---

# UNITED STATESSECURITIES
AND EXCHANGE COMMISSION

                                                        WASHINGTON, D.C. 20549

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# FORM 10-Q

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

## FOR THE QUARTERLY PERIOD ENDED APRIL 1, 2001

## 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)

Incorporated pursuant to the Laws of the State of Delaware

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Internal Revenue Service  Employer Identification No. 86-0385884

1821 West Iomega Way, Roy, UT 84067

(801) 332-1000

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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 [  ]

The total number of shares of the registrants Common Stock, $0.03 1/3 par value,
outstanding on May 7, 2001 was 272,590,400.

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`IOMEGA CORPORATION
                                                           TABLE OF CONTENTS

                                                                                                        Page
                                                     PART I - FINANCIAL STATEMENTS

Item 1.  Financial Statements

         Condensed consolidated balance sheets at April 1, 2001
             and December 31, 2000.................................................................       3

         Condensed consolidated statements of operations for the quarters
             ended April 1, 2001 and March 26, 2000................................................       5

         Condensed consolidated statements of cash flows for the quarters
             ended April 1, 2001 and March 26, 2000................................................       6

         Notes to condensed consolidated financial statements......................................       7

Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations...................................................      23

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

                                                      PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.........................................................................      41

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

Item 4.  Submission of Matters to a Vote of Security Holders.......................................      42

Item 6.  Exhibits and Reports on Form 8-K..........................................................      43

Signatures.........................................................................................      44

Exhibit Index......................................................................................      45`

---

Copyright © 2001
Iomega Corporation. All rights reserved. Iomega, the stylized i
logo, Zip, Jaz, PocketZip, HipZip, FotoShow, Predator, QuikSync, LifeWorks, Club
Iomega, Peerless, Clik! and iomegadirect, are either registered trademarks or
trademarks of Iomega Corporation in the United States, other countries or both.

IBM and Microdrive are
trademarks or registered trademarks of International Business Machines
Corporation in the United States, other countries or both. Microdrive is used
under license by Iomega Corporation. Iomega Corporation is an authorized
licensee of the CompactFlash trademark. SmartMedia is a trademark of Toshiba
Corp. Certain other product names, brand names and company names may be
trademarks or designations of their respective owners.

This  Quarterly  Report on Form 10-Q  contains  a number of  forward-looking  statements,  including,  without  limitation,  statements
referring to: the  scheduled  introduction  of the Peerless  drive system;  the expected  sufficiency  of cash,  cash  equivalents  and
temporary  investment  balances and  available  sources of  financing;  the factors  affecting  future gross  margins;  plans to expand
international  operations,  including  in Latin  America;  the impact of the Euro  conversion  on the  Company's  business or financial
condition;  expected  sales levels due to seasonal  demand;  anticipated  hedging  strategies;  and the possible  effects of an adverse
outcome in the review of the Company's SEC filings  described under the caption "Other Matters" or the legal  proceedings  described in
Note 6 of Notes to Condensed  Consolidated  Financial  Statements in Part I were to occur. Any statements contained herein that are not
statements of historical fact may be deemed to be  forward-looking  statements.  Without limiting the foregoing,  the words "believes,"
"anticipates," "plans," "expects," "intends" and similar expressions are intended to identify forward-looking statements,  although not
all forward-looking statements contain these words.

There are a number of important  factors that could cause actual  events or the  Company's  actual  results to differ  materially  from
those indicated by such  forward-looking  statements.  These factors include,  without  limitation,  those set forth under the captions
"Liquidity and Capital  Resources,"  "Factors  Affecting Future Operating  Results" and "Disclosures  About Market Risk" included under
"Management's  Discussion and Analysis of Financial  Condition and Results of Operations" in Item 2 of Part I of this Quarterly  Report
on Form 10-Q and those set forth in Note 6 of 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 should not be relied upon as  representing  the Company's  estimates as of any
subsequent  date.  While the  Company  may  elect to  update  forward-looking  statements  at some  point in the  future,  the  Company
specifically disclaims any obligation to do so, even if its estimates change.

## IOMEGA CORPORATION
                                                 CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                ASSETS

## (In thousands)

`April 1,            December 31,
                                                                                  2001                    2000   
                                                                                          (Unaudited)
Current assets:
   Cash and cash equivalents                                                  $  272,480             $  255,572
   Temporary investments                                                         100,438                122,347
   Trade receivables, less allowance for doubtful accounts of
     $7,860 and $8,858, respectively                                             163,440                139,461
   Inventories                                                                    92,495                102,497
   Income taxes receivable                                                         3,720                  3,758
   Deferred income taxes                                                          41,791                 43,471
   Other current assets                                                           14,040                 15,301
                                                                              ----------             ----------
      Total current assets                                                       688,404                682,407
                                                                              ----------             ----------

Property, plant and equipment, at cost                                           317,774                317,284
   Less: Accumulated depreciation and amortization                              (219,928)              (215,695)
                                                                              ----------             ----------
      Net property, plant and equipment                                           97,846                101,589
                                                                              ----------             ----------

Intangibles, net                                                                  28,214                 29,293
                                                                              ----------             ----------

Other assets                                                                       1,970                  2,150
                                                                              ----------             ----------

                                                                      $  816,434             $  815,439
                                                                             ==========             ==========`

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

## IOMEGA CORPORATION
                                           CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
                                                 LIABILITIES AND STOCKHOLDERS' EQUITY

## (In thousands, except share data)

`April 1,            December 31,
                                                                                  2001                    2000   
                                                                                          (Unaudited)
Current liabilities:
   Accounts payable                                                             $ 120,128             $ 108,168
   Other current liabilities (Note 1)                                             157,405               181,735
   Current portion of capitalized lease obligations                                 2,155                 2,311
                                                                                ---------             ---------
      Total current liabilities                                                   279,688               292,214
                                                                                ---------             ---------

Long-term liabilities                                                               2,900                 4,001
                                                                                ---------             ---------

Deferred income taxes                                                              34,789                30,684
                                                                                ---------             ---------

Commitments and contingencies (Notes 5 and 6)

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 272,590,400 and 272,350,584 shares,
      respectively                                                                  9,085                 9,078
   Additional paid-in capital                                                     299,555               298,877
   Less: 2,307,642 Common Stock treasury shares, at cost                          (13,267)              (13,267)
   Retained earnings                                                              203,684               193,852
                                                                                ---------             ---------

      Total stockholders' equity                                                  499,057               488,540
                                                                                ---------             ---------

                                                                                $ 816,434             $ 815,439
                                                                                =========             =========`

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

## IOMEGA CORPORATION
                                            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

## (In thousands, except share data)

`For the Quarter Ended
                                                                                April 1,             March 26,
                                                                                  2001                  2000   
                                                                                          (Unaudited)
Sales                                                                           $ 278,175            $ 344,897
Cost of sales                                                                     192,490              216,990
                                                                                ---------            ---------
Gross margin                                                                       85,685              127,907
                                                                                ---------            ---------

Operating expenses:
    Selling, general and administrative                                            60,957               65,947
    Research and development                                                       14,076               11,130
    Bad debt credit                                                                  (276)                (701)
                                                                                ---------            ---------
       Total operating expenses                                                    74,757               76,376
                                                                                ---------            ---------

Operating income                                                                   10,928               51,531
Interest and other income, net                                                      5,261                1,233
                                                                                ---------            ---------

Income before income taxes                                                         16,189               52,764
Provision for income taxes                                                         (6,357)                (938)
                                                                                ---------            ---------

Net income                                                                      $   9,832            $  51,826
                                                                                =========            =========

Net income per common share (Note 1):
    Basic                                                                       $    0.04            $    0.19
                                                                                =========            =========
    Diluted                                                                     $    0.04            $    0.19
                                                                                =========            =========

Weighted average common shares outstanding                                        270,158              270,448
                                                                                =========            =========

Weighted average common shares outstanding -
    assuming dilution                                                             270,429              281,235
                                                                                =========            =========`

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

## IOMEGA CORPORATION
                                            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

## (In thousands)

`For the Quarter Ended
                                                                                April 1,             March 26,
                                                                                  2001                  2000   
                                                                                          (Unaudited)
   Cash flows from operating activities:
       Net income                                                            $    9,832           $   51,826
       Non-cash revenue and expense adjustments:
          Depreciation and amortization                                          14,468               23,739
          Deferred income taxes                                                   5,785                    -
          Bad debts                                                                (276)                (701)
          Tax benefit from dispositions of employee stock                            79                  841
          Other                                                                    (336)               1,035
                                                                              ---------            ---------
                                                                                 29,552               76,740
   Changes in assets and liabilities:
       Trade receivables, net                                                   (23,703)              35,025
       Inventories                                                               10,002                6,198
       Other current assets                                                       1,261                4,812
       Accounts payable                                                          11,960              (24,595)
       Other current liabilities                                                (24,330)             (20,837)
       Income taxes                                                                  38               (9,291)
                                                                              ---------            ---------
   Net cash provided by operating activities                                      4,780               68,052
                                                                              ---------            ---------

   Cash flows from investing activities:
       Purchase of property, plant and equipment                                 (8,357)              (5,867)
       Purchase of temporary investments                                        (49,090)             (74,852)
       Sale of temporary investments                                             70,999               30,559
       Net change in other assets/liabilities                                    (1,717)                 251
                                                                              ---------            ---------
   Net cash provided by (used in) investing activities                           11,835              (49,909)
                                                                              ---------            ---------

   Cash flows from financing activities:
       Proceeds from sales of Common Stock                                          606                1,144
       Payments on capitalized lease obligations                                   (313)              (1,066)
                                                                              ---------            ---------
   Net cash provided by financing activities                                        293                   78
                                                                              ---------            ---------
   Net change in cash and cash equivalents                                       16,908               18,221
   Cash and cash equivalents at beginning of period                             255,572              172,706
                                                                              ---------            ---------
   Cash and cash equivalents at end of period                                 $ 272,480            $ 190,927
                                                                              =========            =========`

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

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

## (1)          SIGNIFICANT ACCOUNTING POLICIES

| | In
the opinion of the Companys management, the accompanying unaudited,
condensed, consolidated financial statements reflect all adjustments (consisting
only of normal recurring adjustments) which are necessary to present fairly the
financial position of the Company as of April 1, 2001 and December 31, 2000, the
results of operations for the quarters ended April 1, 2001 and March 26, 2000
and cash flows for the quarters ended April 1, 2001 and March 26, 2000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
results of operations for the quarter ended April 1, 2001 are not necessarily
indicative of the results to be expected for the entire year or for any future
period.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

| | Fiscal
2001 Calendar - Under the Companys fiscal calendar, quarters for 2001 end
on the following dates compared to the corresponding dates for 2000:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------

`2001                       2000
                                                       ------                     ------

                               Q1                      April 1                    March 26
                               Q2                      July 1                     June 25
                               Q3                      September 30               September 24
                               Q4                      December 31                December 31`

| | Management
believes the 2001 calendar better aligns the Companys fiscal quarters with
its customers fiscal quarters. Under the calendar for fiscal 2001, the
first quarter of 2001 had 5 more days than the first quarter of 2000 and the
fourth quarter of 2001 will have 6 less days than the fourth quarter of 2000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Revenue
Recognition - The Companys customers include original equipment
manufacturers (OEMs), end users, retailers, distributors and
value-added manufacturers. Some retail and distribution customer agreements have
provisions that allow the customer to return product under certain conditions
within specified time periods. Revenue, less reserves for returns, is generally
recognized upon shipment to the customer. The Company has established reserves
for estimated returns, which are reflected as a reduction in trade receivables
in the accompanying condensed consolidated balance sheets. The reserve for
estimated returns totaled $11.2 million and $9.8 million at April 1, 2001 and
December 31, 2000, respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
addition to reserves for returns, the Company defers recognition of revenue on
estimated excess inventory in the distribution and retail channels. For this
purpose, excess inventory is the amount of inventory that exceeds the
channels 30-day requirements as estimated by management. The gross margin
associated with deferral of revenue for estimated excess channel inventory
totaled $14.3 million and $16.8 million at April 1, 2001 and December 31, 2000,
respectively, and is included in Other current liabilities in the
accompanying condensed consolidated balance sheets.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company sells software that is embedded or bundled with some of its drive
products, as well as off-the-shelf software. Revenue from the software embedded
or bundled with drive products, as well as off-the-shelf software, less reserves
for returns, is generally recognized upon shipment to the customer. Software
revenue recognition is also subject to price reduction and rebate reserves, and
the deferred recognition of revenue on estimated excess inventory in the
distribution and retail channels. The Company does not sell any multiple element
software packages.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Price
Protection and Rebates - The Company has agreements with certain of its
customers which, in the event of a price decrease, allow those customers
(subject to certain limitations) credit equal to the difference between the
price originally paid and the new decreased price on units either in the
customers inventories on the date of the price decrease, or on 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 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 estimated rebates given to consumers
at time of purchase from channel partners.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Reserves
for rebates and price protection credits totaled $39.0 million at both April 1,
2001, and December 31, 2000 and are netted against trade receivables in the
accompanying condensed consolidated balance sheets.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | Temporary
Investments - Investments with maturities in excess of three months are
classified as temporary investments. Temporary investments at April 1, 2001 and
December 31, 2000 primarily consisted of municipal notes, bonds and paper;
government securities; commercial paper and corporate notes, bonds and paper.
The Company seeks to minimize its credit risk associated with temporary
investments by using investment grade, highly liquid securities. All of the
Companys temporary investments are classified as available-for-sale
securities.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

`April 1,       December 31,
                                                                              2001             2000
                                                                           ---------       ------------
                                                                                  (In thousands)
              Raw materials                                                 $ 22,745        $  25,462
              Work-in-process                                                  5,329            4,740
              Finished goods                                                  54,118           64,648
              Inventory associated with estimated returns                     10,303            7,647
                                                                            --------        ---------
                                                                            $ 92,495        $ 102,497
                                                                            ========        =========`

| | Other Current Liabilities -  Other current liabilities consist
of the following:
| | --------------------------------------------------------------------------------

`April 1,       December 31,
                                                                              2001             2000
                                                                           ---------       ------------
                                                                                  (In thousands)
              Accrued payroll, vacation and bonus                         $   14,915       $   21,020
              Margin on deferred revenue                                      14,255           16,776
              Accrued warranty                                                12,622           13,315
              Accrued advertising                                             43,629           53,557
              Inventory purchase commitments                                   6,781            3,378
              Other accrued liabilities                                       65,203           73,689
                                                                          ----------       ----------
                                                                         $  157,405       $  181,735
                                                                          ==========       ==========`

| | Reclassifications
- Certain reclassifications were made to the prior periods unaudited,
condensed, consolidated financial statements and notes to condensed,
consolidated financial statements to conform to the current period presentation.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Net
Income Per Common Share - Basic net income per common share (Basic
EPS) excludes dilution and is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
net income per common share (Diluted EPS) reflects the potential
dilution that could occur if stock options or other contracts to issue common
stock were exercised or converted into common stock. Diluted EPS for the quarter
ended March 26, 2000 was determined under the assumption that the convertible
subordinated notes were converted on January 1, 2000. The computation of Diluted
EPS does not assume exercise or conversion of securities that would have an
antidilutive effect on net income per common share.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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              Shares          Per Share
                                                                (Numerator)       (Denominator)        Amount
                                                                ------------      --------------     -----------

         For the Quarter Ended:
         April 1, 2001:
         Basic EPS                                                  $  9,832           270,158          $ 0.04
            Effect of options                                              -               271
                                                                    --------           -------          ------
         Diluted EPS                                               $  9,832           270,429          $ 0.04
                                                                    ========           =======          ======

         March 26, 2000:
         Basic EPS                                                  $ 51,826           270,448          $ 0.19
            Effect of options                                              -             1,571
            Effect of convertible subordinated notes                     753             9,216
                                                                    --------           -------          ------
         Diluted EPS                                              $ 52,579           281,235          $ 0.19
                                                                    ========           =======          ======`

| | For
the quarters ended April 1, 2001 and March 26, 2000, there were outstanding
options to purchase 7,436,209 and 9,045,814 shares, respectively, that had an
exercise price greater than the average market price of the common shares for
the respective quarters.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## (2)          INCOME TAXES

| | For
the quarter ended April 1, 2001, the Company recorded an income tax provision of
$6.4 million on pre-tax income of $16.2 million. The tax provision for the first
quarter of 2001 was calculated using an estimated annual effective tax rate of
approximately 39%. This compares to an income tax provision of $0.9 million on
pre-tax income of $52.8 million representing a tax rate of 2% for the first
quarter of 2000, reflecting a $20.1 million decrease in the valuation allowance
for net deferred income taxes.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company's deferred tax assets and liabilities are as follows:
| | -----------------------------------------------------------------

`April 1,        December 31,
                                                                              2001              2000
                                                                           ---------        ------------
                                                                                   (In thousands)
              Current deferred tax assets                                  $  41,791         $ 43,471
              Non-current deferred tax assets                                 49,838           46,939
                                                                              ------           ------
                  Total deferred tax assets                                   91,629           90,410
                                                                              ------           ------

              Non-current deferred tax liabilities:
                  Tax on unremitted foreign earnings                         (62,407)         (55,393)
                  Nomai goodwill                                              (6,347)          (6,775)
                                                                              ------           ------
                                                                             (68,754)         (62,168)
              Non-current valuation allowance                                (15,873)         (15,455)
                                                                             -------          -------
                  Net deferred tax assets                                  $   7,002        $  12,787
                                                                           =========        =========


              As reported on the balance sheet:
              Current deferred tax assets                                  $  41,791         $ 43,471
                                                                           =========         ========
              Non-current deferred tax liabilities                         $  34,789         $ 30,684
                                                                           =========         ========`

| | The
Company continues to maintain a full valuation allowance of $15.9 million for
net deferred tax assets related to foreign net operating loss carryforwards,
which reflect the tax benefit of approximately $36.3 million in future tax
deductions. These carryforwards expire at various dates beginning in 2004. These
deferred tax assets remain fully valued because their realization is dependent
on earning future foreign taxable income in the tax jurisdictions to which the
net operating loss carryforwards relate. The largest of these foreign net
operating loss carryforwards relates to the Companys French subsidiary,
Nomai S.A. This subsidiarys operations have been shut down and therefore,
the foreign net operating loss carryforward related to Nomai S.A. is not likely
to be realized in the future.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
April 1, 2001, the Company had $10.9 million of deferred tax assets related to
domestic net operating loss carryforwards, which reflect the tax benefit of
approximately $27.9 million in future domestic tax deductions. These
carryforwards expire at various dates beginning in 2020.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cash
paid for income taxes was $0.7 million for the first quarter of 2001 and $0.9
million for the corresponding period in 2000.
| | --------------------------------------------------------------------------------------------------------------------------------

| | U.S.  taxes have not been provided for  unremitted  foreign  earnings of $112  million.  These  earnings are  considered to be
         permanently  invested in non-U.S.  operations.  The  additional  U.S. tax liability,  if such amounts were remitted,  would be
         approximately $44 million.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## (3)         DEBT

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

| | Cash
paid for interest was $0.1 million and $2.0 million, respectively, for the first
quarters of 2001 and 2000. Cash paid for interest for the first quarter of 2001
was for interest on capital leases, while cash paid for interest for the first
quarter of 2000 included interest for the convertible subordinated notes that
were redeemed in October 2000 and for interest on capital leases. Included in
interest expense for the first quarter 2000 was $0.5 million of amortization of
deferred charges associated with obtaining debt.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## (4)          BUSINESS SEGMENT INFORMATION

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

| | The
Company has four reportable segments based primarily on the nature of the
Companys customers and products: Zip®, Jaz®, Iomega® CD-RW
and PocketZip (formerly Clik!) The Zip segment involves the development,
manufacture, distribution and sales of personal storage products and
applications, including Zip disk and drive systems to retailers, distributors
and OEMs throughout the world. The Zip segment also includes the development,
manufacture, distribution and sales of FotoShow digital image centers, which
were introduced during the third quarter of 2000. The Jaz segment involves the
development, manufacture, distribution and sales of professional storage
products and applications, including Jaz disk and drive systems to resellers,
distributors and retailers throughout the world. The Companys CD-RW
segment involves the distribution and sales of CD-RW drives to retailers,
distributors and resellers throughout the world. The CD-RW segment includes the
distribution of the Predator 8X4X32 drive introduced during the fourth quarter
of 2000. The PocketZip segment involves the development, manufacture,
distribution and sales of PocketZip drives and disks for use with portable
digital products such as digital cameras, audio players, handheld personal
computers and notebook computers to retailers, distributors, OEMs and resellers
throughout the world. The PocketZip segment also includes the development,
manufacture, distribution and sales of HipZip digital audio players, which
were introduced during the third quarter of 2000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Other category includes branded products such as Microdrive,
CompactFlash and SmartMedia and other products such as software, Ditto®
tape products and other miscellaneous items.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

## Reportable Operating Segment Information:

`For the Quarter Ended
                                                                            -----------------------------
                                                                             April 1,           March 26,
                                                                               2001                2000
                                                                            ---------           ---------
                                                                                    (In thousands)
                Sales:
                   Zip                                                      $ 204,485           $ 278,517
                   Jaz                                                         26,561              51,847
                   CD-RW                                                       44,484              10,778
                   PocketZip                                                    1,286               2,054
                   Other                                                        1,359               1,701
                                                                            ---------           ---------
                      Total sales                                           $ 278,175           $ 344,897
                                                                            =========           =========

                Product profit margin (loss):
                   Zip                                                      $  54,859           $  87,941
                   Jaz                                                          9,663              12,463
                   CD-RW                                                       (5,904)               (104)
                   PocketZip                                                   (8,053)            (16,269)
                   Other                                                       (6,345)             (2,363)
                                                                            ---------           ---------
                      Total product profit margin                              44,220              81,668

                Common operating expenses:
                   General corporate expenses                                 (33,292)            (30,137)
                   Interest and other income, net                               5,261               1,233
                                                                            ---------           ---------
                      Income before income taxes                            $  16,189           $  52,764
                                                                            =========           =========`

## (5)          RESTRUCTURING CHARGES

| | During
1999, the Company recorded pre-tax restructuring charges of $65.8 million, as a
result of steps the Company was taking to organize along functional lines,
consolidate manufacturing and other facilities, discontinue certain products and
refocus the Clik! product platform on the newer PC Card and OEM drives. Of the
$65.8 million in total pre-tax restructuring charges, $14.1 million related to
inventory and inventory commitments and was recorded in cost of sales. This
$14.1 million was composed of $6.4 million related to inventory and inventory
commitments associated with discontinuing the Buz multimedia producer and a Jaz
development project and $7.7 million related to inventory and inventory
commitments associated with Clik! product streamlining. The remaining $51.7
million of the total pre-tax restructuring charges were reported separately.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Of
the $65.8 million of pre-tax restructuring charges, $41.9 million was recorded
in the second quarter of 1999 and $20.5 million and $5.4 million in
restructuring charges were recorded in the third and fourth quarters of 1999,
respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Second
Quarter 1999 Restructuring Actions. During the second quarter ended June 27,
1999, the Company recorded a pre-tax restructuring charge of $41.9 million as a
result of steps the Company was taking to organize along functional lines (for
example, manufacturing, sales, etc.) as opposed to product lines. Of the $41.9
million, $6.4 million related to inventory and inventory commitments associated
with discontinuing the Buz multimedia producer and a Jaz development project and
was recorded in cost of sales in the financial statements. The restructuring
actions included in the second quarter charge included the exit of facilities,
headcount reductions, the discontinuance of certain products and development
projects and consolidation of the Companys magnetic technology expertise
at its headquarters in Roy, Utah. The actions relating to the exit of facilities
included closing the Companys facilities in Milpitas, California and San
Diego, California, where primarily research and development activities were
conducted for Clik! and Jaz. The restructuring charge was comprised of $20.2
million for manufacturing fixed assets and inventory related to the
discontinuance of the Buz multimedia producer and development projects related
to enhancements associated with the Jaz product platform; $9.7 million for
workforce reduction costs; $4.3 million for excess leasehold improvements,
furniture and fixtures formerly utilized in the Milpitas and San Diego
facilities; $3.0 million for lease termination costs for facilities located in
Milpitas and San Diego; and $4.7 million for workforce reduction costs, contract
obligation costs associated with performance guarantees and other exit costs
such as lease cancellations, fixed asset write-offs and leasehold restoration to
consolidate the Companys operations in France and Scotland. The
consolidation of operations in France and Scotland resulted in the closure of a
sales office in Paris, France and a research facility in Scotland. This
restructuring charge consisted of cash and non-cash charges of approximately $18
million and $24 million, respectively. There were not any indications of
permanent impairment of the assets prior to the restructuring actions.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company estimated that annual cost savings may approximate $40 million when
these actions have been fully implemented. The savings were primarily a result
of reductions in salaries, rent and depreciation. However, it was also
anticipated that these savings would be offset by increased spending in other
areas such as advertising.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of April 1, 2001, all of the restructuring reserves associated with the second
quarter 1999 U.S. restructuring actions have been utilized which included
disposal of equipment, tooling and inventory and payment of purchase commitments
associated with discontinued products and development projects; disposal of
furniture and leasehold improvements and payment of leases associated with the
shutdown of the San Diego and Milpitas, California facilities and payment of
severance and benefits in the United States. As of April 1, 2001, all of the
restructuring reserves associated with the second quarter 1999 international
restructuring actions have been utilized including the disposition of all France
and Scotland assets and liabilities, except for certain contract obligations in
France. The contract obligations in France remain under dispute and therefore
have not been settled. Accordingly, there was no activity in the current quarter
on the contract obligations. The second quarter 1999 restructuring reserves
originally totaled $41.9 million. Remaining restructuring reserves in the amount
of $1.4 million are included in the Companys balance sheet as of April 1,
2001 in other current liabilities. There was no activity in the second quarter
1999 restructuring reserves for the quarter ended April 1, 2001. Current
balances of the second quarter 1999 restructuring reserves are summarized below:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Balance                Utilized             Balance
                                                       12/31/00           Cash         Non-Cash     04/01/01
                                                       --------        ----------    ------------  ----------
       Second Quarter 1999                                               (in thousands)
         Restructuring Actions:

         France/Scotland Consolidation:
            Contract obligations (a)(b)                $  1,414         $      -       $       -      $  1,414
                                                       ========         ========       =========      ========

         Balance Sheet Breakout:
           Other current liabilities                   $  1,414         $      -       $       -      $  1,414
                                                       ========         ========       =========      ========

           (a) Amounts represent primarily cash charges.
           (b) Amounts relate to commitments associated with the manufacturing of floppy drives.`

| | Second Half 1999  Restructuring  Actions.  During the third quarter ended  September 26, 1999, the Company  recorded a pre-tax
         restructuring  charge of $20.5 million as a result of  restructuring  actions  initiated to consolidate  worldwide  Clik! disk
         manufacturing  and refocus the Clik!  product  platform on the newer PC Card and OEM drives  which  resulted in the  Company's
         discontinuance  of the Clik! Mobile drive. Of the $20.5 million,  $7.7 million related to inventory and inventory  commitments
         associated with Clik!  product  streamlining and was recorded in cost of sales in the accompanying  financial  statements.  An
         additional  charge of $5.4  million,  primarily for  severance  and benefits and  write-offs  of other prepaid  administrative
         expenses  related to the shutdown of Avranches,  was taken in the fourth  quarter of 1999 in connection  with the cessation of
         the Avranches, France operations where Clik! disks were manufactured.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The second half  restructuring  charges totaled $25.9 million and included  reserves of $13.4 million related to the cessation
         of manufacturing in Avranches,  France.  These costs were comprised of operating assets such as fixed assets,  receivables and
         inventory,  a $2.1 million charge for a write-off of intangibles  and exit costs  including  contract  obligations  associated
         with service contracts  associated with the Avranches  operations.  The $2.1 million write-off of intangibles  represented the
         unamortized  amount of the original $2.3 million  associated  with other Nomai products that were  discontinued as part of the
         cessation.  The second half  restructuring  charges  also  included  reserves of $11.5  million of  inventory  and fixed asset
         reserves  associated  with the Clik!  Mobile  drive  products  and $1.0  million  for the  write-off  of prepaid  royalty  and
         development  charges and severance and benefit accruals  associated with the Longmont,  Colorado operations where research and
         development  activities were performed.  These  restructuring  charges consisted of cash and non-cash charges of approximately
         $9 million and $17 million,  respectively.  There were not any indications of permanent  impairment of the assets prior to the
         restructuring actions.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company did not anticipate material savings from the second half restructuring actions.
| | -------------------------------------------------------------------------------------------

| | Utilization  of reserves  associated  with the second half 1999  restructuring  actions within the United States was completed
         during 2000,  which  included the disposal of equipment  and payment of purchase  commitments  associated  with Clik!  product
         streamlining and severance payments to Longmont, Colorado employees.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The legal  requirements  in France  relating to  workforce  reductions  are very strict and the social plan  approved  for the
         workforce can take up to two years to fully administrate.  Therefore,  the restructuring reserves,  specifically severance and
         benefits,  related to  manufacturing  cessation in  Avranches,  France will take longer to utilize.  There can be no assurance
         that the Company's  cessation of manufacturing  operations in France will not result in significant  legal or other costs that
         have not been  accrued for in the  restructuring  charges.  The Company is  currently  undergoing  a tax audit in France.  The
         audit covers  payroll and  benefits,  corporate  income taxes and VAT (value added tax). It is too early to assess the outcome
         of this audit.  There can be no  assurance  that the Company will not incur  claims or  assessments  from this audit that have
         not been accrued.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The contract  obligations  in France  remain under  dispute and therefore  have not been  settled.  Accordingly,  there was no
         activity in the current quarter on the contract obligations.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The second half 1999  restructuring  reserves  originally  totalled $25.9  million.  Remaining  restructuring  reserves in the
         amount of $1.8  million are included in the  Company's  balance  sheet as of April 1, 2001 in other  current  liabilities  and
         trade  receivables.  Utilization  of the second half 1999  restructuring  reserves  during the quarter  ended April 1, 2001 is
         summarized below:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Balance             Utilized                 Balance
                                                12/31/00         Cash       Non-Cash          04/01/01
                                                --------       ---------   ----------        ----------
Second Half 1999                                                  (in thousands)
Restructuring Actions:

Manufacturing Cessation -
   Avranches, France:
   Trade receivables (a)                         $      47      $     -     $     47       $       -
   Other commitments (b)(c)                            511          356           62              93
   Contract obligations (b)                          1,581            -            -           1,581
   Severance and benefits (b)                          495          350            -             145
                                                 ---------      -------     --------       ---------
                                                 $   2,634      $   706     $    109       $   1,819
                                                 =========      =======     ========       =========

Balance Sheet Breakout:
   Other current liabilities (b)                 $   2,587     $    706     $      62      $   1,819

   Trade receivables (a)                                47            -            47              -
                                                 ---------     --------     ---------      ---------
                                   $   2,634     $    706     $     109      $   1,819
                                                 =========     ========     =========      =========


(a)      Amounts represent primarily non-cash charges.
(b)      Amounts represent primarily cash charges.
(c)      Represents accruals for shut down costs, taxes and other miscellaneous liabilities.`

## (6)          COMMITMENTS AND CONTINGENCIES

| | Litigation
| | ----------

| | Except as set forth below, in management's  opinion,  there are no significant  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,  after  discussions  with legal counsel,  that
         the  ultimate  dispositions  of the  lawsuits  and  claims  discussed  below will not have a  material  adverse  effect on the
         Company's  financial position or results of operations,  except that, as indicated below, an adverse judgment or settlement of
         certain claims could have a material  adverse effect on the operating  results reported by the Company for the period in which
         any such adverse judgment occurs or settlement occurs (or is implemented).
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As  previously  disclosed in the Company's  Annual Report on Form 10-K for the year ended  December 31, 2000, on September 10,
         1998, a purported class action lawsuit,  Rinaldi, et al. v. Iomega Corporation,  was filed against the Company in the Superior
         Court of  Delaware,  New  Castle  County.  The suit  alleges  that a defect in the  Company's  Zip drives  causes an  abnormal
         clicking noise that may indicate damage to the Zip drive or disks.  The plaintiffs  sought relief pursuant to claims of breach
         of warranty,  violation  of the  Delaware  Consumer  Fraud Act,  negligent  design and  manufacture,  and failure to warn.  On
         September 3, 1999,  the Court  dismissed  the claims of breach of warranty and violation of the Consumer  Fraud Act,  granting
         the plaintiffs  the  opportunity to amend the latter claim.  On January 31, 2000, the plaintiffs  filed an amended  complaint,
         reasserting  their claim under the Delaware  Consumer  Fraud Act and, on February 28, 2000,  the Company moved to dismiss this
         amended claim.  With respect to this motion,  on April 10, 2000,  the Attorney  General of the State of Delaware filed a brief
         in  opposition.  The Court has not yet decided the motion to  dismiss.  On April 25,  2000,  the  plaintiffs  moved to further
         amend their  complaint to add an additional  plaintiff who is a Delaware  resident,  which  amendment the Court allowed on May
         23, 2000 over the  Company's  opposition.  In connection  with the same matter,  on February 28, 2000,  two of the  plaintiffs
         served the Company with a "Notice of Claim" under Section  17.46(b) of the Texas  Deceptive  Trade  Practices  Act,  asserting
         allegations  similar to those made in connection with the plaintiffs'  Delaware  Consumer Fraud Act claim (the "Texas Claim").
         The Texas Claim  purports  to be on behalf of the two  plaintiffs  and a class of other  consumers  similarly  situated in the
         State of Texas.  It demands relief of $150 for each Zip drive  purchased by a class member,  $100 for mental  anguish  damages
         to each class  member and  attorneys'  fees and costs.  Formal  litigation  in  connection  with the Texas  Claim has not been
         commenced.  On March 19, 2001, the parties in the Rinaldi matter  submitted to the Delaware Court a request for  certification
         of the class and approval of a settlement of the class action.  Following  notice to the class members,  the Court is expected
         to hold a hearing  on or about  June 8, 2001 to  consider  final  approval  of the  settlement.  Pursuant  to the terms of the
         proposed  settlement,  class members who do not opt out of the  settlement  will release the Company from all claims that were
         or which could have been raised in the  litigation.  For its part, the Company will issue rebates  ranging  between $5 and $40
         to class  members who submit a proof of claim.  The rebates  will  remain  available  for six months and will be valid for the
         purchase of certain Zip drive  products  and/or media.  The level of the rebate will depend on whether the class  member's Zip
         drive manifested a clicking problem.  The Company will also provide dedicated technical  assistance  personnel for addressing,
         free of charge,  customer inquiries  regarding clicking Zip drives. It will also make a charitable  donation of Zip drives and
         related software,  media and service,  with a total retail value of $1 million.  Finally,  counsel for the class will apply to
         the Court for an award of  attorneys'  fees and costs in the amount of $4.7 million.  The  accompanying  financial  statements
         reflect  accruals  for the  charitable  donations  and for  plaintiffs'  attorneys'  fees and costs less  estimated  insurance
         coverage.  The  settlement  will not be  construed  as a finding of any  liability  on the  Company's  part and, as noted,  is
         subject to the  Court's  approval.  Although  the  Company  does not  expect  this  settlement  or, if the  settlement  is not
         approved,  the suit or the Texas  Claim to have a  material  adverse  effect on the  Company's  ongoing  business,  results of
         operations  or  financial  condition,  the  settlement  or an adverse  judgment  could have a material  adverse  effect on the
         operating  results  reported by the Company for the period in which the settlement  occurs (or is implemented) or such adverse
         judgment occurs.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As previously  disclosed in the Company's  Annual Report on Form 10-K for the year ended  December 31, 2000, on June 15, 1999,
         a patent  infringement  lawsuit,  Valitek,  Inc. v. Iomega  Corporation,  was filed  against the Company in the United  States
         District Court for the Eastern District of Pennsylvania.  The complaint  requests  injunctive  relief against the Company,  as
         well as monetary  damages.  On October 26, 1999, the court granted the  plaintiff's  motion to consolidate  the action against
         Iomega,  for discovery  purposes only, with a second,  similar lawsuit filed by Valitek against  Hewlett-Packard  and Imation.
         Valitek has now settled its lawsuit against  Hewlett-Packard  and Imation.  The Company  intends to vigorously  defend against
         this suit.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As  previously  disclosed in the Company's  Annual Report on Form 10-K for the year ended  December 31, 2000, on July 6, 1999,
         the Company initiated litigation against Castlewood Systems,  Inc.  ("Castlewood"),  Iomega Corporation v. Castlewood Systems,
         Inc., in the United States  District Court for the District of Utah, for  infringing the Company's U.S.  Patent No.  4,458,273
         and U.S.  Patent No.  5,854,719  and for  infringing  and diluting the Company's  registered  trademarks  "Iomega,"  "Zip" and
         "Jaz."  The  complaint  further  alleges  that  Castlewood  has  engaged  in  federal  unfair  competition,  common law unfair
         competition and common law unjust  enrichment.  Through the complaint,  the Company  requests  monetary damages and injunctive
         relief enjoining  Castlewood from further  infringement.  On August 18, 1999,  Castlewood  filed an answer and  counterclaims,
         denying the Company's  claims and requesting a declaratory  judgment that the Company's  patents are invalid.  On September 9,
         1999,  the  Company  filed a reply to the  counterclaims,  denying  that the  patents  are  invalid.  On  November  15,  1999,
         Castlewood  filed an amended answer and  counterclaims,  adding  several  affirmative  defenses.  The Company filed a reply to
         this amended answer and  counterclaims  on January 5, 2000. On February 23, 2000,  Castlewood filed another amended answer and
         counterclaims.  Because this amended answer  contained no new  counterclaims,  the Company did not file a reply.  On April 11,
         2000, the Company also initiated  litigation  against  Castlewood in the United States District Court for the District of Utah
         for  infringement  of the  Company's  U.S.  Patent No.  6,049,444.  The  Company's  complaint  requests  monetary  damages and
         injunctive  relief  enjoining  Castlewood from further  infringement.  Castlewood  responded to the complaint on September 15,
         2000.  The two  complaints  filed  by  Iomega  in the  United  States  District  Court  for the  District  of Utah  have  been
         consolidated.  On April 13, 2001,  the parties  agreed to stay all  proceedings  for 60 days to determine  whether or not this
         dispute can be resolved  through  mediation.  In addition,  on September 17, 1999, the Company  initiated  litigation  against
         Castlewood  in the Paris  District  Court  based on  claims  of  copyright  and  patent  infringement.  The  Company  sought a
         preliminary  injunction  preventing the sale of Castlewood's  infringing  products.  Additionally,  on September 20, 1999, the
         Company  initiated  litigation on this same basis against  Motek, a French  retailer of  Castlewood's  products,  in the Paris
         District Court.  The court has since denied the Company's  request for a preliminary  injunction with respect to the Company's
         patent claims and granted the Company's motion for a preliminary  injunction with respect to the Company's  trademark  claims.
         The action on the merits was  withdrawn  from the  records of the court with the  consent of both  parties.  Either  party may
         revive it within two years.  On November 29, 1999,  the Company filed a second suit against  Castlewood and Motek in Paris for
         patent  infringement.  The court denied the Company's  motion for  preliminary  injunction.  This suit was also withdrawn from
         the records of the court, but can be revived by either party within two years.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As  previously  disclosed in the  Company's  Annual  Report on Form 10-K for the year ended  December 31, 2000, on December 8,
         2000, IPDN Corporation filed a patent infringement  complaint against the Company, IPDN Corporation v. Iomega Corporation,  in
         the U.S.  District  Court for the Eastern  District of Missouri.  IPDN contends that the Company's  sale of the HipZip product
         constitutes  patent  infringement  as the HipZip  incorporates  features or functions  that infringe one or more claims of the
         IPDN  patents.  On March 14, 2001,  the Company  filed a motion to transfer the  litigation  to Utah.  On April 2, 2001,  IPDN
         filed its  opposition  to this  motion.  The Company  filed its reply on April 19,  2001.  The motion to transfer is currently
         pending before the Court.  The Company intends to vigorously defend against this lawsuit.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As previously  disclosed in the Company's  Annual Report on Form 10-K for the year ended December 31, 2000, on March 23, 2001,
         the Company initiated  litigation against Albi Media  Manufacturing,  SARL ("AMM") in the Tribunal de Grande Instance de Paris
         for infringing  certain Iomega patents and patent  applications in connection with AMM's production and sale of the Swap 100MB
         disk, a cartridge  that AMM claims can be used with certain of the  Company's  Zip drives.  The  complaint  requests  monetary
         damages and other relief against  further  infringement  by AMM. On May 10, 2001, the Company filed a motion for a preliminary
         injunction  against AMM before the  Tribunal de Grande  Instance de Paris.  The motion  seeks  injunctive  relief  against the
         continued  manufacture,  marketing and sale by AMM of the Swap 100MB disk or other disks which  infringe the Company's  patent
         rights.  A hearing is  scheduled  before the court on June 22,  2001.  AMM has changed its name from Albi Media  Manufacturing
         SARL to Advanced Mass  Memories,  SARL. The Company  intends to vigorously  pursue these claims and to continue its protection
         of Iomega intellectual property.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Nomai/AMM Litigation:
| | ---------------------

| | Nomai  S.A.  ("Nomai")  is a French  subsidiary  of the  Company  that was  acquired  during  the third  quarter  of 1998.  As
         previously  disclosed in the  Company's  Annual Report on Form 10-K for the year ended  December 31, 2000,  Nomai is currently
         engaged in several  litigation  matters that revolve  around (1) Nomai's  acquisition  of certain  assets of RPS Media S.A, in
         bankruptcy in 1997 and its  organization  of AMM as a subsidiary to operate such assets,  (2) AMM's  involvement in a research
         and development contract known as the "Magic" project, and (3) Nomai's subsequent disposition of AMM in September 1999.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On February 18, 2000,  Maitre Jean Jacques  Savenier,  the  Commissaire a  l'execution  du Plan  (bankruptcy  trustee) for RPS
         Media,  S.A., filed a complaint  against Nomai.  Savenier claimed that Nomai has not complied with the alleged  investment and
         employment  related  commitments made by Nomai's former  management  before the Commercial Court of Albi, France in connection
         with  Nomai's  acquisition  during  1997 of  certain  assets of RPS Media in  bankruptcy.  The action  sought a daily  penalty
         against Nomai of FF 100,000  (approximately  $13,500) until Nomai invests FF 48 million (approximately $6.5 million) and hires
         100 people.  An initial  hearing  before the  Commercial  Court was held on April 4, 2000. On April 18, 2000,  the  Commercial
         Court declined,  on  jurisdictional  grounds,  to issue a summary judgment ruling in favor of Savenier.  On February 16, 2001,
         Savenier filed a new complaint with the Commercial  Court,  again asking that the Court order AMM and Nomai to comply with the
         alleged  employment  and  investment  commitments  set  forth  in the  bankruptcy  plan or to fine AMM and  Nomai  FF  100,000
         (approximately  $13,500) for each day of  noncompliance.  The next hearing in the case is  scheduled  for June 8, 2001.  Nomai
         intends to vigorously defend against these allegations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On May 18, 2000,  Conseil & Technique,  Soterem and IDCC  (parties  involved  with AMM in the Magic  project)  filed a lawsuit
         before the  Commercial  Court of Toulouse,  France  against AMM.  Nomai is obligated to indemnify  for and defend  against the
         lawsuit under the agreement  whereby Nomai  divested its ownership of AMM to its new owner,  Alain  Bouttier.  Neither  Iomega
         nor Nomai are named  parties to the lawsuit.  The lawsuit  alleges  breach of contract and other claims  relating to the Magic
         project.  The lawsuit  claims total damages of  approximately  FF 75 million  (approximately  $10.3  million).  The Court held
         hearings in the case on June 26,  2000,  November 13, 2000 and  February 5, 2001.  The next  hearing is scheduled  for May 14,
         2001. Based on the indemnification obligations described above, Nomai intends to vigorously defend against these allegations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On January 3, 2001, Nomai was served with a notice of arbitration from Computer  Memories Storage,  SARL ("CMS"),  the holding
         company  organized  by Alain  Bouttier  to own AMM.  On  February  26,  2001,  CMS and AMM filed  their  complete  request for
         arbitration.  Their action is based on alleged breaches by Nomai of the agreement  whereby Nomai divested its ownership of AMM
         to Mr.  Bouttier.  In  particular,  CMS and AMM claim that AMM  suffered  damages as a result of (i) Nomai's  treatment of AMM
         assets prior to the sale to Mr. Bouttier and (ii) alleged  breaches by Nomai of certain  post-disposition  obligations to AMM.
         CMS and AMM seek the  nullification of  non-competition  obligations  between AMM and Nomai and claim damages of approximately
         FF 142 million  (approximately  $19.5  million).  These claims  overlap with those  asserted in the Savenier and Magic matters
         described  above. The arbitration will be heard before a three-member  arbitration  panel in Paris. The arbitration  panel has
         been  appointed  and is  commencing  the  proceeding.  On April 20,  2001,  Nomai  filed a statement  of defenses  and certain
         counterclaims against CMS and AMM.  Nomai intends to vigorously defend against these allegations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On January 19, 2001, the Commercial Court of Coutances,  France, which has jurisdiction over Nomai's commercial  registration,
         ordered  Nomai to appear at a hearing  before the Court on  February  6, 2001.  The  purpose of the  hearing  was to  evaluate
         Nomai's solvency, and, if Nomai were found insolvent, to start a judicial reorganization  proceeding.  The Court ordered Nomai
         to provide  documentation  related to its solvency  before a hearing,  which was held on April 24, 2001. The Court is expected
         to issue its ruling in the case before the end of May 2001.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On March 29,  2001,  Conseil &  Technique  filed a lawsuit  before  the  Tribunal  de  Commerce  of  Toulouse  against  Iomega
         International,  S.A. and Nomai.  This lawsuit is based on the same matter as the Magic project  lawsuit  against AMM described
         above.  Conseil & Technique claims that Nomai and Iomega  International  sabotaged the Magic project and interfered with AMM's
         performance of the  agreements  underlying the Magic project to prevent the  development of a competing  product.  The lawsuit
         asks the court to recognize  Conseil & Technique as the owner of the intellectual  property rights in the Magic project and to
         award damages against Nomai and/or Iomega International  totaling  approximately FF 8 million  (approximately $1.1 million). A
         hearing before the Toulouse  court is scheduled for June 19, 2001.  Iomega  International  S.A. and Nomai intend to vigorously
         defend against these allegations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Although  the  Company  does not expect the  arbitration  or the other  Nomai/AMM  claims  described  above to have a material
         adverse  effect on the  Company's  ongoing  business,  results of operations or financial  condition,  an adverse  judgment or
         settlement  of these claims could have a material  adverse  effect on the  operating  results  reported by the Company for the
         period in which any such adverse judgment or settlement occurs.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## (7)          OTHER MATTERS

| | Significant  Customers - During the quarter  ended April 1, 2001,  sales to Ingram  Micro,  Inc.,  Tech Data  Corporation  and
         CompUSA Inc.  accounted for 13.6%,  11.6% and 10.3% of consolidated  sales,  respectively.  No other single customer accounted
         for more than 10% of the  Company's  sales for the quarter  ended April 1, 2001.  No single  customer  accounted for more than
         10% of consolidated sales for the quarter ended March 26, 2000.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Forward Exchange  Contracts - 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.  The Company  uses forward  contracts  to hedge those net assets and  liabilities
         that,  when  remeasured  according  to  generally  accepted  accounting  principles,  impact  the  consolidated  statement  of
         operations.  All forward  contracts  entered into by the Company are  components of hedging  programs and are entered into for
         the sole  purpose  of  hedging an  existing  or  anticipated  currency  exposure,  not for  speculation  or trading  purposes.
         Currently,  the Company is using  forward  contracts  only to hedge  balance  sheet  exposure.  The contracts are primarily in
         European  currencies,  the Singapore  dollar and the Japanese yen. The contracts  normally have  maturities that do not exceed
         three months.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | When hedging balance sheet exposure,  all gains and losses on forward  contracts are recognized in other income and expense in
         the same period as the gains and losses on  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
         consolidated statement of cash flows.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At April 1, 2001,  outstanding  forward exchange  purchase (sales)  contracts,  which all mature in June 2001, were as follows
         (Rates are quoted as United States dollar per other currency unit):
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Contracted
                                                                               Forward               Spot
                                                           Amount                Rate                Rate
                                                       --------------        --------------      ----------


                European Currency Unit                      400,000               1.13               1.14
                Japanese Yen                           (190,000,000)            121.94             126.33
                Singapore Dollar                          1,700,000               1.79               1.81
                Swiss Franc                              (1,700,000)              1.72               1.74
                British Pound                              (250,000)               .70                .71`

| | The
contracts are revalued at the month-end spot rate. The Companys
theoretical risk in these transactions is the cost of replacing, at current
market rates, these contracts in the event of default by the counterparty.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## IOMEGA CORPORATION
                                                MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                                             FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

## FISCAL 2001 CALENDAR

| | Under the Companys
fiscal calendar, quarters for 2001 end on the following dates compared to the
corresponding dates for 2000:
| | -------------------------------------------------------------------------------------------------------------------------------

`2001                2000
                                        ----------         ------------

                      Q1                April 1             March 26
                      Q2                July 1              June 25
                      Q3                September 30        September 24
                      Q4                December 31         December 31`

| | Management believes the
2001 calendar better aligns the Companys fiscal quarters with its
customers fiscal quarters. Under the calendar for fiscal 2001, the first
quarter of 2001 had 5 more days than the first quarter of 2000 and the fourth
quarter of 2001 will have 6 less days than the fourth quarter of 2000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## BUSINESS SEGMENT INFORMATION

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

| | The Company has four
reportable segments based primarily on the nature of the Companys
customers and products: Zip®, Jaz®, Iomega® CD-RW and PocketZip
(formerly Clik!) The Zip segment involves the development, manufacture,
distribution and sales of personal storage products and applications, including
Zip disk and drive systems to retailers, distributors and OEMs throughout the
world. The Zip segment also includes the development, manufacture, distribution
and sales of FotoShow digital image centers, which were introduced during the
third quarter of 2000. The Jaz segment involves the development, manufacture,
distribution and sales of professional storage products and applications,
including Jaz disk and drive systems to resellers, distributors and retailers
throughout the world. The Companys CD-RW segment involves the distribution
and sales of CD-RW drives to retailers, distributors and resellers throughout
the world. The CD-RW segment includes the distribution of the Predator 8X4X32
drive introduced during the fourth quarter of 2000. The PocketZip segment
involves the development, manufacture, distribution and sales of PocketZip
drives and disks for use with portable digital products such as digital cameras,
audio players, handheld personal computers and notebook computers to retailers,
distributors, OEMs and resellers throughout the world. The PocketZip segment
also includes the development, manufacture, distribution and sales of HipZip
digital audio players, which were introduced during the third quarter of 2000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Other
category includes branded products such as Microdrive, CompactFlash and
SmartMedia and other products such as software, Ditto® tape products and
other miscellaneous items.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | Reportable Operating Segment Information:
| | -----------------------------------------

`For the Quarter Ended
                                                                       April 1,           March 26,
                                                                        2001                 2000
                                                                     ----------           ----------
                                                                             (In thousands)
      Sales:
         Zip                                                         $ 204,485            $ 278,517
         Jaz                                                            26,561               51,847
         CD-RW                                                          44,484               10,778
         PocketZip                                                       1,286                2,054
         Other                                                           1,359                1,701
                                                                     ---------            ---------
            Total sales                                              $ 278,175            $ 344,897
                                                                     =========            =========

      Product profit margin (loss):
         Zip                                                         $  54,859            $  87,941
         Jaz                                                             9,663               12,463
         CD-RW                                                          (5,904)                (104)
         PocketZip                                                      (8,053)             (16,269)
         Other                                                          (6,345)              (2,363)
                                                                     ---------            ---------
            Total product profit margin                                 44,220               81,668

      Common operating expenses:
         General corporate expenses                                    (33,292)             (30,137)
         Interest and other income, net                                  5,261                1,233
                                                                     ---------           ----------
            Income before income taxes                               $  16,189           $   52,764
                                                                     =========           ==========`

## SEASONALITY

| | The Company's Zip products are targeted primarily to the personal computer,  consumer digital electronic,  OEM, enterprise and business
professional  markets.  The Company's Jaz products are targeted  primarily to the business  professional  market.  The Company's  CD-RW
products are targeted to the retail consumer and enterprise  markets.  The Company's  PocketZip products are targeted to the enterprise
market,  to various  electronics  device OEMs and to the retail  consumer  markets.  Management  believes the markets for the Company's
products are generally  seasonal,  with a higher  proportional share of total sales typically occurring in the fourth quarter and sales
slowdowns commonly occurring during the first quarter and summer months.  Accordingly,  revenues and growth rates for any prior quarter
are not necessarily indicative of the revenues or growth rates to be expected in any future quarter.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## RESULTS OF OPERATIONS

| | The Company  reported net income of $9.8 million,  or $0.04 per diluted share,  for the first quarter of 2001. This net income compares
to first quarter 2000 net income of $51.8  million,  or $0.19 per diluted share,  which  included  $20.1  million,  or $.07 per diluted
share, attributable to a decrease in the valuation allowance for net deferred tax assets.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## SALES

| | Sales for the quarter ended April 1, 2001 of $278.2  million  decreased by $66.7  million,  or 19.3%,  when compared to sales of $344.9
million  for the first  quarter of 2000.  This  decrease  was  primarily a result of lower Zip drive and disk sales and lower Jaz drive
and disk sales,  offset in part by higher  CD-RW drive sales.  Total drive sales of $175.9  million  decreased by 8.3%  compared to the
first  quarter of 2000.  Total  drive units  shipped  (excluding  licensees)  for the quarter  ended April 1, 2001  decreased  by 10.7%
compared to the first  quarter of 2000.  Total disk sales of $99.4  million  decreased by 33.5%  compared to the first quarter of 2000.
Total disk units shipped for the quarter ended April 1, 2001  decreased by 24.1%  compared to the first quarter of 2000.  Additionally,
the decrease in revenue was impacted by price reductions and rebates,  the majority  associated with Zip products,  which reflected the
Company's strategy to gain increased market penetration for its Zip products.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Zip product sales for the first quarter of 2001 totaled $204.5  million,  representing a decrease of $74.0 million,  or 26.6% ,compared
to sales of $278.5  million  for the first  quarter  of 2000.  Sales of Zip  products  represented  73.5% of total  sales for the first
quarter of 2001,  compared  to 80.8% for the first  quarter of 2000.  Zip drive sales of $120.5  million for the first  quarter of 2001
decreased by $40.6  million,  or 25.2%,  from $161.1  million in the 2000 first  quarter  primarily as a result of lower demand for Zip
drives in the retail and  distribution  channels.  The Company's  Zip drive units shipped  decreased by 21.4% from the first quarter of
2000.  Zip drive units shipped to OEM's  decreased  8.1% while OEM revenue was virtually  unchanged  when compared to the first quarter
of 2000,  due to increased  sales mix of higher  priced Zip 250MB drives to OEM's during the 2001 first  quarter.  Shipments of Zip OEM
drives  (excluding  licensee  shipments)  accounted for  approximately  43% of total Zip drive  shipments in the first quarter of 2001,
compared to  approximately  37% in the first  quarter of 2000.  Zip disk units  shipped  decreased  by 23.3% from the first  quarter of
2000.  Zip disk revenue of $83.8 million for the first quarter of 2001 decreased by $32.8  million,  or 28.2%,  from $116.6 million for
the first  quarter of 2000.  When compared to the first quarter of 2000,  pricing  actions  accounted for $38.0 million of the decrease
in Zip product  revenue and lower units  shipped,  net of favorable  product mix,  accounted  for $36.0  million of the decrease in Zip
product revenue.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Jaz product sales for the first quarter of 2001 totaled $26.6  million,  representing  a decrease of $25.2 million or 48.8% compared to
sales of $51.8 million for the first quarter of 2000.  Sales of Jaz products  represented  9.5% of total sales for the first quarter of
2001,  compared to 15.0% for the first quarter of 2000.  Jaz drive and disk units shipped  decreased by 42.7% and 47.9%,  respectively,
when  compared to the first  quarter of 2000.  Lower units  shipped and pricing  actions  accounted for $23.7 million and $1.5 million,
respectively, of the decrease in Jaz revenue when compared to the first quarter of 2000.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | CD-RW  product  sales for the first  quarter of 2001 totaled  $44.5  million,  representing  a $33.7  million,  or greater than 3 times
increase  compared to sales of $10.8 million for the first quarter of 2000.  Sales of CD-RW products  represented  16.0% of total sales
for the first  quarter of 2001  compared to 3.1% for the first  quarter of 2000.  CD-RW units  shipped  increased  greater than 4 times
compared to the first  quarter of 2000.  Higher units shipped  accounted  for $39.3  million of the  increased  sales and was partially
offset by pricing actions of $5.6 million  resulting  primarily from competitive  pressures that reduced CD-RW revenue when compared to
the first quarter of 2000.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | PocketZip  product  sales for the first  quarter of 2001 totaled  $1.3  million,  representing  a decrease of $0.8  million,  or 37.4%,
compared to sales of $2.1 million for the first quarter of 2000.  Sales of PocketZip  products  represented  0.5% of total sales in the
first  quarter of 2001,  compared to 0.6% for the first  quarter of 2000.  PocketZip  drive units  shipped were  unchanged  compared to
the first  quarter of 2000,  while  PocketZip  disks units  shipped  decreased by 34.4%.  Pricing  actions and lower disk units shipped
accounted for $0.5 million and $0.3 million,  respectively,  of the decrease in PocketZip revenue when compared to the first quarter of
2000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Geographically,  sales in the Americas  totaled  $191.3  million,  or 68.8% of total sales,  in the first quarter of 2001,  compared to
$217.5  million,  or 63.1% of total sales,  in the first  quarter of 2000.  This decrease was primarily due to lower Zip and Jaz sales,
partially offset by higher CD-RW sales.  Sales in Europe totaled $67.8 million,  or 24.4% of total sales, in the first quarter of 2001,
compared to $95.0  million,  or 27.5% of total sales,  in the first  quarter of 2000.  This decrease was primarily due to lower Zip and
Jaz sales,  partially  offset by increased  CD-RW sales.  Sales in Asia totaled  $19.0  million,  or 6.8% of total sales,  in the first
quarter of 2001,  compared to $32.5 million,  or 9.4% of total sales,  in the first quarter of 2000. This decrease was primarily due to
lower Zip sales.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## GROSS MARGIN

| | The Company's  overall gross margin was $85.7 million,  or 30.8%, in the first quarter of 2001,  compared to $127.9 million,  or 37.1%,
in the first quarter of 2000.  This  decrease in gross margin of $42.2 million was due primarily to lower Zip gross margins  reflecting
lower Zip drive and Zip disk revenue  resulting from volume and pricing actions.  Zip margins were also negatively  impacted by a lower
proportion  of disk sales to drive sales and by a higher mix of OEM drive sales,  partially  offset by a favorable mix of higher margin
Zip 250MB products compared to Zip 100MB products.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Jaz and CD-RW gross  margins  declined in the first  quarter of 2001 compared to the first  quarter of 2000.  However,  these  declines
were  substantially  offset by gross margin  improvements in PocketZip  reflecting  non-restructuring  charges of $7.4 million recorded
during  the first  quarter  of 2000 as cost of sales.  These  non-restructuring  charges  were  comprised  of $3.7  million  for excess
PocketZip disk manufacturing  capacity,  $2.8 million to reflect a reduction in the estimated net realizable value of PocketZip PC Card
drive inventory,  $0.6 million for excess PocketZip PC Card drive  manufacturing  capacity and $0.3 million for PocketZip PC Card drive
purchase  commitments.  The $3.7  million  excess  PocketZip  disk  manufacturing  capacity  was due to the  Company not  achieving  or
expecting  to achieve  its  overall  disk sales  volumes.  As a result,  undiscounted  future  cash flows were not  expected  to enable
recovery  of the  carrying  value of the  equipment.  The $2.8  million in  PocketZip  PC Card  drive  inventory  charges  was due to a
reduction in the estimated net realizable value of PocketZip PC Card drives because expected  undiscounted  cash flows would not enable
recovery of costs.  The Company  evaluates the carrying  value of inventory on a quarterly  basis to determine if the carrying value is
recoverable at estimated selling prices.  The Company includes material costs,  manufacturing  costs and direct selling expenses in its
analysis of inventory realization.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Future gross margin  percentages will depend on: sales mix between  aftermarket and OEM channels,  as OEM sales generally provide lower
gross  margins  than sales  through  other  channels;  sales mix of Zip 100MB and Zip 250MB  drives  and  disks,  as sales of Zip 250MB
products have higher gross  margins;  sales volumes of Zip and Jaz disks,  which generate  significantly  higher gross margins than the
corresponding  drives; the mix between disks and drives; the mix between Zip, Jaz, and PocketZip products,  as well as the mix of lower
margin branded products such as CD-RW, Microdrive,  CompactFlash and SmartMedia;  any future pricing actions or promotions; the ability
to cover fixed costs  associated  with  recently  introduced  products such as HipZip and FotoShow;  and  potential  start-up  costs on
introducing new products including Peerless.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## SEGMENT PRODUCT PROFIT MARGIN

| | Zip segment  product profit margin for the first quarter 2001 of $54.9 million  decreased by $33.0 million,  or 37.6%,  compared to Zip
segment  product  profit  margin of $87.9  million for the first  quarter of 2000.  Product  profit margin as a percentage of Zip sales
decreased  to 26.8% for the first  quarter of 2001,  compared to 31.6% for the first  quarter of 2001.  The $33.0  million  decrease in
product profit margin was primarily due to pricing actions and lower units shipped.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Jaz segment product profit margin for the first quarter of 2001 of $9.7 million  decreased by $2.8 million,  or 22.5%,  compared to Jaz
segment  product  profit  margin of $12.5  million for the first  quarter of 2000.  Product  profit margin as a percentage of Jaz sales
increased  to 36.4% for the first  quarter  of 2001,  compared  to 24.0% for the first  quarter  of 2000.  Although  volumes  declined,
product profit margin as a percentage of Jaz sales  increased  primarily from lower warranty and repair costs,  and lower  depreciation
expenses.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | CD-RW segment  product loss for the first  quarter of 2001 was $5.9  million.  The loss  increased  $5.8 million  compared to a loss of
$0.1  million for the first  quarter of 2000.  The $5.8 million  increase in product loss  resulted  primarily  from price  reductions,
higher royalty fees and other  manufacturing  costs due to increased product  offerings.  During the first quarter of 2001, the Company
shipped 5 different CD-RW drive models, compared to only 1 drive model during the first quarter of 2000.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | PocketZip  segment  product loss of $8.1 million  decreased  $8.2 million in the first quarter of 2001,  compared to PocketZip  segment
product loss of $16.3 million in the first quarter of 2000.  The PocketZip  segment  product loss in the first quarter of 2000 included
a charge of $7.4 million to reflect a reduction in the estimated net realizable  value of inventory and equipment  associated  with the
PocketZip PC Card drive and PocketZip disks.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Including Bad Debt)

| | Selling,  general and  administrative  expenses  (including  bad debt) of $60.7 million for the first quarter of 2001 decreased by $4.5
million, or 7.0%, compared to $65.2 million for the first quarter of 2000.  Selling,  general and administrative  expenses increased as
a percentage of sales to 21.8% for the first  quarter of 2001,  from 18.9% in the  corresponding  quarter of 2000, as a result of lower
sales during the first quarter of 2001. The $4.5 million decrease in selling,  general and  administrative  expenses resulted primarily
from reduced bonus accruals.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## RESEARCH AND DEVELOPMENT EXPENSES

| | Research and  development  expenses of $14.1 million for the first quarter of 2001 increased by $3.0 million,  or 26.5%,  when compared
to $11.1 million for the first quarter of 2000.  Research and  development  expenses  increased as a percentage of sales to 5.1% in the
first  quarter of 2001,  from 3.2% in the first  quarter of 2000.  The  increase in research  and  development  expenses  for the first
quarter of 2001 was due  primarily  to  increased  spending  for the  development  of the new  Peerless  drive  system and for software
development, partially offset by lower Jaz research and development expenditures.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## RESTRUCTURING CHARGES

| | During 1999,  the Company  recorded  pre-tax  restructuring  charges of $65.8  million,  as a result of steps the Company was taking to
organize along functional lines,  consolidate  manufacturing and other facilities,  discontinue  certain products and refocus the Clik!
product  platform on the newer PC Card and OEM drives.  Of the $65.8  million in total  pre-tax  restructuring  charges,  $14.1 million
related to inventory  and  inventory  commitments  and was recorded in cost of sales.  This $14.1  million was composed of $6.4 million
related to inventory  and inventory  commitments  associated  with  discontinuing  the Buz  multimedia  producer and a Jaz  development
project and $7.7 million related to inventory and inventory  commitments  associated  with Clik!  product  streamlining.  The remaining
$51.7 million of the total pre-tax restructuring charges were reported separately.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Of the $65.8 million of pre-tax restructuring  charges,  $41.9 million was recorded in the second quarter of 1999 and $20.5 million and
$5.4 million in restructuring charges were recorded in the third and fourth quarters of 1999, respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Second  Quarter  1999  Restructuring  Actions.  During  the  second  quarter  ended  June 27,  1999,  the  Company  recorded  a pre-tax
restructuring  charge of $41.9  million as a result of steps the Company was taking to organize  along  functional  lines (for example,
manufacturing,  sales,  etc.) as opposed to product  lines.  Of the $41.9  million,  $6.4 million  related to inventory  and  inventory
commitments  associated with discontinuing the Buz multimedia  producer and a Jaz development project and was recorded in cost of sales
in the  financial  statements.  The  restructuring  actions  included in the second  quarter  charge  included the exit of  facilities,
headcount  reductions,  the  discontinuance of certain products and development  projects and  consolidation of the Company's  magnetic
technology  expertise at its headquarters in Roy, Utah. The actions  relating to the exit of facilities  included closing the Company's
facilities in Milpitas,  California and San Diego,  California,  where primarily research and development activities were conducted for
Clik! and Jaz. The  restructuring  charge was comprised of $20.2 million for  manufacturing  fixed assets and inventory  related to the
discontinuance  of the Buz  multimedia  producer and  development  projects  related to  enhancements  associated  with the Jaz product
platform; $9.7 million for workforce reduction costs; $4.3 million for excess leasehold  improvements,  furniture and fixtures formerly
utilized in the Milpitas and San Diego  facilities;  $3.0 million for lease  termination  costs for facilities  located in Milpitas and
San Diego; and $4.7 million for workforce reduction costs,  contract obligation costs associated with performance  guarantees and other
exit costs such as lease  cancellations,  fixed asset write-offs and leasehold  restoration to consolidate the Company's  operations in
France and  Scotland.  The  consolidation  of  operations  in France and  Scotland  resulted in the closure of a sales office in Paris,
France and a research  facility in Scotland.  This  restructuring  charge consisted of cash and non-cash  charges of approximately  $18
million  and  $24  million,  respectively.  There  were  not any  indications  of  permanent  impairment  of the  assets  prior  to the
restructuring actions.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company  estimated  that annual cost savings may  approximate  $40 million  when these  actions  have been fully  implemented.  The
savings  were  primarily a result of  reductions  in salaries,  rent and  depreciation.  However,  it was also  anticipated  that these
savings would be offset by increased spending in other areas such as advertising.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As of April 1, 2001, all of the restructuring  reserves  associated with the second quarter 1999 U.S.  restructuring  actions have been
utilized which included disposal of equipment,  tooling and inventory and payment of purchase commitments  associated with discontinued
products  and  development  projects;  disposal of furniture  and  leasehold  improvements  and payment of leases  associated  with the
shutdown of the San Diego and  Milpitas,  California  facilities  and payment of  severance  and benefits in the United  States.  As of
April 1, 2001, all of the  restructuring  reserves  associated with the second quarter 1999  international  restructuring  actions have
been utilized including the disposition of all France and Scotland assets and liabilities,  except for certain contract  obligations in
France.  The contract  obligations  in France  remain under  dispute and therefore  have not been  settled.  Accordingly,  there was no
activity in the current quarter on the contract obligations.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The second quarter 1999 restructuring  reserves  originally totaled $41.9 million.  Remaining  restructuring  reserves in the amount of
$1.4 million are included in the Company's  balance sheet as of April 1, 2001 in other  current  liabilities.  There was no activity in
the second  quarter  1999  restructuring  reserves for the quarter  ended April 1, 2001.  Current  balances of the second  quarter 1999
restructuring reserves are summarized below:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Balance            Utilized              Balance
                                                       12/31/00         Cash         Non-Cash     04/01/01
                                                      ----------      --------     -----------   ----------
         Second Quarter 1999                                                 (in thousands)
         Restructuring Actions:

         France/Scotland Consolidation:
            Contract obligations (a)(b)                $  1,414      $      -        $      -      $  1,414
                                                       ========      ========        ========      ========

         Balance Sheet Breakout:
           Other current liabilities                   $  1,414      $      -        $      -      $  1,414
                                                       ========      ========        ========      ========

(a)      Amounts represent primarily cash charges.
(b)      Amounts relate to commitments associated with the manufacturing of floppy drives.`

| | Second  Half 1999  Restructuring  Actions.  During  the third  quarter  ended  September  26,  1999,  the  Company  recorded  a pre-tax
restructuring  charge  of  $20.5  million  as a  result  of  restructuring  actions  initiated  to  consolidate  worldwide  Clik!  disk
manufacturing  and  refocus  the  Clik!  product  platform  on the  newer  PC Card  and OEM  drives  which  resulted  in the  Company's
discontinuance  of the Clik!  Mobile  drive.  Of the $20.5  million,  $7.7  million  related to  inventory  and  inventory  commitments
associated with Clik! product streamlining and was recorded in cost of sales in the accompanying  financial  statements.  An additional
charge of $5.4 million,  primarily for severance and benefits and write-offs of other prepaid  administrative  expenses  related to the
shutdown of Avranches,  was taken in the fourth quarter of 1999 in connection  with the cessation of the Avranches,  France  operations
where Clik! disks were manufactured.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The second half  restructuring  charges  totaled  $25.9  million and included  reserves of $13.4  million  related to the  cessation of
manufacturing in Avranches,  France.  These costs were comprised of operating  assets such as fixed assets,  receivables and inventory,
a $2.1 million charge for a write-off of intangibles and exit costs including  contract  obligations  associated with service contracts
associated  with the  Avranches  operations.  The $2.1 million  write-off of  intangibles  represented  the  unamortized  amount of the
original  $2.3  million  associated  with other  Nomai  products  that were  discontinued  as part of the  cessation.  The second  half
restructuring  charges also included  reserves of $11.5 million of inventory and fixed asset reserves  associated with the Clik! Mobile
drive  products and $1.0 million for the  write-off of prepaid  royalty and  development  charges and  severance  and benefit  accruals
associated with the Longmont,  Colorado  operations  where research and development  activities  were  performed.  These  restructuring
charges  consisted  of cash and  non-cash  charges  of  approximately  $9 million  and $17  million,  respectively.  There were not any
indications of permanent impairment of the assets prior to the restructuring actions.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company did not anticipate material savings from the second half restructuring actions.
| | -------------------------------------------------------------------------------------------

| | Utilization  of reserves  associated  with the second half 1999  restructuring  actions  within the United States was completed  during
2000,  which included the disposal of equipment and payment of purchase  commitments  associated with Clik!  product  streamlining  and
severance payments to Longmont, Colorado employees.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The legal  requirements in France  relating to workforce  reductions are very strict and the social plan approved for the workforce can
take up to two years to fully administrate.  Therefore,  the restructuring  reserves,  specifically severance and benefits,  related to
manufacturing  cessation in Avranches,  France will take longer to utilize.  There can be no assurance that the Company's  cessation of
manufacturing  operations  in France  will not  result in  significant  legal or other  costs  that  have not been  accrued  for in the
restructuring  charges.  The Company is currently  undergoing a tax audit in France.  The audit covers payroll and benefits,  corporate
income  taxes and VAT (value  added  tax).  It is too early to assess the  outcome of this audit.  There can be no  assurance  that the
Company will not incur claims or assessments from this audit that have not been accrued.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The contract  obligations  in France remain under dispute and therefore  have not been settled.  Accordingly,  there was no activity in
the current quarter on the contract obligations.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The second half 1999  restructuring  reserves  originally  totalled $25.9 million.  Remaining  restructuring  reserves in the amount of
$1.8 million are included in the  Company's  balance  sheet as of April 1, 2001 in other  current  liabilities  and trade  receivables.
Utilization of the second half 1999 restructuring reserves during the quarter ended April 1, 2001 is summarized below:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Balance        Utilized                      Balance
                                                12/31/00          Cash         Non-Cash       04/01/01
                                               ----------      ----------     ----------     ----------
Second Half 1999                                                  (in thousands)
Restructuring Actions:

Manufacturing Cessation -
   Avranches, France:
   Trade receivables (a)                         $      47      $     -       $    47       $       -
   Other commitments (b)(c)                            511          356            62              93
   Contract obligations (b)                          1,581            -             -           1,581
   Severance and benefits (b)                          495          350             -             145
                                                 ---------      -------       -------       ---------
                                                 $   2,634      $   706       $   109       $   1,819
                                                 =========      =======       =======       =========

Balance Sheet Breakout:
   Other current liabilities (b)                 $   2,587      $   706       $    62       $   1,819
   Trade receivables (a)                                47            -            47               -
                                                 ---------      -------       -------       ---------
                                                 $   2,634      $   706       $   109       $   1,819
                                                 =========      =======       =======       =========


(a)      Amounts represent primarily non-cash charges.
(b)      Amounts represent primarily cash charges.
(c)      Represents accruals for shut down costs, taxes and other miscellaneous liabilities.`

## INTEREST AND OTHER INCOME AND EXPENSE

| | Interest  income of $5.3  million in the first  quarter  of 2001  increased  from $3.5  million  in the first  quarter of 2000.  Higher
average cash and  investment  balances  during the first  quarter 2001  resulted in higher  interest  income when compared to the first
quarter of 2000.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Interest  expense of $0.1 million  during the first quarter of 2001  decreased  $1.3 million from $1.4 million during the first quarter
of 2000.  The lower  interest  expense  resulted  from no debt balances in 2001 other than capital  lease  obligations  of $2.2 million
compared to the first quarter of 2000,  when the Company had $45.5 million in convertible  subordinated  notes  outstanding and capital
lease obligations of $5.8 million.  The convertible subordinated notes were paid off in October 2000.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

## INCOME TAXES

| | For the  quarter  ended  April 1, 2001,  the  Company  recorded  an income tax  provision  of $6.4  million on pre-tax  income of $16.2
million.  The tax  provision  for  the  first  quarter  of 2001  was  calculated  using  an  estimated  annual  effective  tax  rate of
approximately  39%.  This compares to an income tax provision of $0.9 million on pre-tax  income of $52.8  million  representing  a tax
rate of 2% for the first quarter of 2000,  reflecting a $20.1  million  decrease in the  valuation  allowance  for net deferred  income
taxes.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At April 1, 2001, the Company had total deferred tax assets of $91.6 million  related to foreign and domestic  operations.  These total
deferred tax assets reflect the tax benefit of temporary  differences,  tax credit  carryforwards and net operating loss carryforwards.
At April 1, 2001,  the total  deferred  tax assets  were  reduced by deferred  tax  liabilities  of $68.7  million  which are  composed
primarily of tax liabilities on unremitted foreign earnings, and by a valuation allowance of $15.9 million.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company  continues  to maintain a full  valuation  allowance of $15.9  million for net  deferred tax assets  related to foreign net
operating  loss  carryforwards,  which  reflect  the tax  benefit  of  approximately  $36.3  million in future  tax  deductions.  These
carryforwards  expire at various dates  beginning in 2004.  These deferred tax assets remain fully valued because their  realization is
dependent on earning  future foreign  taxable income in the tax  jurisdictions  to which the net operating loss  carryforwards  relate.
The  largest of these  foreign  net  operating  loss  carryforwards  relates  to the  Company's  French  subsidiary,  Nomai  S.A.  This
subsidiary's  operations have been shut down and therefore,  the foreign net operating loss  carryforward  related to Nomai S.A. is not
likely to be realized in the future.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At April 1, 2001,  the Company had $10.9 million of deferred tax assets  related to domestic net operating  loss  carryforwards,  which
reflect the tax benefit of  approximately  $27.9  million in future  domestic tax  deductions.  These  carryforwards  expire at various
dates beginning in 2020.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## LIQUIDITY AND CAPITAL RESOURCES

| | At April 1, 2001, the Company had cash,  cash  equivalents and temporary  investments of $372.9 million,  compared to $377.9 million at
December 31, 2000, a decrease of $5.0 million or 1.3%. The $5.0 million  decrease of cash, cash  equivalents and temporary  investments
for the first quarter of 2001 compares to an increase of $62.5 million for the first quarter of 2000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At April 1, 2001, $187.5 million of cash, cash equivalents and temporary  investments were on deposit in foreign  countries  (primarily
Western Europe)  compared to $178.7 million at December 31, 2000.  Deferred tax liabilities for estimated U.S.  federal and state taxes
of $62.4 million and $55.4  million as of April 1, 2001 and December 31, 2000,  respectively,  have been accrued on unremitted  foreign
earnings of $160.0  million and $142.0  million as of April 1, 2001 and  December  31,  2000,  respectively.  U.S.  taxes have not been
provided for unremitted foreign earnings of $112 million which are considered to be permanently  invested in non-U.S.  operations.  The
additional U.S. tax liability, if such amounts were remitted, would be approximately $44 million.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Working  capital of $408.7  million  increased by $18.5  million when  compared to $390.2  million at December 31, 2000.  The Company's
ratio of current assets to current  liabilities of 2.5 to 1 at April 1, 2001  increased  slightly  compared to 2.3 to 1 at December 31,
2000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During the quarter ended April 1, 2001, cash provided by operating  activities  amounted to $4.8 million,  a decrease of $63.3 million,
compared to cash provided from  operating  activities of $68.1 million for the first quarter of 2000.  The decreased cash provided from
operating  activities  resulted primarily from lower net income and from changes in current assets and current liabilities as described
below.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Accounts  receivable  increased in the first quarter of 2001 primarily from the timing of sales and  collections.  Inventory  decreased
in the first  quarter of 2001  primarily  due to timing  differences  such as increased  Zip product sales near the end of the quarter.
Accounts  payable  increased  primarily from the timing of inventory  receipts and related  payments to vendors.  The decrease in other
current  liabilities was due to a combination of decreases in accrued  advertising,  lower bonus accrual balances due to bonus payments
and no accruals  being made during the first quarter of 2001 and decreases in various other accrued  liabilities  which were  partially
offset by increases in purchase commitment obligations.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

## OTHER MATTERS

| | SEC Review.  As previously  disclosed in the Company's  Annual Report on Form 10-K for the year ended  December 31, 2000, in connection
with a review of the Company's  periodic SEC reports,  the Company has received  comments from the staff of the SEC requesting  various
supplemental  information and certain additional  disclosures.  The staff has also questioned  aspects of the Company's  accounting for
its 1998  acquisition  of Nomai,  the  subsequent  evaluation  of  impairment  of goodwill  relating to the Nomai  acquisition  and the
restructuring charges recorded by the Company in 1999.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In particular,  the staff has questioned  whether:  (a) in connection  with the Nomai  acquisition,  approximately  $9.5 million of the
acquisition  cost should have been  recorded as  post-acquisition  expenses,  rather than as goodwill;  (b) any  remaining  unamortized
goodwill  relating to the Nomai  acquisition  should have been  written  off in the third  quarter of 1999 when the Company  decided to
cease  manufacturing at the Nomai facilities in Avranches,  France (the amount of unamortized  goodwill  reported by the Company at the
end of the third  quarter of 1999 was $28  million);  and (c) the  Company  had in place a  sufficiently  detailed  plan to support the
restructuring  charges  which  amounted  to  $41.9  million  and  $25.9  million  in the  second  quarter  and  second  half  of  1999,
respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company's  management  believes that the Company's  accounting for each of these matters,  which is described in the Company's 2000
Annual Report on Form 10-K, is in accordance  with generally  accepted  accounting  principles and  applicable  accounting  literature.
However,  there can be no assurance  that the Company will prevail in its  position.  If the Company does not prevail,  the Company may
be required to restate its financial  statements  in order to adjust the manner in which it has  accounted  for the Nomai  acquisition,
the subsequent  evaluation of the impairment of the goodwill  relating to the Nomai  acquisition  and the 1999  restructuring  actions.
The Company  does not believe  that any such  restatement  would have a material  adverse  effect on the  Company's  current  financial
condition or future results of operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## FACTORS AFFECTING FUTURE OPERATING RESULTS

| | The  Company's  future  operating  results will depend in large part on the success of its Zip,  Jaz,  CD-RW,  Peerless  and  PocketZip
product  solutions  for personal  computers  and other  devices.  Although the Company  believes  there is a market demand for personal
storage  devices,  there can be no  assurance  that the Company  will be  successful  in  establishing  its  products as the  preferred
solutions for those market needs.  The extent to which the Zip, Jaz,  CD-RW and PocketZip  products  achieve and maintain a significant
market presence will depend upon a number of factors,  including:  the price,  performance,  quality and other  characteristics  of the
Company's  products and of competing  solutions  rumored,  announced or  introduced  by other  vendors;  the emergence of any competing
solutions as industry standards;  the success of the Company in meeting targeted availability dates for new and enhanced products;  the
success of the Company in establishing  and maintaining OEM arrangements and meeting OEM quality,  supply and other  requirements;  the
willingness of OEMs to promote  computers and other  products  containing  the Company's  drives;  the ability of the Company to create
consumer  demand for Zip, Jaz, CD-RW and PocketZip  products;  the success of the Company's  efforts to maintain  customer  service and
satisfaction;  the public perception of the Company and its products,  including  statements made by industry analysts or consumers and
adverse publicity resulting from such statements or from litigation filed against the Company;  general economic conditions,  including
overall market demand for personal computers and other products with which the Company's products can be used.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | Sales of Zip products have accounted for a significant  majority of the Company's revenue since 1996.  However,  these sales may not be
indicative of the long-term  demand for Zip products and in the first quarter of 2001,  Zip revenue  decreased  approximately  27% from
the first quarter of 2000.  Accordingly,  historic  sales levels should not be assumed to be an indication of future sales levels.  The
level of future  shipments of Zip drives to OEM  customers  will depend in great part on the  Company's  ability to further  reduce the
cost of Zip drives and on the extent to which the  incorporation  of CD-RW or  DVD-Recordable  drives  into OEM  products  results in a
reduction in the demand for OEM products also incorporating a built-in Zip drive.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company  anticipates  continued  sales  decline in the future for the Jaz  product  platform  as a result of  replacement  products
entering the market and changing  customer  requirements.  The process of managing Jaz and  maximizing its  profitability  is different
than managing a growing  product  platform and involves  maintaining  the size of the product's  infrastructure  and monitoring  vendor
commitments and inventory levels to prevent  inventory  write-offs and cancellation  costs.  There can be no assurance that the Company
will be successful in managing the Jaz product platform and in maximizing its profitability in the future.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company's  business strategy for CD-RW is different from its strategy for its Zip, Jaz, and PocketZip  products because most of the
drives are  purchased  from  suppliers  and  marketed  under the Iomega name  without  any  significant  manufacturing  activity by the
Company.  The CD-RW drive does not use  proprietary  media and has lower  overall  margins.  Given the low margins and frequency of new
product  introductions,  the Company has to closely  monitor its sales channels,  advertising and other marketing  expenses in order to
sell the product  profitably.  The CD-RW drive market is very  competitive and includes  several  established  participants.  Since the
introduction  of the CD-RW  product  platform  in 1999,  product  losses  have been  reported  each year.  In light of the  competitive
marketplace for this product and the lower margins, the Company is at risk that it will not be able to sell this product profitably.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Since the  introduction of the PocketZip  platform in 1998, the Company has incurred  product losses  including  charges totaling $55.6
million in 1999 and $7.4 million in 2000 related to the net realizable  value of inventory and equipment  associated with the PocketZip
platform.  Although the Company is making significant efforts to develop  applications for the PocketZip platform,  particularly in the
digital  audio market and believes the products  have  potential in the  enterprise  and OEM markets,  there is no assurance  that this
product line will become profitable or that the Company will not be required to take additional  charges  associated with the PocketZip
platform in the future.  Market acceptance of PocketZip  products as a storage solution for digital audio players,  digital cameras and
other electronic  devices is dependent upon obtaining a significant  market presence and continuing to increase OEM relationships  with
manufacturers, who produce digital devices incorporating built-in PocketZip drives.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company has entered into various  arrangements  under which the Company purchases  products from other businesses and markets those
products  under the Iomega name. In addition to CD-RW,  examples of this strategy  include  Microdrive,  CompactFlash,  SmartMedia  and
Network  Attached  Storage  products  all  announced  since the  beginning  of the fourth  quarter of 2000.  Since these  products  are
manufactured  by other parties,  the Company does not have control of the  manufacturing  process and has to closely  monitor its sales
channels to control  inventory  levels.  The Company also has to closely monitor its  advertising  and other marketing  expenses in the
Company's efforts to differentiate these products from those of the manufacturer.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | With the  introduction of several new products such as HipZip,  FotoShow and various software  products,  the Company has expanded into
new markets and channels such as digital audio players,  digital photo  storage/display and packaged software in which the Company does
not have  significant  prior  experience.  The Company faces  additional risks that these new or other future products will not achieve
significant  market  presence or otherwise be able to achieve  profitability.  The Company's  future  operating  results will depend in
part on its success in introducing enhanced and new products in a timely and competitively effective manner.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company has announced the new Peerless drive system,  the  development  of which is still  ongoing.  In addition to the other risks
described  herein which relate to all of the Company's  products,  additional  risks relating to Peerless  include:  development of the
product  involves the  implementation  of several new  technologies;  the Company's  dependency  upon a third party for some of the key
technology  to be used in the product;  and the fact that a number of the potential  market  applications  for Peerless are new.  There
can be no assurance  that the Company  will  successfully  complete the  development  of Peerless as  scheduled or that  Peerless  will
achieve significant market presence or otherwise be successful.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company has experienced and may in the future experience  significant  fluctuations in its quarterly  operating results.  Moreover,
because the Company's expense levels (including  budgeted selling,  general and administrative  and research and development  expenses)
are based in part on  expectations  of future sales levels,  a shortfall in expected sales could result in a  disproportionate  adverse
effect on the Company's net income and cash flow. For example,  the fourth  quarter is  traditionally  a seasonally  strong quarter for
the Company and during the fourth quarter of 2000, the Company  increased its  advertising  and marketing  expenditures in an effort to
increase sales.  However,  sales decreased  unexpectedly and operating results were negatively impacted by the incremental  advertising
expenditures.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company's future operating  results are subject to risks associated with  deteriorating  general economic  conditions and declining
consumer confidence.   A decrease in consumer spending could have a direct impact on the Company's revenue.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | The Company believes that in order to compete successfully  against current and future sources of competition,  it will be necessary to
further reduce the  manufacturing  costs of its products,  thus enabling the Company to sell its products at lower prices.  The Company
is continuing to focus on reducing the  manufacturing  costs of its products by:  reducing the cost of parts and components used in the
Company's  products through improved  inventory  management and product design  modifications  and by taking advantage of industry-wide
reductions in costs; increasing  manufacturing  efficiencies;  and decreasing defect rates. This is particularly true for the Company's
OEM business,  as OEM customers are particularly price sensitive.  The Company's ability to reduce manufacturing costs may be adversely
affected if the lower sales volumes  reported by the Company  result in less  favorable  pricing for  components  purchased  from third
parties.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company faces  development,  manufacturing  and demand risks with regard to recently  introduced  products and to future  products.
Future operating results will also depend on the Company's ability to effectively  manage  obsolescence  risks associated with products
that are phased out and its  success in  anticipating  and  ramping to volume  production  of new or  enhanced  products.  The  factors
described above relating to Zip, Jaz, CD-RW and PocketZip  products are, or will be,  relevant to any other products  currently sold by
the Company or new products introduced by the Company in the future.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | The Company has experienced  difficulty in the past and may experience  difficulty in the future,  in obtaining a sufficient  supply of
many key  components on a timely and cost  effective  basis.  Also,  many  components  incorporated  or used in the  manufacture of the
Company's  products are currently  available  only from single or sole source  suppliers or from a limited  number of suppliers and are
purchased by the Company without guaranteed supply  arrangements.  In particular,  media used in Zip 250MB disks and PocketZip disks is
obtained  exclusively  from Fuji Photo  Film,  certain  integrated  circuits  used in Zip drives are  obtained  exclusively  from Texas
Instruments,  motors used in Jaz and PocketZip drives are obtained  exclusively from Nidec Corporation,  head stack assemblies ("HSAs")
used in Jaz drives are obtained  exclusively from Read Rite International,  HSAs used in Zip notebook and PocketZip drives are obtained
exclusively  from SAE Magnetics and disk enclosures used in PocketZip disks are obtained  exclusively from J.E.B.  Engineering  Design,
Ltd.  There can be no  assurance  that the  Company  will be able to obtain a  sufficient  supply of  components  on a timely  and cost
effective  basis. The inability to obtain  sufficient  components and equipment to obtain or develop  alternative  sources of supply at
competitive prices and quality or to avoid  manufacturing  delays could:  prevent the Company from producing  sufficient  quantities of
its products to satisfy market demand (or, in the case of a component  purchased  exclusively  from one supplier,  the Company could be
prevented from producing any quantity of the affected  product(s) until such component becomes  available from an alternative  source);
delay product  shipments;  increase the  Company's  material or  manufacturing  costs;  cause an imbalance in the  inventory  levels of
certain  components  and cause the Company to modify the design of its products to use a more readily  available  component,  which may
result in  product  performance  problems.  Any or all of these  problems  could in turn  result in the loss of  customers,  provide an
opportunity for competing  products to achieve market  acceptance and otherwise  adversely affect the Company's  business and financial
results.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | During  the 1999 third  quarter,  the  Company  announced  plans to cease  manufacturing  operations  in  Avranches,  France and ceased
operations shortly thereafter.  There can be no assurance that the Company's  cessation of manufacturing  operations in France will not
result in significant  legal or other costs that have not been accrued for in the  restructuring  charges.  The legal  requirements  in
France  relating to workforce  reductions  are very strict and the social plan  approved for the  workforce can take up to two years to
fully  administrate.  The Company is currently  undergoing  a tax audit in France.  The audit covers  payroll and  benefits,  corporate
income  taxes and VAT (value  added  tax).  It is too early to assess the  outcome of this audit.  There can be no  assurance  that the
Company will not incur claims or assessments from this audit that have not been accrued.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Significant  portions of the Company's revenue are generated in Europe and Asia. The Company's existing  infrastructure  outside of the
United States is less mature and  developed  than in the United  States.  Consequently,  future sales and  operating  income from these
regions are less predictable  than in the United States.  The Company has also experienced  significant  turnover in its  international
management  and the managing  directors for both the Asia Pacific and European  operations  have been in their present  positions  less
than nine  months.  In  addition,  operating  expenses may increase as those  operations  mature and  increase in size.  The  Company's
international  sales transactions are generally  denominated in U.S. dollars.  Fluctuation in the value of foreign currencies  relative
to the U.S.  dollar that are not  sufficiently  hedged by foreign  customers  could result in lower sales and have an adverse effect on
future  operating  results (see  "Quantitative  and  Qualitative  Disclosures  About Market Risk" below).  In addition,  the Company is
continuing to assess  potential issues relating to the adoption of the Euro and is  contemplating  actions such as invoicing  customers
in their local currency instead of the U.S. dollar.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | The Company has issued stock  options that are subject to variable  plan  accounting  in  accordance  with FASB  Interpretation  No. 44
"Accounting for Certain Transactions Involving Stock Compensation"  ("Interpretation 44"). Under variable plan accounting,  the Company
is required to recognize  compensation  expense in its  statement of  operations  for any increase in the market price of the Company's
Common  Stock above $4.00 (the market price at July 1, 2000 which was the  effective  date of  Interpretation  44).  This  compensation
expense must be recorded on a quarterly basis until the option is exercised,  forfeited or expires  unexercised.  The impact of the new
options  granted  under the  Exchange  Program on the  Company's  financial  statements  will depend on quarterly  fluctuations  in the
Company's Common Stock price and the dates of exercises,  forfeitures or  cancellations  of the new options by employees.  Depending on
these factors, the Company could be required to record significant  compensation  expense during the life of the options,  which expire
in April 2010.  Moreover,  because the precise  amount of  compensation  expense will depend on the market price of the Common Stock at
the end of each quarterly period,  the Company will not be able to forecast in advance the amount of compensation  expense that it will
incur in any future period.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

## IOMEGA CORPORATION

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

| | The Company is exposed to various  interest rate risks.  The Company did not have any  significant  debt  outstanding at April 1, 2001.
Should the Company  need to borrow  funds in the future,  it would be subject to interest  rate risks.  The Company is also  subject to
interest rate risks on its current cash balances.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.  The Company uses forward contracts
to hedge those net assets and liabilities  that, when remeasured  according to generally  accepted  accounting  principles,  impact the
consolidated  statement of operations.  All forward  contracts  entered into by the Company are components of hedging  programs and are
entered into for the sole purpose of hedging an existing or anticipated  currency  exposure,  not for speculation or trading  purposes.
Currently,  the Company is using  forward  contracts  only to hedge  balance  sheet  exposure.  The contracts are primarily in European
currencies,  the Singapore  dollar and the Japanese yen. The contracts  normally have maturities  that do not exceed three months.  The
Company has a substantial  presence in Malaysia.  In September  1998, the ruling party in Malaysia  fixed the Malaysian  Ringgit to the
U.S.  dollar.  The Company has material  amounts of accounts payable  denominated in Ringgit.  Currently,  the foreign currency markets
are closed to hedging  alternatives  in Ringgit.  When the foreign  currency  markets  re-open for the  Ringgit,  the Company  plans to
re-evaluate its hedging strategy for Ringgit exposure.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | When hedging balance sheet exposure,  all gains and losses on forward  contracts are recognized in other income and expense in the same
period as the gains and losses on  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  consolidated  statement of
cash flows.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The fair  value of the  Corporation's  forward  contracts  is subject to change as a result of  potential  changes in market  rates and
prices.  The Company has performed a sensitivity  analysis  assuming a hypothetical  10% adverse movement in foreign exchange rates and
interest  rates  applied to the  forward  contracts  and  underlying  exposures  described  above.  As of April 1, 2001,  the  analysis
indicated that such market  movements would not have a material effect on the Company's  consolidated  financial  position,  results of
operations or cash flows.  Factors that could impact the  effectiveness of the Company's  hedging  programs  include  volatility of the
currency and interest rate markets,  availability of hedging  instruments and the Company's ability to accurately  project net asset or
liability  positions.  Actual gains and losses in the future may differ materially from the Company's  analysis depending on changes in
the timing and amount of interest rate and foreign exchange rate movements and the Company's actual exposure and hedges.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## PART II - OTHER INFORMATION

## ITEM 1.   LEGAL PROCEEDINGS

| | A  discussion  of the  Company's  legal  proceedings  appears  in Item 1 of this  Form  10-Q  under  Note 6 of the  Notes to  Condensed
Consolidated Financial Statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## ITEM 2.  CHANGE IN SECURITIES AND USE OF PROCEEDS:

| | (a)      Since  January 1, 2001,  the Company's  Board of Directors  has approved a series of  amendments to the Company's  Amended and
      Restated By-Laws.  The full,  current text of the Company's Amended and Restated By-Laws is filed as an exhibit to this Quarterly
      Report on Form 10-Q and is  incorporated  herein by  reference.  The  following is a summary of the  material  changes made since
      January 1, 2001:  The By-Laws were amended to reflect  changes in the  corporate  law of the State of Delaware  providing for the
      enhanced use of electronic  communications.  Specifically,  the bylaws were amended to: (a) permit  electronic notice of meetings
      to  consenting  shareholders  and/or  directors;  (b)  authorize  the  Company's  Board of  Directors to permit  shareholders  to
      participate in meetings by means of remote  communications;  (c) permit the list of shareholders eligible to vote at a meeting to
      be provided either at the offices of the Company or on an electronic  network;  (d) facilitate the delivery of electronic proxies
      by  shareholders;  (e) permit  directors  to use  electronic  communications  to deliver  resignations  and consents to corporate
      actions; and (f) permit electronic waivers of notices by shareholders and directors.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The By-Laws  relating to the  conduct of meetings of  shareholders,  including  the  advance  notice  provisions,  were  revised.
      Specifically,  the By-Laws were amended to: (a) provide that meetings of shareholders will take place at the Company's  principal
      place of business unless another  location is specified;  (b) give the Board of Directors full  flexibility in selecting the date
      and time on which the annual  meeting will be held each year;  (c) provide  that a quorum at a  shareholder  or director  meeting
      shall not be broken by the departure of  shareholders  or  directors,  as the case may be; (d) provide rules for the selection of
      the chairman of meetings of shareholders and to establish the chairman's role and obligations at such meetings;  (e) specify when
      the polls at a meeting of shareholders shall be deemed to be opened; and (f) revise the information  required to be provided by a
      shareholder  who wishes to nominate a director for election or to present an item of business at a meeting of  shareholders.  The
      changes to the advance  notice  By-Laws did not alter the time periods in which notice must be given by a shareholder in order to
      be timely.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)   Not Applicable.
| | ---------------------

| | (c) The Company did not sell any equity  securities  during the first  quarter of 2001 that were not  registered  under the  Securities
      Act of 1933.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d)   Not Applicable.
| | ---------------------

## ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:

| | The  Company's  2001  Annual  Meeting of  Shareholders  was held on  Wednesday,  May 2,  2001.  At the Annual  Meeting,  the  Company's
shareholders voted upon the following three proposals:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`1.       Approval of amendments to the Company's  Certificate of Incorporation and By-Laws  eliminating the Company's  classified Board
         of Directors.
2.       Election of three Class I directors, each for a term of three years;  and
3.       Ratification of the selection of Arthur Andersen LLP as the Company's independent auditors for the current year.`

| | The affirmative  vote of at least 80% of the shares of common stock  outstanding on the record date for the Annual Meeting was required
to approve the amendments to the Company's  Certificate of Incorporation  and By-Laws  eliminating the Company's  classified  board. As
indicated in the table below,  this proposal was not approved by the requisite  number of  affirmative  votes,  since  abstentions  and
broker  non-votes had the same effect as a vote against the proposal.  If this  proposal had been approved by the requisite  vote,  the
shareholders  would have voted to elect nine  directors,  each of whom would serve for a one-year term until the next annual meeting of
shareholders.  Instead,  at the Annual Meeting the  shareholders  elected three Class I directors,  each to serve until the 2004 Annual
Meeting of  Shareholders.  The Class I directors  elected are David J. Dunn,  Werner T. Heid and James E. Sierk. The Class II and Class
III directors  continued to serve as directors  after the Annual Meeting.  The Class II directors are Bruce R.  Albertson,  Jonathan S.
Huberman and John M. Seidl.  The Class III directors are Robert P. Berkowitz, John R. Myers and John E. Nolan.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The following table indicates the votes received for each proposal.
| | -------------------------------------------------------------------

`Against/                  Broker
                     Proposal                                   For              Withheld     Abstain      Non-votes
        -----------------------------------------           -----------          ---------   ---------    ------------

1.      Approval of amendments to Iomega's
            Certificate of Incorporation and By-
            Laws eliminating Iomega's classified
            Board of Directors                              131,913,514          2,369,548   1,526,617    113,587,525

2.      Election of three Class I directors, each
            for a term of three years:
               David J. Dunn                                245,101,431          4,295,733           -            -
               Werner T. Heid                               245,725,744          3,671,460           -            -
               James E. Sierk                               245,728,908          3,668,296           -            -

3.      Ratification of Arthur Andersen LLP as
            independent auditors                            246,574,798          1,611,743   1,210,663            -`

## ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K:

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

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

## SIGNATURES

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

IOMEGA CORPORATION
                                                                                     (Registrant)

`Dated:   5/14/01                                                 /s/ Bruce R. Albertson
         ----------                                              ------------------------------------
                                                                 Bruce R. Albertson
                                                                 Chief Executive Officer and President



Dated:   5/14/01                                                 /s/ Philip G. Husby
         ----------                                              ------------------------------------
                                                                 Philip G. Husby
                                                                 Senior Vice President, Finance and
                                                                 Chief Financial Officer`

## EXHIBIT INDEX

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

`Exhibit No.                Description
------------               ---------------

3.(ii).1                   By-Laws of the Company, as amended.

10.23                      Form of Executive Retention Agreement (as entered into between the Company
                           and each of John L. Conely, Sr., Philip G. Husby and Herbert K. Scales).`