, distribution and sale of NAS
servers targeted toward small and medium-sized businesses and enterprise
workgroups. The Network Storage Systems segment also includes the distribution
and sale of third-party Tape drive products which the Company began selling in
immaterial amounts during the third quarter of 2003. The Company is exiting the
Tape drive products market as a result of the Companys reorientation in
the fourth quarter of 2003 of its Network Storage Systems segment product
offerings. The Company was unsuccessful in generating significant sales in the
high-end of the targeted NAS server market and as a result of this difficulty,
in the fourth quarter of 2003, the Company decided to reorient its NAS product
lines and exit the high-end of the targeted NAS server market and focus on the
entry-level and certain models of the mid-range of the targeted market where the
Company expects to better leverage its small- to medium-sized business customer
base and channel customers, including existing value added resellers
(VARs) already focused on these customers.

The New Technologies
segment includes the research and development of two new high capacity removable
storage devices, REV products and the DCT technology. At March 28, 2004, there
had been no sales associated with New Technologies. REV products began selling
in April 2004. The Company has been unsuccessful in securing OEM commitments for
the DCT technology and is exploring various options for the DCT technology,
including the launch of an Iomega branded PC peripheral device in the second
half of 2004 (most likely the fourth quarter of 2004) or the sale, licensing or
discontinuance of the technology.

27

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Business
Segment Information (Continued)

The Company evaluates
performance based on product profit margin (PPM) for each segment.
PPM is defined as sales and other income related to a segments operations,
less both fixed and variable product costs, research and development expenses,
selling expenses and amortization related to a segments operations. When
such costs and expenses exceed sales and other income, PPM is referred to as
product loss. The accounting policies of the segments are the same as those
described in Note 1 of the notes to condensed consolidated financial statements.
Intersegment sales, eliminated in consolidation, are not material. The expenses
attributable to general corporate activity are not allocated to the product
segments.

The information in the
following table was derived directly from the segments internal financial
information used for corporate management purposes. All 2003 amounts have been
reclassified to match the 2004 presentation.

## Reportable
Operating Segment Information:

`For the Quarter Ended
                                                                --------------------------
                                                                March 28,        March 30,
                                                                   2004            2003
                                                                ---------        ---------
                                                                      (In thousands)
Sales:
Mobile and Desktop Storage Products:
  Zip Products                                                  $ 44,220         $ 73,309
  Sourced Branded Products                                        35,127           27,333
  Other Mobile and Desktop Storage Products                        1,387            3,260
                                                                --------         --------
    Total Mobile and Desktop Storage Products                     80,734          103,902
Network Storage Systems                                            3,392            2,280
                                                                --------         --------
    Total sales                                                 $ 84,126         $106,182
                                                                ========         ========

PPM (Product Loss):
Mobile and Desktop Storage Products:
  Zip Products                                                  $ 18,167         $ 29,356
  Sourced Branded Products                                           473              (42)
  Other Mobile and Desktop Storage Products                          966            1,618
                                                                --------         --------
    Total Mobile and Desktop Storage Products                     19,606           30,932
Network Storage Systems                                             (811)          (4,044)
New Technologies                                                  (8,390)          (4,858)
                                                                --------         --------
    Total PPM                                                     10,405           22,030

Common Expenses:
  General corporate expenses                                     (15,839)         (14,866)
  Restructuring reversal (charges)                                  (546)              78
  Interest and other income, net                                     430            1,888
                                                                --------         --------
    Income (loss) before income taxes                           $ (5,550)        $  9,130
                                                                ========         ========`

28

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Seasonality

The Companys Sourced
Branded business is typically strongest during the fourth quarter. The
Companys European sales are typically weakest during the third quarter due
to summer holidays. Zip product sales to OEM customers are typically strongest
during the third quarter. There can be no assurance that these historic patterns
will continue. Given the continued expected decline of the Zip business, the
Company is unable to estimate or forecast any Zip product seasonality in future
quarters. As a result of the foregoing, sales for any prior quarter are not
necessarily indicative of the sales to be expected in any future quarter.

## Sales

Sales for the quarter ended
March 28, 2004 of $84.1 million decreased $22.1 million, or 21%, when compared
to sales of $106.2 million for the quarter ended March 30, 2003. This decrease
was primarily due to the continued decrease in Zip product sales, partially
offset by increases in Sourced Branded product sales.

Zip product sales for the
first quarter of 2004 totaled $44.2 million, representing a decrease of $29.1
million, or 40%, compared to sales of $73.3 million for the first quarter of
2003. Sales of Zip products represented 53% of total sales for the first quarter
of 2004, compared to 69% for the first quarter of 2003. Zip drive sales of $23.9
million for the first quarter of 2004 decreased by $16.2 million, or 40%,
consistent with a 40% decrease in Zip drive units. Zip OEM drive units accounted
for approximately 47% of total Zip drive units in the first quarter of 2004
compared to approximately 48% in the first quarter of 2003. Zip disk sales of
$20.2 million for the first quarter of 2004 decreased by $13.0 million, or 39%,
while Zip disk units decreased by 35% from the first quarter of 2003. Zip
product sales decreased more than units primarily due to the increased usage of
rebates and promotions during the first quarter of 2004.

Sourced Branded product
sales for the first quarter of 2004 totaled $35.1 million, representing an
increase of $7.8 million, or 28%, compared to sales of $27.3 million for the
first quarter of 2003. Sales of Sourced Branded products represented 42% of
total sales for the first quarter of 2004, compared to 26% for the first quarter
of 2003. Sourced Branded sales increased primarily from higher unit volumes on
DVD rewritable drives, Iomega Mini and Micro Mini USB drives and external floppy
drive sales, partially offset by lower CD-RW drive unit volumes. The Company
began selling DVD rewritable and external floppy drives late in the first
quarter of 2003. The higher overall Sourced Branded unit volumes were partially
offset by lower prices on all Sourced Branded products. The $7.8 million
increase in Sourced Branded sales resulted from a $5.9 million, $4.3 million,
$1.8 million and $1.0 million increase in DVD rewritable drives, Iomega Mini USB
drives, floppy external drives and HDD drives, respectively, partially offset by
a $5.2 million decrease in CD-RW drive sales. Prices on Sourced Branded products
are anticipated to continue to decline due to competitive market pressures and
the Companys plan to increase market share in the U.S. retail markets.

Other Mobile and Desktop
Storage Product sales for the first quarter of 2004 totaled $1.4 million,
representing a decrease of $1.9 million, or 57%, compared to sales of $3.3
million for the first quarter of 2003. The decrease in Other Mobile and Desktop
Storage Product sales resulted primarily from lower Jaz disk and Peerless sales.

29

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Sales
(Continued)

Network Storage Systems
sales for the first quarter of 2004 totaled $3.4 million, representing a $1.1
million increase, compared to sales of $2.3 million for the first quarter of
2003. The increase was due primarily to selling off the Companys remaining
inventory of high-end NAS units which the Company decided to exit during the
fourth quarter of 2003. The Company was not selling these high-end NAS units in
the first quarter of 2003.

Geographically, sales in
the Americas totaled $44.4 million, or 52% of total sales, in the first quarter
of 2004, compared to $65.2 million, or 61% of total sales, in the first quarter
of 2003. The decrease in sales dollars in the Americas was due primarily to
lower Zip product sales. Sales in Europe totaled $33.2 million, or 40% of total
sales, in the first quarter of 2004, compared to $31.8 million, or 30% of total
sales, in the first quarter of 2003. The increase in sales dollars in Europe was
due primarily to higher Sourced Branded product sales, partially offset by lower
Zip product sales. Sales in Asia totaled $6.5 million, or 8% of total sales, in
the first quarter of 2004, compared to $9.2 million, or 9% of total sales, in
the first quarter of 2003. The decrease in sales dollars in Asia was due
primarily to lower Zip product sales.

## Gross Margin

The Companys overall
gross margin of $24.4 million, or 29%, in the first quarter of 2004 compares to
$37.1 million, or 35%, in the first quarter of 2003. Total gross margin dollars
in the first quarter of 2004 decreased $12.7 million, or 34% from the first
quarter of 2003, primarily from a lower proportion of sales from the higher
margin Zip products. The decrease in the gross margin percentage was primarily
due to a lower proportion of sales from the higher margin Zip products. The Zip
product gross margin percentage was 46% in the first quarter of both 2004 and
2003.

Sourced Branded products
gross margin percentage increased to 13% for the first quarter of 2004, compared
to 11% for the first quarter of 2003. Management anticipates that Sourced
Branded products gross margins will decrease in the future as the Company
attempts to gain greater retail market penetration in the U.S. and the CD-RW
market, which has higher gross margins than some of the other sourced branded
products, continues to decline. However, the Company hopes to partially offset
these lower prices with increased sourcing and supply chain efficiencies as the
Company moves to a single logistics provider for both the Americas and Europe.

Management anticipates that
it will be difficult to maintain the overall gross margin percentage that was
reported for the first quarter of 2004 as the product mix continues to shift
from higher margin Zip products to Sourced Branded products, Network Storage
Systems and REV products, all of which have lower gross margins than Zip
products.

30

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Gross Margin
(Continued)

Future gross margin
percentages will depend on a number of factors including: the future volume of
Zip products sold; pricing actions or promotions; the mix between Zip products
compared to Sourced Branded, NAS and REV products; sales mix between aftermarket
and OEM or private label channels, as OEM and private label sales generally
provide lower gross margins than sales through other channels; sales mix of Zip
100 megabyte (MB) drives and disks, where megabyte equals 1 million
bytes, Zip 250MB and Zip 750MB drives and disks, as sales of the various Zip
products have differing gross margins; sales volumes of Zip disks, which
generate significantly higher gross margin percentages than the corresponding
drives; the strength or weakness of foreign currencies, especially the euro; the
impact of any future material cost changes; supply or other disruptions; the
ability to avoid future inventory and fixed asset charges; the ability to
accurately forecast future product demand; the ability to cover fixed costs
associated with newly introduced products, particularly REV products; start-up
costs associated with the introduction of new products, particularly REV
products; price competition from other substitute third-party storage products
(including CD-RW and DVD products); significant price competition given that
CD-R, CD-RW and DVD discs are significantly cheaper than Zip disks; possible
payment of license royalties to resolve alleged patent infringement disputes and
general economic conditions.

## Product
Segment PPM

Zip PPM for the first
quarter of 2004 was $18.2 million and decreased by $11.2 million, or 38%,
compared to Zip PPM of $29.4 million for the first quarter of 2003. The decrease
in Zip PPM resulted primarily from lower sales. Zip PPM as a percentage of Zip
product sales increased to 41% for the first quarter of 2004 from 40% for the
first quarter of 2003. The increase in Zip PPM as a percentage of Zip product
sales resulted primarily from lower operating expenses reflecting the cost
savings from the 2003 restructuring actions.

Sourced Branded PPM for the
first quarter of 2004 was $0.5 million and improved by $0.5 million, compared to
near break even for the first quarter of 2003. Sourced Branded PPM as a
percentage of Sourced Branded sales improved to 1% in the first quarter of 2004
from break even in the first quarter of 2003. The Sourced Branded PPM
improvement in the first quarter of 2004 resulted primarily from higher gross
margins that resulted primarily from inventory reversals as the Company was able
to sell DVD rewritable drives without having to drop prices as anticipated and
was able to sell certain DVD rewritable drives that were previously considered
excess and obsolete.

Other Mobile and Desktop
Storage Products PPM for the first quarter of 2004 was $1.0 million and
decreased by $0.6 million, or 40% compared to Other Mobile and Desktop Storage
Products PPM of $1.6 million for the first quarter of 2003. The lower Other
Mobile and Desktop Storage Products PPM resulted primarily from lower Jaz PPM.

Network Storage Systems had
a product loss of $0.8 million in the first quarter of 2004 which represented a
$3.2 million, or 80%, improvement compared to a product loss of $4.0 million in
the first quarter of 2003. The lower product loss resulted primarily from lower
costs reflecting the Companys reorientation of the NAS product line during
the fourth quarter of 2003 and high research and development and sales and
marketing spending in the first quarter of 2003 when the Company was attempting
to broaden the NAS product offering by entering into the high-end of the target
market.

31

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Product
Segment PPM (Continued)

New Technologies product
loss of $8.4 million increased by $3.5 million, or 73%, in the first quarter of
2004 compared to a product loss of $4.9 million in the first quarter of 2003.
The higher loss resulted from increased spending on the two new technologies
under development. The Company began shipping REV products in April 2004 and
does not anticipate REV products to be profitable before the fourth quarter of
2004, as REV products ramp up to volume and the Company incurs substantial
marketing expenses to generate market awareness of REV products. The Company is
continuing to develop the DCT technology and plans to do so as long as market
research shows significant consumer interest in the DCT technology as a PC
peripheral device for data storage, backup and archiving among laptop users.
However, the Company has experienced some setbacks in its DCT development
schedule and has been unsuccessful in securing OEM commitments for the DCT
technology. In light of these challenges, the Company is exploring various
options for the DCT technology, including the launch of an Iomega branded PC
peripheral device in the second half of 2004 (most likely the fourth quarter of
2004) or the sale, licensing or discontinuance of the DCT technology. If the
Company were to decide to discontinue the DCT technology, the Company would
incur material write-offs and other charges. The Company expects to make a
decision regarding the DCT technology during the second quarter of 2004.

General corporate expenses
that were not allocated to PPM of $15.8 million in the first quarter of 2004,
increased $0.9 million, or 7%, compared to $14.9 million for the first quarter
of 2003. The $14.9 million of general corporate expenses for the first quarter
of 2003 included favorable net legal settlements of $6.0 million. The $0.9
million increase, which includes the $6.0 million of favorable net legal
settlements for the first quarter of 2003, reflected the cost savings from the
restructuring plans implemented in the third quarter of 2003.

## Selling,
General and Administrative Expenses

Selling, general and administrative
expenses of $23.2 million for the first quarter of 2004 decreased by $0.1
million, or 1%, compared to $23.3 million for the first quarter of 2003. The
$23.3 million of selling, general and administrative expenses for the first
quarter of 2003 included favorable net legal settlements of $6.0 million. The
$0.1 million decrease, which includes the $6.0 million of favorable net legal
settlements for the first quarter of 2003, reflected the cost savings from the
restructuring plans implemented in the third quarter of 2003.Included in
the $23.2 million in selling, general and administrative expenses for the first
quarter of 2004 was $1.1 million of expenses incurred in conjunction with the
Companys upcoming information technology system upgrade scheduled to be
implemented in July of 2004.

Selling, general and
administrative expenses increased as a percentage of sales to 28% for the first
quarter of 2004, from 22% in the first quarter of 2003, as sales declined at a
faster rate than overall selling, general and administrative costs. For the
first quarter of 2003, the net favorable legal settlements of $6.0 million
equated to almost 6% as a percentage of sales.

32

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Bad Debt

For the first quarter of
2004, a bad debt expense of $0.1 million was recorded, compared to a bad debt
credit of $2.0 million for the first quarter of 2003. The $2.0 million bad debt
credit for the first quarter of 2003 resulted primarily from a significantly
large decrease in trade receivable balances during the first quarter of 2003. At
both March 28, 2004 and December 31, 2003, the Company had $0.9 million of trade
receivables in excess of 180 days.

## Research and
Development Expenses

Research and development expenses
of $6.5 million for the first quarter of 2004 were $2.1 million, or 25%, lower
than research and development expenses of $8.6 million during the first quarter
of 2003. The $2.1 million decrease in research and development expenses was
primarily due to cost reductions reflecting the benefits of the 2003
restructuring actions, lower NAS research and development expenditures due to
the reorientation of the NAS product line in the fourth quarter of 2003 and the
transition of resources away from Zip products to REV products and the DCT
technology. Research and development expenses as a percentage of sales remained
flat at 8% in both the first quarters of 2004 and 2003.

Even though REV products
began shipping in April of 2004, there will be continued significant development
costs incurred for REV products in the future as development continues on
FireWire®, SCSI and S-ATA interfaces which are planned for the second half
of 2004, continued software development costs, as well as development costs on
the second generation REV drive, among other areas.

As discussed above in the
section entitled, Product Segment PPM, the Company is continuing to
develop the DCT technology and plans to do so as long as market research shows
significant consumer interest in the DCT technology as a PC peripheral device
for data storage, backup and archiving among laptop users. Currently, the
Company anticipates that spending levels on the DCT technology will continue at
the recent quarterly rate of $2 million to $3 million per quarter.

33

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Restructuring
Charges and Reversal

The Company currently has restructuring
reserves under two different restructuring actions, the 2001 restructuring
actions and the 2003 restructuring actions. The following table summarizes the
reserve balances related to each of these actions:

`March 28,      December 31,
                                                      2004             2003
                                                    ---------      ------------
                                                          (In Thousands)

Other Current Liabilities:
  2003 Restructuring Actions                         $ 2,060         $ 3,564
  2001 Restructuring Actions                           4,644           4,598
                                                     -------         -------
     Total                                           $ 6,704         $ 8,162
                                                     =======         =======

Fixed Asset Reserves:
  2003 Restructuring Actions                         $   516         $   597
  2001 Restructuring Actions                             266             299
                                                     -------         -------
     Total                                           $   782         $   896
                                                     =======         =======`

During the first quarter of
2004, the Company recorded pre-tax restructuring charges of $0.5 million related
to lease expenses for facilities vacated in 2001 as part of the restructuring
actions initiated during 2001, which the Company has been unable to sublease.
During the first quarter of 2003, severance and benefit reserves of $0.1 million
were reversed as part of the restructuring actions initiated during 2001, due to
the original estimates being higher than what was utilized.

2003 Restructuring Actions

The Company recorded $14.5
million of charges in 2003 for the 2003 restructuring actions including $6.5
million for severance and benefits for 199 regular and temporary personnel
worldwide, or approximately 25% of the Companys worldwide workforce, $3.0
million to exit contractual obligations, $2.6 million to reimburse a strategic
supplier for its restructuring expenses, $1.8 million for lease termination
costs and $0.6 million related to excess furniture.

Of the $14.5 million
recorded in 2003 for the 2003 restructuring actions, $5.0 million was charged to
cost of sales with the remaining $9.5 million being shown as restructuring
expenses as a component of operating expenses. The $5.0 million charged to cost
of sales included $2.6 million to reimburse a strategic supplier for its
restructuring expenses and $2.4 million to exit a third-party Zip disk
manufacturing agreement. This $5.0 million was charged to the Zip Products
segment and the remaining $9.5 million was not allocated to any of the business
segments. Of the $14.5 million restructuring charges, all but the $0.6 related
to excess furniture will be paid in cash. As of March 28, 2004, the Company has
made $11.8million in cash payments related to the 2003 restructuring
actions, of which $1.5 million was disbursed during the first quarter of 2004.

34

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Restructuring
Charges and Reversal (Continued)

Of the 199 individuals
worldwide whose positions were identified for elimination in the third quarter
of 2003, 7 employees worked on a transition basis into the first quarter of
2004, with 6 additional employees being scheduled to work on a transition basis
through the second quarter of 2004 and 3 more employees being scheduled to work
on a transition basis into the third quarter of 2004. The $6.5 million severance
and benefits costs recognized during 2003 included the costs associated with
those employees whose positions were eliminated during 2003 and the ratable
recognition of the severance and benefits costs to be paid to the employees who
remained in transition into 2004. The Company anticipates that the total
separation payments or liability for the 199 employees notified during 2003 will
be $6.6 million. During the first quarter of 2004, the Company recorded $0.3
million of expense related to the ratable recognition of the severance and
benefits costs to be paid to the employees who remained in transition into 2004.
However, during the first quarter of 2004, the Company also released $0.3
million of outplacement reserves as employee usage of outplacement resources was
less than originally estimated. An additional $0.1 million of severance and
benefits costs related to the 9 employees who are on transition into the second
and third quarters of 2004 will be recognized ratably over their respective
future transition periods. None of these remaining charges will be allocated to
any of the business segments. Other than these additional severance charges, the
Company does not anticipate recording any other expenses related to the 2003
restructuring actions.

Remaining restructuring
reserves in the amount of $2.1 million and $0.5 million are included in the
Companys other current liabilities and fixed asset reserves, respectively,
as of March 28, 2004. Utilization of and other activity relating to the 2003
restructuring charges during the quarter ended March 28, 2004 are summarized
below:

`Balance             Utilized            Additions     Balance
                                                          -------------------
                                           12/31/03         Cash     Non-Cash     (Reversals)    03/28/04
                                           --------       --------   --------     -----------    --------
                                                                  (In thousands)
2003 Restructuring Actions:
Severance and benefits                     $ 1,323        $   (756)    $   -          $ 2        $   569
Contract cancellations                         500            (500)        -            -              -
Lease termination costs                      1,741            (250)        -            -          1,491
Furniture                                      597               -       (81)           -            516
                                           -------        --------     -----          ---        -------
                                           $ 4,161        $ (1,506)    $ (81)         $ 2        $ 2,576
                                           =======        ========     =====          ===        =======

Balance Sheet Breakout:
  Other current liabilities                $ 3,564        $ (1,506)    $   -          $ 2        $ 2,060
  Fixed asset reserves                         597               -       (81)           -            516
                                           -------        --------     -----          ---        -------
                                           $ 4,161        $ (1,506)    $ (81)         $ 2        $ 2,576
                                           =======        ========     =====          ===        =======`

As of March 28, 2004, the remaining
severance and benefits are associated with the 9 employees who are on transition
until the second and third quarters of 2004. Lease payments are being made on a
continuous monthly basis and of these facilities, the last lease expires at the
end of 2006 and the Company is trying to sublease these facilities. The Company
is in the process of showing the furniture to potential buyers and anticipates
disposing of the furniture during 2004.

35

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Restructuring
Charges and Reversal (Continued)

2001 Restructuring Actions

During the third quarter of
2001, the Company recorded pre-tax restructuring charges of $33.3 million. The
$33.3 million of restructuring charges recorded in the third quarter of 2001
included $17.4 million associated with exiting lease facilities - of which $9.8
million related to leasehold improvements, furniture and information technology
asset write-downs and $7.6 million was associated with lease termination costs -
and $15.9 million related to the reduction of 1,234 regular and temporary
personnel worldwide, or approximately 37% of the Companys worldwide
workforce.

During the first quarter of
2003 severance and benefit reserves of $0.1 million were reversed due to the
original estimates being higher than what was utilized. During the first quarter
of 2004, the Company recorded an additional $0.5 million for the Ireland
facility due to continuing depressed real estate market conditions in Ireland.

Remaining restructuring
reserves in the amount of $4.6 million and $0.3 million are included in the
Companys other current liabilities and fixed asset reserves, respectively,
as of March 28, 2004. Utilization of and other activity relating to the 2001
restructuring reserves during the quarter ended March 28, 2004 are summarized
below:

`Balance           Utilized                        Balance
                                                          -------------------
                                             12/31/03      Cash      Non-Cash     Additions     03/28/04
                                             --------     ------     --------     ---------     --------
                                                               (In thousands)
2001 Restructuring Actions:
North America Reorganization:
  Lease cancellations                         $ 3,274     $ (310)     $   -         $   -       $ 2,964
  Leasehold improvements and
    furniture                                     299          -        (33)            -           266
                                              -------     ------      -----         -----       -------
                                                3,573       (310)       (33)            -         3,230
                                              -------     ------      -----         -----       -------

Europe Reorganization:
  Lease cancellations                           1,324       (188)         -           544         1,680
                                              -------     ------      -----         -----       -------
                                              $ 4,897     $ (498)     $ (33)        $ 544       $ 4,910
                                              =======     ======      =====         =====       =======

Balance Sheet Breakout:
  Other current liabilities                   $ 4,598     $ (498)     $   -         $ 544       $ 4,644
  Fixed asset reserves                            299          -        (33)            -           266
                                              -------     ------      -----         -----       -------
                                              $ 4,897     $ (498)     $ (33)        $ 544       $ 4,910
                                              =======     ======      =====         =====       =======`

As of March 28, 2004, the remaining
leasehold improvements are associated with subleased facilities and cannot be
disposed of until the related subleases expire. The last sublease will expire in
March 2006. Lease payments are being made on a continuous monthly basis and the
Company is still trying to sublease one of the facilities where the lease does
not expire until 2009.

## Interest Income

Interest income of $0.4
million in the first quarter of 2004 decreased $1.5 million, or 80%, from $1.9
million in the first quarter of 2003. The decrease in interest income resulted
primarily from lower cash, cash equivalents and temporary investment balances
resulting from the $257.2 million one-time cash dividend payment made on October
1, 2003 and from lower interest rates.

36

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Income Taxes

For the quarter ended March
28, 2004, the Company recorded an income tax benefit of $0.7 million on a
pre-tax loss of $5.6 million. The income tax benefit for the first quarter was
reduced by a $1.6 million increase in the valuation allowance for net deferred
tax assets as a result of a decrease in the first quarter of 2004 in the
available foreign cash which could be repatriated to utilize NOLs and other
deferred tax assets. The resulting effective tax benefit rate for the first
quarter of 2004 was 12%. The $1.6 million increase in the valuation allowance
for net deferred tax assets accounts for a 28% reduction of the effective
benefit tax rate. This compares to an income tax provision of $3.8 million on
pre-tax income of $9.1 million resulting in an effective tax rate of 42% for the
first quarter of 2003.

On April 22, 2004, in
conjunction with releasing its first quarter 2004 pre-tax results, the Company
announced that it was conducting an analysis of its net tax assets and
associated valuation reserves. That analysis has been completed and the Company
concluded that foreign withholding taxes which were previously presented as income
taxes receivable should be reclassified and reported as deferred tax assets on
the consolidated balance sheets. The amount reclassified on the
December 31, 2003 condensed consolidated balance sheet was $8.5 million. The
Company further concluded that no net adjustment was required to the fourth
quarter 2003 tax provision as a result of certain fourth quarter 2003 offsetting
adjustments related, in part, to the tax consequences of a $75 million
intercompany dividend required to fund the one-time $5 per share cash dividend
paid to shareholders on October 1, 2003 and that no adjustments to the tax
provisions were required in any other prior period.

The realizability of the
deferred tax assets is evaluated quarterly in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes, which requires that a valuation allowance be established
when there is significant uncertainty as to the realizability of the deferred
tax assets.

The following table summarizes the Company's U.S. and foreign loss and tax credit carryforwards:

`March 28,
                                                                      2004         Expiration Dates
                                                                  -------------    ----------------
                                                                  (In Thousands)
U.S. and Foreign Loss Deferred Tax Assets:
    Federal NOLs (1)                                                $ 9,351        2021 to 2024
    State NOLs                                                        8,591        2004 to 2023
    Foreign NOLs                                                     11,836        2004 to indefinate
    Capital losses                                                      430        2005
                                                                   --------
                                                                   $ 30,208
                                                                   ========

Tax Credit Deferred Tax Assets:
    Foreign tax credits                                            $ 19,838        2004 to indefinite
    Research credits                                                  9,585        2007 to 2023
    Alternative minimum tax credits                                   1,190        Indefinite
                                                                   --------
                                                                   $ 30,613
                                                                   ========

(1) NOLs = Net Operating Loss Carryforwards`

37

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Income Taxes
(Continued)

At March 28, 2004, the
Company had $9.4 million of deferred tax assets related to U.S. federal net
NOLs, which reflect a tax benefit of approximately $27 million in future U.S.
federal tax deductions. At March 28, 2004, the Company had $8.6 million of
deferred tax assets related to state NOLs, which reflect a tax benefit of
approximately $215 million in future state tax deductions. The difference in the
amount of future federal and state tax deductions related to the NOLs is largely
the result of differences between federal and state NOL carryback rules which
have allowed the use of federal NOLs in instances where state NOLs could not be
utilized.

Net deferred tax
liabilities for the Company at March 28, 2004 were $6.0 million. As of March 28,
2004, deferred tax liabilities for estimated U.S. federal and state taxes of
$61.4 million have been accrued on unremitted foreign earnings of $166 million.
U.S. taxes have not been provided for unremitted foreign earnings of $10.5
million as these earnings are considered to be permanently invested in non-U.S.
operations.

## Liquidity and
Capital Resources

At March 28, 2004, the
Company had total cash, cash equivalents and temporary investments of $150.1
million compared to $168.9 million at December 31, 2003, a decrease of $18.8
million or 11%.

At March 28, 2004, $3.3
million of total cash, cash equivalents and temporary investments were on
deposit in the U.S., for the U.S. entity, compared to $0.7 million at December
31, 2003.

At March 28, 2004, the
remaining $146.8 million of non-U.S. entities total cash, cash equivalents
and temporary investments were on deposit in the U.S. and foreign countries
(primarily Western Europe), compared to $168.2 million at December 31, 2003. The
repatriation of any of the $146.8 million of foreign cash to the U.S. will be
taxable income in the U.S. for federal and state tax purposes at a rate of
approximately 37%. However, the amount of cash required for U.S. federal and
state taxes will be less than the Companys 37% rate due to the
availability of the Companys existing federal and state NOLs and tax
credit carryforwards. Any taxes paid on the repatriation of cash to the U.S.
would not impact the condensed consolidated statement of operations as taxes
have already been provided on these foreign earnings.

Working capital of $120.9
million at March 28, 2004 decreased by $10.6 million, or 8%, compared to $131.5
million at December 31, 2003. The decrease in working capital resulted primarily
from lower cash, cash equivalents and temporary investments and lower trade
receivables, partially offset by lower other current liabilities.

For the quarter ended March
28, 2004, cash used by operating activities amounted to $14.6 million, a
decrease of $28.1 million, compared to cash provided by operating activities of
$13.5 million for the quarter ended March 30, 2003. The primary drivers for the
usage of cash in the first quarter of 2004 were $11.3 million for the
development, launch and capital expenditures for REV products and development
and capital expenditures for DCT, $2.7 million for the payment of annual
management bonus plans, $2.0 million for restructuring disbursements and changes
in current assets and current liabilities as described below.

38

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Liquidity and
Capital Resources (Continued)

Trade receivables decreased
for the quarter ended March 28, 2004 primarily from lower sales. Days sales
outstanding (DSO) in receivables decreased to 35 days at March 28,
2004, compared to 36 days at December 31, 2003. DSO is calculated by multiplying
the period end trade receivables balance by 90 and dividing that amount by the
sales for the quarter ended of the applicable year. Other current liabilities
decreased primarily from lower accrued payroll, vacation and bonus accruals due
to the payment of annual management bonus plans in January 2004 that were
accrued at December 31, 2003, lower margin on deferred sales primarily due to
lower levels of Zip products channel inventory, lower restructuring accruals due
primarily to utilization of the accruals (see the section above entitled,
Restructuring Charges and Reversals) and lower accrued excess
purchase commitments due to accrual utilization (through payments),
transfer to inventory reserve (associated with inventory receipts) and reduction
in certain supplier exposures.

During the first quarter of
2004, the Company did not repurchase any shares of the Companys Common
Stock, however the Companys treasury share balance increased by 584 shares
for restricted Common Stock that was forfeited back to the Company for no
consideration in conjunction with the Companys Management Incentive Plan.
As of March 28, 2004, approximately $122.3 million remained available for future
repurchases under the $150 million stock repurchase plan authorized by the
Companys Board of Directors on September 8, 2000. The repurchase plan does
not have a fixed termination date.

The Company believes that
its balance of unrestricted cash, cash equivalents and temporary investments,
together with cash flows from future operations, will be sufficient to fund
anticipated working capital requirements (including the investments in REV
products and DCT), funding of restructuring actions, capital expenditures and
cash required for other activities for the next two or more years. However, cash
flow from future 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 future volume of Zip and REV products sold,
the Companys ability to slow its sales decline, the progress of the
Companys product development efforts, the success of the Companys
new technologies, competitive price pressures, worldwide economic conditions,
the availability of critical components, the adequate supply of products from
the Companys sourcing partners, the financial stability of the
Companys customers, the necessity for future restructuring or other
charges which might consume cash and the success of the Company in managing its
inventory, forecasting accuracy, litigation exposures or other unforeseen
liabilities, trade receivables and accounts payable. Should the Company be
unable to meet its cash needs from its current balance of unrestricted cash,
cash equivalents and temporary investments and future cash flows from
operations, the Company would most likely seek financing from other sources
and/or incur additional restructuring charges to adjust the Companys
expenditures to a level that its cash flows could support.

The Companys current
balance of unrestricted cash, cash equivalents and temporary investments is its
sole source of liquidity. Given the Companys recent history of sales
declines, there is no assurance that, if needed, the Company would be able to
obtain financing from external sources or obtain a competitive interest rate.

39

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Factors
Affecting Future Operating Results

Demand for the Company's Products and Operating Efficiencies

The Companys future
operating results will depend, in large part, upon the Companys ability to
achieve and maintain a significant market demand and presence for its products
and to operate profitably and efficiently. The Companys ability to
accomplish these objectives will depend on a number of factors, including the
following:

- Market demand for digital storage products in general;
- Successful marketing and acceptance of the Company's recently-released REV products;
- Completion  of  development,  launch and market  success  and  acceptance  of the  Company's  planned  DCT
         technology;
- Success of the Company in establishing OEM arrangements on REV products and the
DCT technology and meeting OEM quality, supply and other requirements;
- Price, performance, quality and other characteristics of the Companys
products and of competing and substitute products rumored, announced or
introduced by other vendors;
- Emergence of any competing solutions as industry standards;
- Success of the Company in
meeting targeted availability dates for new and enhanced products;
- Success of
the Company in maintaining Zip product OEM arrangements and meeting OEM quality,
supply and other requirements;
- Willingness of OEMs to
promote products containing the Companys drives;
- Success of the
Companys efforts to provide and maintain customer service and
satisfaction;
- 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;
- Worldwide economic conditions, including overall market demand for personal
computers and other products with which the Companys products can be used;
- Ability of the Company to profitably and efficiently manage its supply of
products and key components, and to avoid disruptions in the supply thereof;
- Ability of the Company to maintain profitable relationships with distributors,
retailers and other resellers of the Companys products;
- The Company's ability to attract and retain competent, motivated employees;
- Ability of the Company to comply with applicable laws, regulations, ordinances
and other legal requirements in the numerous countries in which it does
business;
- Ability of the Company to successfully manage litigation, including enforcing
its rights, protecting its interests and defending itself from claims made
against it and
- Ability of the Company to successfully achieve and maintain an appropriate cost
structure and to minimize unforeseen and extraordinary expenses.

40

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Factors
Affecting Future Operating Results (Continued)

The Company cannot provide
any assurance that it will be able to successfully manage, satisfy or influence
any of these factors.

Zip Drives and Disks

Since 1996, sales of Zip
products have accounted for a significant majority of the Companys
revenues and profits. However, for the past several years Zip product sales have
declined consistently and significantly on a year-over-year basis, both in terms
of unit volumes and sales dollars. For example, in the first quarter of 2004,
Zip product sales were $44.2 million, a decrease of $29.1 million, or 40%, from
the first quarter of 2003. In the first quarter of 2004, Zip drive and disk
units decreased 40% and 35%, respectively, compared to the first quarter of
2003. Overall Zip product sales in calendar year 2003 were $246.1 million, which
represented a decline of $232.4 million, or 49%, from calendar year 2002 Zip
product sales of $478.5 million.

The Company expects
continuing declines in Zip product units and sales of at least comparable, if
not greater, quarter-over-quarter and year-over-year rates, due to factors such
as the following:

- Abandonment of Zip drive and disk usage by existing Zip drive customers as the
Zip technology reaches the end of its lifecycle;
- The continued loss of shelf space for Zip products at key retailers;
- The continued widespread proliferation of other low cost storage devices and
media such as optical drives (CD-RW and DVD), external hard drives and USB flash
drives;
- The continued proliferation of alternative means for sharing, transporting and
backing up large data files;
- Increasing difficulty in generating demand for Zip products through promotions and
- Potential disruptions in the supply of Zip drives and disksfrom the
Companys suppliers as Zip product volumes continue to decline.

The Company has launched
the new REV line of products, is developing the DCT technology, has launched a
line of Network Storage Systems products and has broadened its line of Sourced
Branded products in an attempt to create additional revenue streams. However,
until and unless the Company demonstrates an ability to launch and sell such
products profitably (particularly REV products and the DCT technology), its
profitability remains largely dependent on maximizing, to the extent possible,
sales of Zip drives and disks, which generate significantly higher gross and
product profit margins than the Companys other products. In the meantime,
the Companys profitability and/or results of operations will continue to
be adversely affected by Zip product sales declines unless and until the
Companys other product lines become consistently profitable. There can be
no assurance that they will ever do so.

As the Companys Zip
drive and disk sales have declined, it has consistently been losing shelf space
for Zip products with its key resellers and retailers because of reduced
volumes. The Company anticipates increasing challenges in this area for the
remainder of the Zip product life cycle. Although the Company attempts to offer
competitive sales and marketing programs to induce channel customers to continue
to purchase Zip products and other offerings, there is no assurance that the
Company will be successful in this regard.

41

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Factors
Affecting Future Operating Results (Continued)

The Company sells a
significant percentage of its total volume of Zip drives to a relatively small
number of computer OEMs. The Companys OEM customers are not obligated to
purchase any minimum volume of Zip drives. Moreover, the fact that the number of
OEM customers is relatively small presents a risk that the loss of one or more
key OEM accounts would have an immediate, material adverse effect on the
Companys financial condition or operating results. Computer OEM customers
have adopted CD-RW and DVD rewritable drives as standard product features. The
Company believes that this adoption, which has had a material adverse impact on
the Companys Zip business, is irreversible. At some point, more OEMs will
cease offering the Zip drive as a built-in option or will stop purchasing the
Companys Zip products altogether. When that occurs, the adverse impact on
the Company may be significant. The Company cannot predict when that will occur.

As the Companys Zip
product volumes continue to decline, suppliers of several critical components of
both Zip drives and disks have indicated that they will stop producing, or
End of Life, such components. In such cases, the Company attempts to
make an End of Life purchase on the required component(s) based on its estimates
of all future requirements. The End of Life of such components raises a number
of business risks, including risks such as the following:

- Risks that an End of Life purchase option will not be available from a supplier
who has chosen to discontinue a component;
- Risks that the Company
will order insufficient or excess quantities of key components;
- Risks that
compliance with volume, amortization, or other obligations owed by the Company
to component          suppliers will result in unanticipated costs or charges;
- Risks of irreparable quality problems manifesting in certain components,
spoilage, loss or destruction only after the Company has completed last time
buys of such components and
- Risks that certain suppliers may produce excess inventory of key components in
the absence of firm orders from the Company, leading to potential disputes
regarding payment obligations.

The Company will need to
properly manage the End of Life processes for such components to ensure ongoing
Zip product profitability. The Company can give no assurance that it will be
able to do so.

As Zip product segment
sales and profits continue to decline, the risk increases that the $11.7 million
of goodwill associated with the Zip product segment will become impaired and
that impairment charges will become necessary. During the first quarter of 2004,
the Company reviewed goodwill and has determined that the Zip goodwill is not
currently impaired.

In addition, as the
Companys Zip product volumes continue to decline, it becomes increasingly
difficult for the Company to forecast Zip product revenue streams, to manage the
Companys supply of Zip products and to manage inventory of Zip products at
distributors and retailers. The Company can give no assurance that it will be
able to successfully manage these factors. Moreover, the Company has been unable
to accurately forecast and predict the actual rate of Zip product decline over
time. Any significant negative change in the rate of the decline, from the
Companys internal forecasts, from quarter to quarter or year to year, will
have a negative impact on financial results because the Company is generally
unable to quickly make a corresponding reduction in operating expenses or other
costs. Consequently, there is no assurance that the Company will be able to
maintain its Zip business and profitability.

42

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Factors
Affecting Future Operating Results (Continued)

Sourced Branded Products

The Company ships a variety
of sourced branded products (finished products which contain little or no Iomega
intellectual property and are procured from third-party suppliers) including
CD-RW drives, DVD rewritable drives, HDD, Iomega Mini and Micro Mini USB drives
and external floppy disk drives. The Companys Sourced Branded Products
business strategy differs fundamentally from its Zip product strategy. Material
differences between the Sourced Branded and Zip businesses include the
following: a) the Company does not own any significant intellectual property
relating to its Sourced Branded Products; b) there is intense competition
between different providers of Sourced Branded Products; c) the Company obtains
significantly lower overall gross margins on sales of Sourced Branded Products
than on Zip drives; d) there is a need to continually requalify new drives and
products as existing drives and products come into short supply or become
obsolete and e) in the case of CD-RW, DVD rewritable and external floppy disk
drives, these drives use very low-cost, non-proprietary discs available from
many sources, unlike Zip drives. The overall Sourced Branded Products business
is characterized by low gross margins, continuing end user price reductions, the
frequent introduction of performance upgrades and intense competition from both
brand name and generic, low-cost competitors. One or more of these factors could
compel the Company to initiate an inventory write-down with respect to its
Sourced Branded Products. In light of these factors, the Company must accurately
forecast demand and closely monitor its inventory levels, product transitions,
sales channel inventory, purchase commitments, advertising and other marketing
expenses in order to compete effectively and profitably. There is no assurance
that the Company can consistently achieve these objectives, and historically it
has failed to do so. Since the Company entered the optical market in 1999 and
began sourcing products from other third-party suppliers, the Company has
reported product losses on its Optical and the Sourced Branded business as a
whole every year through 2003.

In spite of these
challenges, the Company believes it must maintain a presence in the various
sourced branded products markets in order to achieve its overall objective to be
viewed as a full-line supplier of digital Mobile and Desktop Storage Products
for the Companys retail, catalog and online customers. The Companys
Sourced Branded Products business activities are focused on reducing product
costs and operating expenses, improving inventory management processes,
decentralizing final assembly processes in order to increase efficiencies and
reduce costs, receiving more favorable contract terms, enforcing contract
rights, improving product life cycle management and revising channel marketing
programs with the ultimate goal to achieve profitability or to minimize product
losses. However, there is no assurance that the Companys activities in
this regard will be successful. The suppliers, as the original manufacturers,
have certain competitive advantages over the Company in the marketplace,
including the ability at any time to sell substantially identical drives at
significantly lower prices than the Company. In addition, the Company believes
that the overall market for aftermarket external CD-RW drives is shrinking, due
to factors such as the following: a) OEMs continue to offer, and customers
continue to choose, internal CD-RW drives as a standard product feature, thereby
minimizing market demand for aftermarket external CD-RW drives; b) customers
continue to transition from CD-RW drives to DVD rewritable drives and c)
aftermarket internal CD-RW drives are now significantly less expensive than
external drives. The Company is trying to mitigate the impact of the shrinking
aftermarket external CD-RW drive market by offering external DVD drive products;
however, there is no guarantee that this strategy will be successful.

43

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# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Factors
Affecting Future Operating Results (Continued)

There are other risks
associated with shipping sourced branded products. Such products may infringe
another partys protected intellectual property, may lack adequate quality
or may otherwise expose the Company to liabilities which could exceed the
profits or even the revenues that the Company would recognize from selling such
products. In order to successfully compete in this market, the Company must
accurately forecast demand, secure quality products, meet aggressive product
price and performance targets, create market demand for its particular brand of
products and avoid holding excessive inventory.

In addition, the Company
must ensure access to an adequate supply of products in the face of potential
shortages of particular products or of key components thereof. For example,
there is a current worldwide shortage of flash memory products in certain
capacities, which the Company expects to last at least through the first half of
calendar year 2004. This shortage has had, and will continue to have, a negative
impact upon the Companys sales of Iomega Mini and Micro Mini USB drives or
other products which incorporate flash memory. There is no assurance that the
Company can or will be able to successfully manage any of the risks set forth
above or achieve sustainable profitability on these products.

Network Storage Systems

In 2002, the Company
introduced a line of NAS servers. The NAS market is dominated by large computer
providers (including Dell and HP), is highly price competitive, primarily relies
upon VARs to resell the products and
requires core competencies in server, software, systems integration and
networking technologies. The Company has not yet demonstrated an ability to
operate profitably in this market. In 2002, the Company incurred start-up
expenses relating to NAS product qualification, launch and customer support in
excess of its expectations. During 2003, the Company recorded product losses in
excess of $17.9 million in its Network Storage Systems operations due to
under-absorbed operational overhead due to lower than planned volumes and from
higher sales and marketing and research and development spending designed to
broaden the Companys NAS product offerings. The Company has recorded
Network Storage Systems product losses in every quarter since this segment
began.

During the fourth quarter
of 2003, the Company decided to focus on the entry level segment of the market
and is in the process of exiting the high-end (products costing $5,000 to
$25,000 per unit) of the market.  Despite efforts and spending on
marketing and product introductions during 2002 and 2003, the Company was not
successful in penetrating the high-end of the market and first tier corporate
reseller channels and thus made the decision to exit this market. In conjunction
with this re-alignment, at the end of December 2003, the Company incurred $2.3
million of inventory and other charges to exit the high-end NAS market.
During 2004, the Company plans to focus on the
sales of NAS servers with capacities ranging from 160GB to 1TB. By focusing on
the entry level market, the Company expects to better leverage its small- to
medium-sized business customer base and channel customers, including existing
VARs already focused on these customers. The
Company can provide no assurance that these actions will help it to build a
profitable sustained Network Storage Systems business.

The Company has not yet
successfully developed, nor can there be any assurance that the Company will
successfully develop, the necessary core competencies to compete in this market
segment. There can be no assurance that the Companys NAS products will be
successful, that the Company will be successful in implementing its
Network Storage Systems strategy, that the Company will be able to
resolve any of the other challenges set forth above or that the Company will
ever achieve profitability on this product line.

44

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# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Factors
Affecting Future Operating Results (Continued)

Development and Introduction of New Products and New Revenue Streams

In light of continuing
declines in the Zip business, the Company believes that it must either develop
or acquire the right to sell new products that are profitable in order to remain
viable. However, the Companys efforts in this regard have been
unsuccessful in recent years. During 1999, 2000 and 2001, the Company invested
significant resources in developing and launching new products, including
Peerless, PocketZip, HipZip, FotoShow and Microdrive products. The Company was
unable to sell any of these products profitably and no longer markets any of
these products. In 2002, the Company introduced additional sourced branded
products including desktop and portable HDD drives and Iomega Mini USB drives as
well as NAS servers. In 2003, the Company introduced external floppy disk
drives. With the exception of the Iomega Mini USB drives, the external floppy
disk drive and recently, CD-RW, the Company has not been able to maintain
profitable operations on any of the other sourced branded products, for any
sustained period of time.

The Company has spent, and
plans to continue to spend, significant resources on efforts to develop two new
high capacity removable storage devices, referred to as REV products and the DCT
technology. These are discussed in more detail below. In addition, the Company
expects to review new business opportunities in multiple areas including digital
storage, software, disks, networking, services and other related areas. The
Company may spend significant resources attempting to develop new technology
products, attempting to market new products incorporating such products or
applications, or otherwise attempting to acquire the rights to new technologies.
There is no assurance that the Company will be successful in any of these
endeavors.

Recent Introduction of REV Products

In April 2004, the Company
began shipping the first products in its new REV family. The Companys
current REV products consist of a drive (in both external USB 2.0 and internal
ATAPI versions) and removable cartridges with a native capacity of 35GB and up
to 90GB compressed. The Company plans to introduce additional REV products with
the same capacities in the second half of 2004. The Companys recent
introduction of REV products entails numerous risks, including risks relating to
factors such as the following:

- Lack of market acceptance;
- Failure to achieve any
significant OEM adoption of the products;
- Unforeseen manufacturing and
technical challenges or delays;
- Inability to maintain acceptable agreements
with key suppliers or manufacturers;
- Performance,  quality or other issues that are only  discovered  in the context of usage by large  numbers
         of end users;
- Lack of defensible intellectual property;
- Lack of relevant core competencies or market expertise;
- Intense competition from substitute and strongly entrenched technologies;
- Significant product
launch and sales and marketing expenses which could cause on-going product
losses;
- Significant expenditures for tooling and inventory before any market
demand is validated;
- Risk that third parties may assert intellectual property
claims against new products and
- Risk that unforeseen REV product quality or
supply problems will generate negative publicity and perception of the Company.

45

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# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Factors
Affecting Future Operating Results (Continued)

Additional risks exist with
respect to the Companys recent introduction of REV products. Unforeseen
technical, supplier and manufacturing challenges -- either hardware or software
related -- could manifest themselves at any time. The Company believes that the
ultimate commercial success of REV products is dependent upon significant OEM
acceptance. However, as of the date of this filing, no agreements with any such
OEMs have been executed. There can be no assurance that the Company will be able
to successfully resolve any of these challenges, problems or risks.

Development of DCT Technology

The Company has spent
significant resources developing the DCT technology. The Company has previously
stated that it intends to launch the DCT technology in the summer of 2004.
However, the Company has experienced some setbacks in its development schedule
and now believes that the launch of the potential DCT technology will not occur
before the second half, and more likely, the fourth quarter, of 2004. The
Company plans to introduce DCT drives in embedded (for OEM), USB and PCMCIA
formats. As currently planned, DCT disks will be removable and fully rewritable,
will be about the size of a half-dollar coin, will weigh about 9 grams and are
expected to have a capacity of about 1.2 to 1.5GB per disk. The Companys
planned introduction of the DCT technology entails numerous risks, including
risks relating to factors such as the following:

- Lack of market acceptance;
- Unforeseen manufacturing
and technical challenges or delays;
- Failure to achieve any significant OEM
adoption of the products;
- Failure to achieve the desired product capacity or
other features;
- Inability to reach acceptable agreements with key suppliers,
manufacturers or OEMs;
- Performance, quality or other issues that are only discovered in the context of
usage by large numbers of end users;
- Lack of defensible intellectual property;
- Lack of relevant core competencies or market expertise;
- Intense competition from substitute technologies;
- Significant product
launch and sales and marketing expenses which could cause on-going product
losses;
- Significant expenditures for tooling and inventory before any market
demand is validated;
- Risk that third parties may assert intellectual property
claims against new products and
- Risk that any cancellation of the DCT program
or delay of the DCT launch, which the Company has now updated
to be in the second half of 2004 (most likely the fourth quarter of 2004), will
generate negative publicity and perception of the Company.

46

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# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Factors
Affecting Future Operating Results (Continued)

Additional risks exist with
respect to the Companys planned introduction of the DCT technology. The
DCT development effort currently faces significant challenges. The Company has
not yet resolved various technical issues necessary to achieve the targeted
capacity of 1.2 to 1.5GB. The launch schedule, currently set for the second half
of 2004, (most likely the fourth quarter of 2004) remains at risk given
outstanding technical issues. DCT prototype products currently cost more to
manufacture than potential OEM customers appear willing to bear. The products
may never achieve the functionality or cost parameters that the Company has
anticipated and announced.

In light of technical
challenges, the Company recently reduced its capacity specification for DCT from
1.5GB per disk to 1.2 to 1.5GB per disk. This reduction in the expected capacity
was driven by, among other technical issues, the design of the heads
(which read the media) and the media. The DCT heads and media are sourced from,
and designed by, third parties which creates greater uncertainty. Given the
uncertainty surrounding the capacity parameter, the Company believes that it is
most likely that the capacity achieved at DCT launch will be at the low end of
the 1.2 to 1.5GB target range. Further, the DCT manufacturing lines and
production processes are still being developed and unforeseen problems with the
supply chain may arise. In addition, the Company believes that the DCT
technology is unlikely to be commercially successful in the absence of
agreements with key consumer electronics OEMs to incorporate or distribute such
products. As of the date of this filing, no agreements with any such OEMs have
been executed and the Company may decide not to proceed with the launch of the
DCT technology without such OEM commitments.

In summary, there can be no
assurance that the Company will be able to successfully resolve any of the
DCT-related challenges, problems or risks set forth above. In light of technical
challenges and the schedule delays discussed above, the Company is exploring
various options for the DCT technology, including the launch of an Iomega
branded PC peripheral device in the second half of 2004 (most likely the fourth
quarter of 2004) or the sale, licensing or discontinuance of the DCT technology.
If the Company were to decide to discontinue the DCT technology, the Company
would incur material write-offs and other charges.

General Economic Conditions

The Companys future
operating results are subject to risks associated with general economic
conditions and consumer confidence. Any disruption in consumer confidence or
general economic conditions including those caused by acts of war, terrorism or
other factors could have an adverse impact on the Companys operating
results.

Collection Risks

Although the Company uses
commercially reasonable steps to manage the credit granted to its customers,
certain trade receivable balances from one or more of its customers may become
uncollectible. This event could adversely affect the Companys financial
results. The Company may be required to increase its allowance for doubtful
accounts in the future. In addition, there is a risk that key resellers,
distributors and resellers who sell the Companys products may require the
Company to offer them increasingly favorable credit and purchase terms and
conditions in exchange for continuing to carry the Companys products. Such
terms could have an adverse effect upon the Company.

47

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# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Factors
Affecting Future Operating Results (Continued)

Information Technology System Upgrade

During the third quarter of
2003, the Company began a project to upgrade the Companys information
technology system, re-engineer its business processes and upgrade its Enterprise
Resource Planning (ERP) systems. Work on these upgrades will
continue into the third quarter of 2004. The ultimate goal of these combined
projects is to reduce costs by simplifying business processes and reducing the
number of systems needed to be maintained. There is no assurance that the
Company will reduce costs or simplify processes a result of the system upgrade
and business process changes. During the system upgrade process and thereafter,
there is a risk that product shipments may be delayed or other significant
operational and informational interruptions could occur.

Company Operations

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.

Inventory Management

Management of the
Companys inventory levels is complex. The Companys customers
frequently adjust their ordering patterns in response to factors such as the
following:

- Company's and competitors' inventory supplies in the retail and distribution channel;
- New product introductions;
- Seasonal fluctuations;
- Company and customer promotions;
- Consolidation of customer distribution centers and
- Customer and market demand for the Companys products and perceptions of
the Companys ability to meet demand.

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.
Excess inventories could force the Company to reduce prices, write down such
inventory or take other actions which in turn could adversely affect the
Companys results of operations.

48

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# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Factors
Affecting Future Operating Results (Continued)

Product Procurement

On November 1, 2002, the
Company sold its Penang Manufacturing Subsidiary to a third party. The Company
entered into a five-year manufacturing services agreement with the third party
for the manufacture and supply of Zip drives and certain other products. As a
result of this transaction, the Company faces the following risks: the Company
no longer has direct control over the manufacturing processes of Zip drives, Zip
disks, and other products (including REV drives and disks); the Companys
ability to quickly increase or decrease production rates may be impaired; the
Companys lack of control over its manufacturing processes may increase the
risk that quality or reliability problems may arise with respect to its products
and the Company has incurred increased product and operational costs, and may
incur additional product and operational costs in the future. For example, Zip
product prices agreed to with the third-party contract manufacturer are
contingent upon the Company purchasing certain volumes. The Company has incurred
significant incremental costs as a result of not meeting the targeted volumes on
Zip drives and the Company may incur such additional costs in the future.

Product Procurement Costs

The Company believes that
it must continually reduce the procurement costs of its products in order to
remain competitive. However, with the sale of the Companys Penang
Manufacturing Subsidiary, the Company has limited involvement in the
manufacturing of any of the products it sells. Thus, in order to reduce product
costs, the Company believes that it must successfully negotiate lower product
procurement costs from suppliers. In the case of Zip products, in particular,
the supplier may not be able to meet contractual obligations to reduce
operational overhead or introduce business from other non-Iomega sources rapidly
enough to offset the decline in Zip products unit production, causing further
price adjustments.

The Company has also
consolidated all Zip disk manufacturing with one supplier with the goal to
reduce costs. This consolidation entails a number of risks, including risks of
disruption in the supply of Zip disks in the event of labor, quality or other
problems at the Zip disk manufacturer and risks that the consolidation will not
lead to reduced costs or efficiencies. There can be no assurance that the
Company will be able to successfully manage these risks.

Distribution and Logistics

The Company in recent years
has outsourced its distribution and logistics centers. During first quarter
2004, the Company entered into separate agreements with a global provider of
logistics services and a global provider of reverse logistics services with the
goal to consolidate its worldwide distribution, logistics, and reverse logistics
requirements with as few prime contractors as possible. Consequently, the
Company has become more reliant upon the computer systems and business processes
of its outsourcing partners and logistics services providers. The Company faces
risks that these systems may have communication, control or reliability problems
including new processes on both the Companys and the new logistics
providers systems and new interface systems on both parties systems. In
addition, the Company faces risks of operational interruptions, missed or
delayed shipments and inventory management risks in conjunction with its
transition to a new logistics provider. The Company hopes to realize cost
savings and operational efficiencies with its transition to a new logistics
provider. However, the Company can give no assurance that any cost savings or
operational efficiencies will result from this consolidation.

Moreover, a number of
problems may occur in any distribution outsourcing relationship, including
problems relating to product availability, supply, distribution, handling,
shipping, quality or reliability. Such problems, if they were to arise with
respect to the Companys outsourced operations, could have an adverse
effect in the form of: a) lower Company sales, income and/or gross margin; b)
damage to the Companys reputation in the marketplace, resulting in
decreased demand for or acceptance of the Companys products or c) damage
claims filed against the Company by customers, contract partners or investors as
a result of such problems.

49

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# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Factors
Affecting Future Operating Results (Continued)

Reporting of Channel Inventory and Product Sales by Channel Partners

The Company defers
recognition of sales on estimated excess inventory in the distribution, retail
and catalog channels. For this purpose, excess inventory is the amount of
inventory that exceeds the channels four-week requirements as estimated by
management. In order to make this estimation, the Company relies on its global
channel partners weekly reporting of channel inventory and product sales
by SKU. Errors in reports received from channel partners could lead to
inaccurate estimates of the excess channel inventory. The Company has processes
and systems checks in place to help reasonably ensure the accuracy of the
reports and believes these reports to be correct in all material respects.
However, there can be no assurance that the third-party data, as reported, will
always be correct and reliable.

Obsolescence Risks

The Companys ability
to effectively manage obsolescence risks will affect its operating results. The
Company may terminate its marketing of certain products from time to time in
response to market demand, supply, cost, competition or other factors. This
requires the Company to carefully manage a number of issues, such as: a)
maintaining market demand for the terminated product while successfully selling
existing inventories through the channel; b) reserving sufficient, but not
excessive, quantities of product to comply with warranty, customer satisfaction
and legal obligations and c) preventing, to the extent possible, the return of
such products from inventories held by distributors, retailers and other
resellers. There is no assurance that the Company can successfully manage these
factors.

Component Supplies

Although the Company has
sold its Penang Manufacturing Subsidiary, the Company has retained
responsibility for the supply of certain key components. 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. Many components incorporated or used in the manufacture of the
Companys products are currently available only from single source
suppliers or from a limited number of suppliers and are purchased by the Company
without guaranteed supply arrangements. In addition, the Company has only one
supplier of certain key products. As Zip product volumes have declined, multiple
suppliers have imposed component price increases, which increases the overall
cost of the Zip products and this trend is expected to continue. 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.

50

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# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Factors
Affecting Future Operating Results (Continued)

The Companys
inability to obtain sufficient components and equipment or to obtain or develop
alternative sources of supply could have a number of adverse consequences, such
as the following:

- The Company might be
unable to produce sufficient quantities of its products to satisfy market
demand;
- 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;
- The Company might be forced to delay product shipments;
- The Companys
material costs might increase thereby reducing product gross margins and
- The Company could experience an imbalance in the inventory levels of certain
components, which could increase
costs, slow or stop production or cause the Company to modify the design of its
products to use a more readily available component, with uncertain consequences.

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 and sourced products generally
extend one to three quarters in the future based on the lead times associated
with the specific component or sourced product. The quantities on the purchase
orders are based on estimated future sales requirements. In the case of new
products or products with declining sales, it can be difficult to estimate
future product demand, which could result in excess purchase commitments, where
the Company has made commitments for purchases that the Company does not
anticipate utilizing and therefore are considered excess. The Company has
recorded significant charges in the past relating to excess purchase commitments
and inventory reserves. The Company may be required to take similar charges
attributable to forecasting inaccuracies in the future.

Intellectual Property Risks

Patent, copyright,
trademark or other intellectual property infringement claims may be asserted
against the Company at any time. Such claims could have a number of adverse
consequences, including:

- An injunction against current or future product shipments;
- A requirement that the Company 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;
- A requirement that the
Company pay royalties to third parties for past product shipments;
- A requirement that the Company devote unplanned resources to developing
modifications to its products or         marketing programs;
- A requirement that the Company indemnify third parties who have distributed the
infringing product with the Companys permission or
- Significant legal fees incurred by the Company.

The Company must routinely
review and respond to claims from third parties for patent royalties, both on
products designed or sold by the Company and products designed and supplied to
the Company by third parties. Resolution of patent infringement demand letters
and lawsuits can be very costly, with legal fees and costs running into the
millions of dollars.

51

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# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Factors
Affecting Future Operating Results (Continued)

The Company attempts to
protect its intellectual property rights through a variety of means, including
seeking and obtaining patents, trademarks and copyrights, and through license,
nondisclosure and other agreements. The Companys failure to properly
protect its intellectual property rights could have devastating consequences.
Although the Company has, in general, been successful in its efforts to protect
its intellectual property rights, there is no assurance that it will be able to
do so in the future.

Legal Risks

The Company has entered
into multiple agreements, including service, supply, resale, distribution,
development and other agreements in multiple jurisdictions throughout the world.
In addition, as of March 28, 2004, the Company employed 579 people throughout
the world. Although the Company attempts to fulfill all of its obligations and
enforce all of its rights under these agreements and relationships, there is no
assurance that it will be able to do so. The Company has been sued and may be
sued, under numerous legal theories, including breach of contract, tort,
products liability, intellectual property infringement and other theories.
Complaints have been filed and may be filed, against the Company by contract
partners, third parties, employees and other individuals or entities. Such
litigation, regardless of outcome, may have an adverse effect upon the
Companys profitability or public perception.

Restructuring and Other Cost Reduction Activities

The Company restructured
its operations during 2003 and notified 198 employees that their positions were
being eliminated. Of these, all but 9 have been released; these remaining
individuals will leave the Company in the second and third quarters of 2004. In
conjunction with the 2003 restructuring actions, the Company incurred pre-tax
restructuring charges of $14.5 million, which reflects expenses associated with
reductions in the Companys worldwide workforce described above;
reimbursement of restructuring expenses incurred by a strategic supplier;
termination of contractual obligations and lease expenses associated with
unutilized facilities. There is no assurance that these restructuring actions
will lead to sustainable cost reductions or will otherwise benefit the Company.
In addition, in carrying out these actions, the Company is at risk that key
personnel and experience may have been lost. The Company may experience
short-term disruptions of information technology systems and other business
operations, or the strategic supplier may experience similar disruptions as a
result of its restructuring. The Company may incur legal liabilities and claims
associated with the restructuring actions and layoff.

Retention of Key Personnel

The Companys
continued success will depend, in part, upon its ability to attract and retain
highly skilled and experienced personnel and to maintain continuity and
stability within the Companys senior management team. There is no
assurance that the Company will be able to do so. Some skilled and experienced
employees voluntarily resigned from the Company during the first quarter of 2004
and there is a risk of additional resignations by such employees, particularly
in light of recent restructuring activities, the Companys recent financial
performance and recent improvements in the U.S. economy. The Company regularly
reviews and modifies its compensation programs as a tool to facilitate retention
of key employees in an increasingly competitive job market. As part of its
overall employee retention program, the Company may decide to more broadly grant
stock options to key employees as compared to its practice in the past few
years. In such case, the Company would expense such stock option grants and
would incur stock compensation expense(s).

52

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# IOMEGA
CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

## Factors
Affecting Future Operating Results (Continued)

Other Risk Factors

Significant portions of the
Companys sales are generated in Europe and Asia. The Company invoices the
majority of its European customers in Euros and invoices its remaining customers
in U.S. dollars. Fluctuations in the value of foreign currencies relative to the
U.S. dollar that are not sufficiently hedged by international customers invoiced
in U.S. dollars could result in lower sales and have an adverse effect on future
operating results (see Quantitative and Qualitative Disclosures About
Market Risk below).

Doing business outside the
United States can be difficult to manage or to properly execute. American
executives may overlook local trends outside the U.S., market ineffectively in
countries outside of the U.S., institute efforts from an American perspective
that are unsuccessful outside the U.S. or be unaware of customs or laws in other
countries, with resulting legal exposure, complaints, cost inefficiencies or
weak sales. The Companys tax structure requires compliance with
requirements in organizing, charter, and enabling documents in addition to
compliance with local laws and regulations. Any failure of the Company to comply
with such requirements, laws, or regulations could result in significant fines,
penalties, or other material adverse consequences.

Effective January 1, 2003,
the Company began expensing the cost of stock options that the Company grants to
employees. As a result of the payment of the one-time $5.00 cash dividend on
October 1, 2003, after the payment, all of the Companys outstanding stock
options are being accounted for under the fair value method of SFAS No. 123 Accounting for
Stock-Based Compensation. It is difficult to estimate the impact that
expensing stock options will have on the Companys statement of operations
as this expense is dependent upon variables that are difficult to predict, such
as the number of options to be granted during a period, the price of the
Companys Common Stock at the time of grant, the stock price volatility,
the risk free interest rate during the period and the expected average life of
the option. A slight change in any one of these variables can materially affect
the amount of compensation expense to be recorded.

In summary, a number of
factors could adversely affect the Company or could cause actual events or
results to differ materially from those indicated by any forward-looking
statements. Such factors include: the ability of management to manage an
increasingly complex business in a highly competitive environment,
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,
seasonality and changes or slowdowns in overall market demand for personal
computer products and other consumer products which utilize the Companys
products.

# ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:

The Company is exposed to
various interest rate risks including foreign currency, interest rate and
securities price risks. The Company is exposed to various foreign currency
exchange rate risks that arise in the normal course of business. The
Companys functional currency is the U.S. dollar. The Company has
international operations resulting in receipts and payments in currencies that
differ from the functional currency of the Company. The Company attempts to
reduce foreign currency exchange rate risks by utilizing financial instruments,
including derivative transactions pursuant to Company policies.

53

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# IOMEGA
CORPORATION AND SUBSIDIARIES

# ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK:
               (Continued)

The Company uses forward contracts to hedge those net assets and liabilities that, when
remeasured according to accounting principles generally accepted in the United
States of America, impact the condensed 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.
Currently, the Company is using forward contracts only to hedge net balance
sheet exposures. The contracts are primarily in European currencies and the
Singapore dollar. The Company enters into contracts throughout the month as
necessary. These contracts normally have maturities that do not exceed 40 days.

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

The fair value of the
Companys forward contracts is subject to change as a result of potential
changes in market rates and prices. If the U.S. dollar were to strengthen or
weaken against these foreign currencies by 10%, the hypothetical value of the
contracts would have increased or decreased by approximately $1.9 million and
$2.4 million at March 28, 2004 and December 31, 2003, respectively. However,
these forward exchange contracts are hedges and consequently any market value
gains or losses arising from these foreign exchange contracts should be offset
by foreign exchange losses or gains on the underlying assets and liabilities.
Calculations of the above effects assume that each rate changed in the same
direction at the same time relative to the U.S. dollar. The calculations reflect
only those differences resulting from mechanically replacing one exchange rate
with another. They do not factor in any potential effects that changes in
currency exchange rates may have on statement of operations translation, sales
volume and prices and on local currency costs of production. As of March 28,
2004 and December 31, 2003, the Companys analysis indicated that such
market movements, given the offsetting foreign currency gains or losses on the
underlying net assets and liabilities, 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 exposures and hedges.

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# IOMEGA
CORPORATION AND SUBSIDIARIES

# ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK:
               (Continued)

The Company did not have
any significant debt outstanding at March 28, 2004 and December 31, 2003. Should
the Company need to borrow funds in the future, it would be subject to credit
based interest rate risks. The Company is also subject to interest rate risks on
its current cash, cash equivalents and temporary investment balances. For
example, if the interest rate on the Companys interest bearing investments
were to change 1% (100 basis points), interest income would have hypothetically
increased or decreased by $0.4 million during the first quarter of 2004 and $1.1
million during the first quarter of 2003. This hypothetical analysis does not
take into consideration the effects of the economic conditions that would give
rise to such an interest rate change or the Companys response to such
hypothetical conditions. The Companys temporary investments are purchased
with maturities in excess of three months. Temporary investments at March 28,
2004 and 2003 primarily consisted of corporate notes and bonds and paper, U.S.
treasuries, certificates of deposit, U.S. agencies, asset-backed securities and
mortgage-backed securities. None of the Companys temporary investments has
an effective maturity greater than 24 months and at March 28, 2004, the average
duration of the Companys temporary investments was just over 12 months, as
compared to just under 14 months at December 31, 2003. At March 28, 2004, the
Company had $11.9 million and $48.1 million of debt security investments that
will mature within one year and will mature between one to two years,
respectively. The balance of temporary investments at March 28, 2004
is comprised of U.S. treasuries and certificates of deposit
 The Company minimizes its credit risk associated with temporary
investments by purchasing investment grade, liquid securities. The Company has
classified all of its temporary investments as available-for-sale securities.

# ITEM 4.
CONTROLS AND PROCEDURES

The Companys
management, with the participation of the Companys chief executive officer
and chief financial officer, evaluated the effectiveness of the Companys
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act) as of March 28, 2004.In designing and evaluating
the Companys disclosure controls and procedures, management recognized
that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives and management
necessarily applied its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Based on this evaluation, the Companys
chief executive officer and chief financial officer concluded that as of March
28, 2004, the Companys disclosure controls and procedures were (1)
designed to ensure that material information relating to the Company, including
its consolidated subsidiaries, is made known to the Companys chief
executive officer and chief financial officer by others within those entities,
particularly during the period in which this report was being prepared and (2)
effective, in that they provide reasonable assurance that information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms.

During the first quarter of
2004, the Companys independent auditors for the year ended December 31,
2003, notified the Companys Audit Committee that they had identified a
reportable condition regarding the Companys internal controls. The
condition, which was not a material weakness, related to the controls around the
preparation of the fourth quarter 2003 tax provision, which the Company believes
was particularly complex due, in part, to the tax consequences of a $75 million
intercompany dividend required to fund the one-time $5 per share cash dividend
paid to shareholders on October 1, 2003. In the first quarter of 2004, the
Company has extended by one week the time between fiscal quarter end and when it
publicly announces financial results for the completed quarter to allow for
further review and analysis of financial results and tax provisions before their
disclosure. The Company further plans to add an additional layer of review to
the quarterly tax provision. The Company believes that these actions adequately
address the condition.

No other changes in the
Companys internal controls over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the first
quarter ended March 28, 2004, that has materially affected, or is reasonably
likely to materially affect, the Companys internal control over financial
reporting.

55

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# IOMEGA CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION

# ITEM 1. LEGAL
PROCEEDINGS:

A discussion of the
Companys legal proceedings appears in Part I, Item 1 of this Form 10-Q
under Note 5 of the notes to condensed consolidated financial statements and is
incorporated herein by reference.

# ITEM 2.  CHANGE IN SECURITIES, USE OF PROCEEDS
 AND ISSUER PURCHASES  OF EQUITY SECURITIES:

The Company did not sell
any equity securities during the first quarter of 2004 that were not registered
under the Securities Act of 1933.

During the first quarter of
2004, the Company did not repurchase any shares of the Companys Common
Stock. As of March 28, 2004, approximately $122.3 million remained available for
future repurchases under the $150 million stock repurchase plan authorized by
the Companys Board of Directors on September 28, 2000. The repurchase plan
does not have a fixed termination date.

# 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.  On March 12,  2004,  the  Company  filed a Form  8-K/A  under  Item 4,  "Changes  in
        Registrant's  Certifying  Accountant"  updating  the  previous  Form 8-K filed on  February  12,  2004,  to
        disclose  that the  Company's  former  auditors,  Ernst & Young LLP,  had issued  their report for the 2003
        consolidated  financial  statements.  The report did not  contain an  adverse  opinion or a  disclaimer  of
        opinion and was not qualified or modified as to uncertainty or audit scope.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
April 22, 2004, the Company furnished a Form 8-K announcing the Companys
pre-tax financial results for the quarter ending March 28, 2004 under Item 12,
Results of Operations and Financial Condition.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

56

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# IOMEGA CORPORATION AND SUBSIDIARIES
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.

|Dated: May 10, 2004
Dated: May 10, 2004 | IOMEGA CORPORATION
        (Registrant)/s/ Werner T. Heid
    Werner T. Heid
    President and Chief Executive Officer    /s/ Barry Zwarenstein
Barry Zwarenstein
    Vice President, Finance and
        Chief Financial Officer
|--------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

57

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## IOMEGA CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX

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

|Exhibit Index | Description
|------------- | -----------

|31.5 | Section 302 certification letter from Werner T. Heid, President and Chief Executive Officer.
|---- | --------------------------------------------------------------------------------------------

|31.6 | Section 302 certification letter from Barry Zwarenstein, Vice President, Finance
and Chief Financial Officer.
|---- | -------------------------------------------------------------------------------------------------------------

|32.3 | Section 906 certification letter from Werner T. Heid, President and Chief Executive Officer.
|---- | --------------------------------------------------------------------------------------------

|32.4 | Section 906 certification letter from Barry Zwarenstein, Vice President, Finance
and Chief Financial Officer.
|---- | -------------------------------------------------------------------------------------------------------------

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