---

# UNITED STATESSECURITIES
AND EXCHANGE COMMISSION

                                                        WASHINGTON, D.C. 20549

---

# FORM 10-Q

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

## FOR THE QUARTERLY PERIOD ENDED MARCH 30, 2003

## OR

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

## COMMISSION FILE NUMBER 1-12333

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

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

4435 Eastgate Mall, 3rd Floor, San Diego, CA 92121(Address of principal executive offices)

(858) 795-7000(Registrant's telephone number, including area code)

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

Yes    X      
No

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock
as of May 2, 2003.

|Common Stock, par value $.03 1/3(Title of each class) | 51,326,197(Number of shares)
|----------------------------------------------------- | ----------------------------

---

# IOMEGA CORPORATION
TABLE OF CONTENTS

`Page
                                                                                                        ----

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

                                                     PART I - FINANCIAL STATEMENTS

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets at March 30, 2003
             and December 31, 2002.................................................................       3

         Condensed Consolidated Statements of Operations for the Quarters
             ended March 30, 2003 and March 31, 2002...............................................       5

         Condensed Consolidated Statements of Cash Flows for the Three Months
             ended March 30, 2003 and March 31, 2002...............................................       6

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

Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations...................................................      26

Item 3.  Quantitative and Qualitative Disclosures About Market Risk................................      51

Item 4.  Controls and Procedures...................................................................      52

                                                      PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.........................................................................      53

Item 2.  Changes in Securities and Use of Proceeds.................................................      53

Item 6.  Exhibits and Reports on Form 8-K..........................................................      53

Signatures.........................................................................................      54

Certification - Werner T. Heid, President and Chief Executive Officer..............................      55

Certification - Barry Zwarenstein, Vice President, Finance and Chief Financial Officer.............      56

Exhibit Index......................................................................................      57`

---

Copyright © 2003 Iomega Corporation. All rights reserved. Iomega, the stylized i
logo, Zip, Jaz, Peerless, PocketZip, HipZip, HotBurn, FotoShow, Active Disk, ioLink and
IoClub are either registered trademarks
or trademarks of Iomega Corporation in the United States and/or other countries.
Certain other product names, brand names
and company names may be trademarks or designations of their respective owners.

1

---

## SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form
10-Q contains a number of forward-looking statements, including, without
limitation, statements referring to: plans to introduce new and enhanced
products and software, including a small-form factor removable flexible magnetic
storage device (referred to as Digital Capture Technology or DCT)
expected to have a capacity of about 1.5GB and a removable hard disk storage
system (referred to as Removable Rigid Disk System or RRD) expected
to have a capacity of approximately 35GB; goals to recruit OEM customers for new
products; the overall objective to be viewed as a full line supplier of digital
storage devices for the Companys retail, catalog and online customers and
to achieve the goal of creating destination storage in the retail
and catalog channels; plans to mitigate the continued decline in the
Companys core Zip business; the need for additional restructuring or other
charges in the future; the expectation of future outsourcing initiatives; the
expected profitability or lack of profitability on certain product lines; the
expected sales volume or lack of sales volume on certain product lines; plans
concerning the availability of PocketZip and Jaz disks and other plans
concerning product lines; the belief that NAS represents a sales growth
opportunity and the goal to launch new NAS products during 2003; the goal to
expand the sales of DVD Rewritable drives during the second quarter of 2003; the
goal to grow the Companys sales; the expectation of continuing to lower
product procurement costs; the goal to improve the procurement and commodity
business processes to maximize profitability on sourced branded products; the
impacts of expensing stock option grants; the expected sufficiency of
unrestricted cash, cash equivalents and temporary investment balances and cash
flows from future operations; the Companys belief that its cash reserves
are in excess of what is required to operate the existing business on an ongoing
basis and that it is continuing to analyze and explore strategic opportunities
both in and outside the storage industry with the goal to obtain the maximum
benefit for the Companys stockholders; the factors affecting future gross
margins; expected sales levels due to seasonal demand; the expectation that the
Company can obtain sufficient product and components thereof to meet business
requirements; anticipated hedging strategies; the possible effects of an adverse
outcome in the review of the Companys SEC filings described under the
caption Other Matters in Managements Discussion and Analysis
of Financial Condition and Results of Operations; the expected impact of the
adoption of recent accounting pronouncements and the possible effects of an
adverse outcome in legal proceedings, including the resolution of the adverse
judgments in the Nomai litigation, as described in Note 5 of the notes to
condensed consolidated financial statements in Part I. Any other statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
believes, anticipates, plans,
expects, intends and similar expressions are intended to
identify forward-looking statements, although not all forward-looking statements
contain these words.

There are a number of
important factors that could cause actual events or the Companys actual
results to differ materially from those indicated by such forward-looking
statements. These factors include, without limitation, those set forth under the
captions Application of Critical Accounting Policies,
Liquidity and Capital Resources, Factors Affecting Future
Operating Results and Quantitative and Qualitative Disclosures About
Market Risk included under Managements Discussion and Analysis
of Financial Condition and Results of Operations in Items 2 and 3 of Part
I of this Quarterly Report on Form 10-Q and those set forth in Note 5 of the
notes to condensed consolidated financial statements in Part I of this Quarterly
Report on Form 10-Q. The factors discussed herein do not reflect the potential
future impact of any mergers, acquisitions or dispositions. In addition, any
forward-looking statements represent the Companys estimates only as of the
day this quarterly report was first filed with the Securities and Exchange
Commission and 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.

2

---

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

`March 30,            December 31,
                                                                                2003                   2002
                                                                              ---------            ------------
                                                                             (Unaudited)
Current Assets:
   Cash and cash equivalents                                                  $ 174,064             $ 241,519
   Restricted cash                                                                  200                 3,800
   Temporary investments                                                        286,395               208,545
   Trade receivables, less allowance for doubtful accounts of
     $2,867 and $5,462, respectively                                             32,316                54,477
   Inventories                                                                   35,098                40,525
   Deferred income taxes                                                         23,670                27,573
   Income taxes receivable                                                          295                     -
   Other current assets                                                          12,668                14,490
                                                                              ---------             ---------
      Total Current Assets                                                      564,706               590,929
                                                                              ---------             ---------

Property and Equipment, at Cost                                                 156,328               155,376
Accumulated Depreciation and Amortization                                      (139,352)             (137,274)
                                                                              ---------             ---------
      Net Property and Equipment                                                 16,976                18,102
                                                                              ---------             ---------

Goodwill                                                                         11,691                11,691
                                                                              ---------             ---------
Other Intangibles, Net                                                            6,085                 6,755
                                                                              ---------             ---------
Other Assets                                                                         95                   122
                                                                              ---------             ---------
   Total Assets                                                               $ 599,553             $ 627,599
                                                                              =========             =========`

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

3

---

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

`March 30,            December 31,
                                                                                2003                   2002
                                                                              ---------            -----------
                                                                             (Unaudited)
Current Liabilities:
   Accounts payable                                                           $  37,357             $  60,131
   Other current liabilities (Note 1)                                            89,691                98,456
   Income taxes payable                                                               -                   622
                                                                              ---------             ---------
      Total Current Liabilities                                                 127,048               159,209
                                                                              ---------             ---------

Other Long-Term Liabilities                                                       1,301                 2,244
                                                                              ---------             ---------

Deferred Income Taxes                                                            54,352                55,107
                                                                              ---------             ---------

Commitments and Contingencies (Notes 4 and 5)

Stockholders' Equity:
   Preferred Stock, $0.01 par value; authorized 4,600,000
      Shares; none issued                                                             -                     -
   Series A Junior Participating Preferred Stock; authorized
      400,000 shares; none issued                                                     -                     -
   Common Stock, $0.03 1/3 par value; authorized 400,000,000
      shares; issued 54,743,235 and 54,645,278 shares,
      respectively                                                                1,825                 1,822
   Additional paid-in capital                                                   308,213               307,716
   Less: 3,426,288 Common Stock treasury shares, at cost                        (33,791)              (33,791)
   Retained earnings                                                            140,605               135,292
                                                                              ---------             ---------
      Total Stockholders' Equity                                                416,852               411,039
                                                                              ---------             ---------
         Total Liabilities and Stockholders' Equity                           $ 599,553             $ 627,599
                                                                              =========             =========`

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

4

---

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

`For the Quarter Ended
                                                                              -------------------------------
                                                                              March 30,             March 31,
                                                                                2003                  2002
                                                                              ---------             ---------
                                                                                        (Unaudited)
Sales                                                                         $ 106,182             $ 178,897
Cost of sales                                                                    69,072               106,371
                                                                              ---------             ---------
Gross margin                                                                     37,110                72,526
                                                                              ---------             ---------

Operating Expenses:
   Selling, general and administrative                                           23,340                38,196
   Research and development                                                       8,588                 8,644
   Restructuring reversal                                                           (78)                    -
   Bad debt credit                                                               (1,982)                 (696)
                                                                              ---------             ---------
      Total Operating Expenses                                                   29,868                46,144
                                                                              ---------             ---------

Operating income                                                                  7,242                26,382
Interest income                                                                   1,866                 2,320
Interest expense and other income and expense, net                                   22                (2,104)
                                                                              ---------             ---------

Income before income taxes                                                        9,130                26,598
(Provision) benefit for income taxes                                             (3,817)                4,611
                                                                              ---------             ---------

Net Income                                                                    $   5,313             $  31,209
                                                                              =========             =========


Net income per basic and diluted common share                                 $    0.10             $    0.61
                                                                              =========             =========

Weighted average common shares outstanding                                       51,265                51,281
                                                                              =========             =========
Weighted average common shares outstanding -
   assuming dilution                                                             51,298                51,375
                                                                              =========             =========`

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

5

---

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

`For the Quarter Ended
                                                                              -------------------------------
                                                                              March 30,             March 31,
                                                                                2003                  2002
                                                                              ---------             --------
                                                                                        (Unaudited)
Cash Flows from Operating Activities:
   Net income                                                                 $   5,313             $  31,209
   Non-Cash Revenue and Expense Adjustments:
      Depreciation and amortization                                               3,608                 7,058
      Deferred income taxes                                                       3,148                 7,753
      Non-cash inventory write-offs                                                   -                 2,231
      Amortization on temporary investments                                         822                   277
      Bad debt credit                                                            (1,982)                 (696)
      Other                                                                          31                   799
                                                                              ---------             ---------
                                                                                 10,940                48,631
   Changes in Assets and Liabilities:
      Restricted cash                                                             3,600                (1,763)
      Trade receivables                                                          24,143                 8,145
      Inventories                                                                 5,427                  (515)
      Other current assets                                                        1,822                (5,121)
      Accounts payable                                                          (22,774)               (8,924)
      Other current liabilities                                                  (8,310)               (5,842)
      Accrued restructuring                                                        (455)               (6,433)
      Income taxes                                                                 (917)              (10,959)
                                                                              ---------             ---------
         Net cash provided by operating activities                               13,476                17,219
                                                                              ---------             ---------

Cash Flows from Investing Activities:
   Purchases of property and equipment                                           (1,810)               (2,590)
   Purchases of temporary investments                                          (215,396)              (59,812)
   Sales of temporary investments                                               136,724                61,106
   Net change in other assets and other liabilities                                (617)                 (651)
                                                                              ---------             ---------
      Net cash used by investing activities                                     (81,099)               (1,947)
                                                                              ---------             ---------

Cash Flows from Financing Activities:
   Proceeds from sales of Common Stock                                              168                    82
   Purchases of Common Stock                                                          -                (2,924)
   Payments on other obligations                                                      -                  (302)
                                                                              ---------             ---------
      Net cash used in financing activities                                         168                (3,144)
                                                                              ---------             ---------
Net (Decrease) Increase in Cash and Cash Equivalents                            (67,455)               12,128
Cash and Cash Equivalents at Beginning of Period                                241,519               219,949
                                                                              ---------             ---------
Cash and Cash Equivalents at End of Period                                    $ 174,064             $ 232,077
                                                                              =========             =========`

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

6

---

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

## (1)
Significant Accounting Policies

In the opinion of the
Companys management, the accompanying unaudited, condensed consolidated
financial statements reflect all adjustments which are necessary to present
fairly the financial position of the Company as of March 30, 2003 and December
31, 2002, the results of operations for the quarters ended March 30, 2003 and
March 31, 2002 and cash flows for the three months ended March 30, 2003 and
March 31, 2002.

The results of operations
for the quarter ended March 30, 2003 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 the Companys
latest Annual Report on Form 10-K.

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. All entities of the Company have been consolidated
and there are no special purpose or variable interest entities.

Pervasiveness of Estimates

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

Manufacturing Relationships

The Company uses
independent parties to manufacture for the Company, on a contract basis, the
Companys products or components. Not all of the Companys
manufacturing relationships are covered by binding contracts and certain of the
relationships are subject to unilateral termination by the Companys
manufacturing partner. Shortages resulting from a change in a manufacturing
arrangement could cause a delay in product availability and a possible loss of
sales, which would have a material adverse effect on the Companys
operating results. The Company is evaluating the consolidation of Zip disk
manufacturing with the goal to reduce costs. In the event the Company implements
any such consolidation, the Company may be required to record charges for
discontinuing certain manufacturing relationships.

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.

7

---

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

Revenue Recognition

The Companys
customers include original equipment manufacturers (OEMs),
retailers, distributors, value added resellers (VARs), catalogs,
private label and end users. Typically, retail and distribution customer
agreements have provisions that allow the customer to return product under
certain conditions within specified time periods. Sales, less reserves for
estimated returns, are generally recognized upon shipment and passage of title
to the customer. The Company has established reserves for estimated returns,
which are reflected as a reduction in sales and trade receivables in the
accompanying condensed consolidated financial statements. The reserve for
estimated returns totaled $5.2 million and $6.0 million at March 30, 2003 and
December 31, 2002, respectively.

In addition to reserves for
estimated returns, the Company defers recognition of sales on estimated excess
inventory in the distribution, retail and catalog channels. For this purpose,
excess inventory is the amount of inventory that exceeds the channels
four-week requirements as estimated by management. The OEM and VAR customers are
not considered to have excess inventory as they tend to not carry more than four
weeks of inventory. For example, the Companys OEM customers are on a
just-in-time inventory system, so there is no excess inventory in the OEM
channel. The channels four-week requirements are estimated based on
inventory and sell-through amounts reported to the Company by the Companys
key customers, who make up the majority of the Companys sales in the
distribution, retail and catalog channels. No adjustment is made for those
customers that do not report inventory and sell-through information. The Company
defers estimated sales and cost of sales associated with estimated excess
channel inventory in its condensed consolidated financial statements. The gross
margin associated with deferral of sales for estimated excess channel inventory
totaled $11.2 million and $17.9 million at March 30, 2003 and December 31, 2002,
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 some
software titles that are downloaded from the Companys website. Sales from
the software embedded or bundled with drive products, less reserves for
estimated returns, are recognized upon shipment to the customer. Sales from
software that is downloaded from the Companys website is recognized at the
time of download. The software sold by the Company does not contain multiple
elements. The Companys software sales are immaterial.

Price Protection and Volume Rebates

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

Reserves for volume rebates
and price protection credits totaled $27.4 million and $29.2 million at March
30, 2003 and December 31, 2002, respectively and are netted against trade
receivables in the accompanying condensed consolidated balance sheets.

8

---

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

Cash and Cash Equivalents

For the purposes of the
condensed consolidated statements of cash flows, cash and cash equivalents
include all marketable securities purchased with maturities of three or fewer
months. Cash equivalents consist primarily of investments in corporate
obligations, money market funds, repurchase agreements, asset backed securities,
mortgage backed securities, U.S. agencies, U.S. treasuries and taxable and
non-taxable municipal obligations.

Restricted Cash

At March 30, 2003, the
Company had $0.2 million of cash to cover foreign bank guarantees for value
added taxes (VAT). At December 31, 2002, the Company had classified
a total of $3.8 million as restricted cash, of which $3.6 million of
cash was set aside to secure a letter of credit. This letter of credit expired
in March 2003 and therefore this cash is no longer restricted. These amounts are
reported separately as restricted cash in the accompanying condensed
consolidated balance sheets.

Temporary Investments

Investments purchased with
maturities in excess of three months are classified as temporary investments.
Temporary investments at March 30, 2003 and December 31, 2002 primarily
consisted of corporate obligations, U.S. treasuries, U.S. agencies, taxable and
non-taxable municipal obligations, asset backed securities and mortgage backed
securities. None of the Companys temporary investments have an effective
maturity greater than 24 months and at March 30, 2003, the average duration of
the Companys temporary investments was just under one year. The Company
minimizes its credit risk associated with temporary investments by purchasing
investment grade, liquid securities. The Company has classified all of its
temporary investments as available-for-sale securities.

Fair Value of Financial Instruments

The book value of all
financial instruments approximates fair value. The Company considers its cash
equivalents, temporary investments and foreign exchange contracts to be
financial instruments and the estimated fair values for these instruments have
been determined using appropriate market information. The Company also considers
its accounts payable and trade receivables to be financial instruments and the
carrying value of these instruments approximates their fair values because of
the short-term maturities of these items.

Allowance for Doubtful Accounts

The Company records its
trade receivables at sales value and establishes a non-specific allowance for
estimated doubtful accounts by applying specified percentages to the different
receivable aging categories. The percentage applied against the aging categories
increases as the accounts become further past due. Accounts in excess of 180
days past due are fully reserved. In addition, specific reserves are established
for specific customer accounts as collection problems become known or occur due
to insolvency, disputes or other collection issues. The amount of these specific
reserves are estimated by management based on the following
assumptions/variables: customers financial position, age of the
customers receivables and changes in payment schedules. The allowance for
doubtful accounts is charged with the write-off of uncollectible customer
accounts whether due to insolvency, settlement or disputes.

9

---

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

Inventories

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

`March 30,         December 31,
                                                   2003                2002
                                                 ---------         ------------
                                                          (In thousands)
              Raw materials                      $  2,719            $  2,249
              Finished goods                       32,379              38,276
                                                 --------            --------
                                                 $ 35,098            $ 40,525
                                                 ========            ========`

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

Property and Equipment

The carrying amounts of
property and equipment are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. Impairment is recognized when estimated expected future cash flows
(undiscounted and without interest charges) are less than the carrying amount of
the asset.

Fixed asset reserves are
established for those assets that are considered impaired or if a commitment has
been made for the removal of a fixed asset. These reserves are included with
accumulated depreciation and amortization in the accompanying condensed
consolidated financial statements.

Marketing Program Accruals

The Company, as part of its
normal operations, has entered into contracts with many of the Companys
distribution and retail customers whereby the customer is allowed to use a set
percentage of its purchases of the Companys products for various marketing
purposes. The purpose of these contracts is to encourage advertising and
promotional events to promote the sale of the Companys products to end
users. The Company also contracts with various third parties to support these
customer programs. The Company accrues for the estimated costs of these
marketing programs with the customers and third parties in accordance with the
contractual percentage of product sold to the respective customer and the
estimated support costs during the period that the product is sold or the period
that the support costs are incurred. During the period, the customer and Company
develop and approve specific marketing programs to utilize the above funds in a
manner intended to best promote the Companys products. On a quarterly
basis, the Company evaluates the adequacy of these marketing program accruals to
cover known marketing programs that the Company has agreed to pay and/or share
costs with the customer. In addition, the Company evaluates the specific
programs for proper classification of these costs in accordance with Emerging
Issues Task Force (EITF) Issue No. 00-25, Vendor Income
Statement Characterization of Consideration Paid to a Reseller of the
Vendors Products.

10

---

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

Other Current Liabilities

Other current liabilities
consist of the following:

`March 30,        December 31,
                                                                       2003               2002
                                                                     --------           --------
                                                                            (In thousands)
      Margin on deferred sales                                       $ 12,110           $ 19,102
      Accrued marketing (a)                                            11,616             15,426
      Accrued payroll, vacation, bonus and profit sharing              10,011              9,589
      Accrued warranty                                                  7,202              8,035
      Other accrued liabilities (b)                                    48,752             46,304
                                                                     --------           --------
                                                                     $ 89,691           $ 98,456
                                                                     ========           ========`

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

| | (b) | Includes  accruals for royalties,  professional  fees,  self-insurance  liabilities,  employee
relocation costs,  restructuring  charges,  purchase  commitments,  litigation,  VAT, sales and
other taxes and other miscellaneous liabilities.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Stock Compensation Expense

The Company has four
stock-based compensation plans. Prior to January 1, 2003, the Company accounted
for these plans under the recognition and measurement provisions of Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB No. 25) and related interpretations. No
stock-based compensation expense is reflected in net income for the three months
ended March 31, 2002, as all options granted under the four plans had an
exercise price equal to the market value of the Companys Common Stock on
the date of grant.

11

---

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

Effective January 1, 2003,
the Company adopted the fair value recognition provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation (SFAS 123). The Company selected
the prospective method, which is one of the three transition methods allowed by
SFAS No. 148 Accounting for Stock Based Compensation  Transition and
Disclosure, to transition to the fair value method of measuring
stock-based compensation expense. Under the prospective method, the Company
expensed only those employee stock options that were granted after January 1,
2003. The majority of awards under the Companys plans vest over periods
ranging from four to five years. Therefore, the cost related to stock-based
compensation included in the determination of net income for the period ending
March 30, 2003 is less than that which would have been recognized if the fair
value based method had been applied to all awards since the original effective
date of SFAS 123. The following table illustrates the effect on net income and
earnings per share if the fair value based method had been applied to all
outstanding and unvested awards in each period.

`For the Three Months Ended
                                                               --------------------------------------
                                                               March 30, 2003          March 31, 2002
                                                               --------------         ---------------
                                                               (In thousands, except per share data)

     Net income as reported                                        $ 5,313                $ 31,209
                                                                   =======                ========
        Add: Stock compensation expense included
           in reported net income, net of related tax
           effects                                                      16                       -
        Less: Total stock compensation expense
           determined under fair value method for
           all awards, net of related tax effects                      336                     663
                                                                   -------                --------
     Pro forma net income                                          $ 4,993                $ 30,546
                                                                   =======                ========

     Basic EPS:
        As reported                                                $  0.10                $   0.61
                                                                   =======                ========
        Pro forma                                                  $  0.10                $   0.60
                                                                   =======                ========

     Diluted EPS:
        As reported                                                $  0.10                $   0.61
                                                                   =======                ========
        Pro forma                                                  $  0.10                $   0.59
                                                                   =======                ========`

Accrued Warranty

A one-year limited
warranty, or a two-year limited warranty in Europe, is generally provided on the
Companys Zip, Jaz, CD-RW, Peerless, portable and desktop hard disk drives
(HDD) and Peerless disks as well as on products that have been
discontinued such as PocketZip drives, HipZip digital audio players
(HipZip) and FotoShow digital image centers (FotoShow).
Certain OEM customers have a three-year limited warranty on the Companys
Zip drives. Zip, Jaz and PocketZip disks have a five-year limited warranty. The
new Iomega Mini USB drives have a three-year limited warranty. NAS servers have
limited warranty periods ranging from one to three years depending on the model
purchased. In January 2001, the Company began shipping the Zip U250MB disk,
which has a ten-year limited warranty.

12

---

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

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

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

`For the Three Months Ended
                                           ---------------------------------------
                                           March 30, 2003           March 31, 2002
                                           --------------           --------------
                                                        (In thousands)

     Balance at beginning of period            $ 8,035                 $ 10,856
        Accruals/additions                       2,410                    3,364
        Claims/charges                          (3,243)                  (4,414)
                                               -------                 --------
     Balance at end of period                  $ 7,202                 $  9,806
                                               =======                 ========`

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. The
computation of Diluted EPS does not assume exercise or conversion of securities
that would have an anti-dilutive effect on net income per common share.

13

---

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

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
                                                                -----------       -------------       ---------
                                                                     (In thousands, except per share data
     For the Quarter Ended:
     March 30, 2003:
     Basic EPS                                                    $  5,313            51,265            $ 0.10
        Effect of options                                                -                33                 -
                                                                  --------            ------            ------
     Diluted EPS                                                  $  5,313            51,298            $ 0.10
                                                                  ========            ======            ======
     March 31, 2002:
     Basic EPS                                                    $ 31,209            51,281            $ 0.61
        Effect of options                                                -                94                 -
                                                                  --------            ------            ------
     Diluted EPS                                                  $ 31,209            51,375            $ 0.61
                                                                  ========            ======            ======`

For the quarters ended
March 30, 2003 and March 31, 2002, there were outstanding options to purchase
1,456,037 and 1,873,707 shares, respectively, that had an exercise price greater
than the average market price of the common shares for the respective quarters.
Therefore, these shares would have had an anti-dilutive effect on EPS.

Recent Accounting Pronouncements

In November of 2002, the
EITF reached a consensus on Issue No. 00-21, Revenue Arrangements with
Multiple Deliverables (EITF 00-21). EITF 00-21 addresses
certain aspects of accounting for arrangements whereby a vendor performs
multiple revenue-generating activities. EITF 00-21 also discusses how to
determine whether an arrangement involving multiple deliverables contains more
than one unit of accounting and how the related revenue should be measured and
allocated to the separate units of accounting. EITF 00-21 is effective for
revenue arrangements entered into for fiscal periods beginning after June 15,
2003. The Company plans on adopting EITF 00-21 on June 30, 2003. The Company
believes that the effect of EITF 00-21 on the Companys results of
operations, financial position or liquidity will not be material as the Company
currently has few multiple deliverable revenue arrangements.

14

---

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

## (2) Income
Taxes

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

`March 30,        December 31,
                                                                               2003              2002
                                                                             ---------        ------------
                                                                                    (In thousands)
              Deferred Tax Assets (Liabilities):
              Current Deferred Tax Assets:
                 Trade receivable reserves                                   $   8,897         $  11,259
                 Inventory reserves                                              3,809             3,042
                 Accrued expense reserves                                       10,862            13,030
                 Other                                                             102               242
                                                                             ---------         ---------
              Total current deferred tax assets                                 23,670            27,573
                                                                             ---------         ---------

              Non-Current Deferred Tax Assets:
                 Fixed asset reserves                                              947             1,185
                 Tax credit carryforwards                                       19,421            19,058
                 Accelerated depreciation/amortization                           4,440             4,301
                 Foreign net operating loss carryforwards                       13,048            15,199
                 U.S. net operating loss carryforwards                          34,868            34,444
                 Other                                                             904               884
                                                                             ---------         ---------
              Total non-current deferred tax assets                             73,628            75,071
                                                                             ---------         ---------
              Total deferred tax assets                                         97,298           102,644
                                                                             ---------         ---------

              Non-Current Deferred Tax Liabilities:
                 Tax on unremitted foreign earnings                           (109,982)         (109,988)
                 Nomai goodwill and intangible asset                            (4,950)           (4,991)
                                                                             ---------         ---------
                 Total non-current deferred tax liabilities                   (114,932)         (114,979)
                                                                             ---------         ---------
              Non-current valuation allowance                                  (13,048)          (15,199)
                                                                             ---------         ---------
                   Net deferred tax assets (liabilities)                     $ (30,682)        $ (27,534)
                                                                             =========         =========

              As Reported on the Balance Sheet:
                 Current deferred tax assets                                 $  23,670         $  27,573
                                                                             =========         =========
                 Non-current deferred tax liabilities                        $ (54,352)        $ (55,107)
                                                                             =========         =========`

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

15

---

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

At March 30, 2003, the
Company had $34.9 million of deferred tax assets related to net operating loss
carryforwards (NOLs). Of the total NOL deferred tax assets, $28.1
million related to U.S. federal NOLs and $6.8 million related to state NOLs. The
federal NOLs reflect a tax benefit of approximately $80 million in future U.S.
federal tax deductions. The state NOLs reflect a tax benefit of approximately
$170 million in future state tax deductions. The difference in the amount of
future federal and state tax deductions related to the NOLs is largely the
result of differences between federal and state NOL carryback rules. The U.S.
federal NOLs expire at various dates beginning in 2022 and the state NOLs expire
at various dates beginning in 2004.

The Company continues to
maintain a full valuation allowance of $13.0 million for deferred tax assets
related to foreign NOLs, which reflect the tax benefit of approximately $35
million in future foreign tax deductions. These NOLs expire at various dates
beginning in 2004. These deferred tax assets remain fully reserved because their
realization is dependent on earning future foreign taxable income in the tax
jurisdictions to which the NOLs were generated. The largest of these foreign
NOLs relate to the Companys French subsidiary, Nomai S.A. This
subsidiarys operations have been shut down and therefore, the foreign NOL
related to Nomai S.A. is not likely to be realized in the future.

Net deferred tax
liabilities for the Company at March 30, 2003 were $30.7 million. As of March
30, 2003, deferred tax liabilities for estimated U.S. federal and state taxes of
$110.0 million have been accrued on unremitted foreign earnings of $282.0
million.

## (3) Business
Segment Information

The Company has seven
reportable segments based primarily on the nature of the Companys
customers and products: Zip, Optical (formerly called CD-RW), Jaz, PocketZip,
Other Mobile and Desktop Storage Products, Network Storage Systems and New
Technologies. Jaz, PocketZip and some of the Other Mobile and Desktop Storage
Products have been discontinued, as further discussed below. The Zip segment
involves the development, distribution and sale of Zip drives and disks to
retailers, distributors, resellers and OEMs throughout the world. The
Companys Optical segment involves the distribution and sale of CD-RW
drives to retailers, distributors and resellers throughout the world and the
distribution and sale of DVD Rewritable drives to distributors which began on a
limited basis during the first quarter of 2003. Sales of DVD Rewritable drives
will be expanded to retailers and resellers during the second quarter of 2003.
The Optical segment also includes HotBurn software which is bundled with CD-RW
and DVD Rewritable drives and sold on a stand-alone basis on the Companys
website. The Jaz segment involved the development, manufacture, distribution and
sale of professional storage products and applications, including Jaz disk and
drive systems to resellers, distributors and retailers throughout the world. The
PocketZip segment involved the development, manufacture, distribution and sale
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 and resellers throughout the world.

The Other Mobile and
Desktop Storage Products category (formerly included in Other)
includes: Peerless drive systems; sourced branded products such as HDD, which
began shipping during the second quarter of 2002, Iomega Mini USB drives, which
began shipping during the fourth quarter of 2002; Iomega software products such
Iomega Automatic Backup software and other miscellaneous items. The Other Mobile
and Desktop Storage Products category also includes products that have been
discontinued such as FotoShow, Iomega Microdrive miniature hard drives, Iomega
CompactFlashand Iomega SmartMedia memory cards.

16

---

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

The Network Storage
Systems segment (formerly included in Other) currently consists of
the distribution and sale of network attached storage (NAS) servers
targeted toward small and medium-size businesses and enterprise workgroups.

The New Technologies
segment includes the research and development of other high capacity removable
storage devices, including a small-form factor removable flexible magnetic
storage device (referred to as Digital Capture Technology or DCT)
that is expected to have a capacity of about 1.5GB and a removable hard disk
storage system (referred to as Removable Rigid Disk System or RRD)
that is expected to have a capacity of approximately 35GB. There have been no
sales associated with New Technologies and no sales are expected before 2004.

In early 2002, the Company
discontinued the Jaz drive and PocketZip product line, including HipZip, which
was being reported in the PocketZip segment. Under the Other Mobile and Desktop
Storage Products category, the Company also discontinued in early 2002 its
FotoShow, Microdrive, CompactFlash and SmartMedia products. The Company has
continued to sell disks for Jaz and PocketZip products to support the installed
drive base of these products.

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

17

---

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

The information in the
following table was derived directly from the segments internal financial
information used for corporate management purposes. Network Storage Systems
were previously presented in Other products and all 2002 amounts have been
reclassified for consistent presentation. New Technologies were previously
presented in general corporate expenses and all 2002 amounts have been
reclassified for consistent presentation.

## Reportable
Operating Segment Information:

`For the Quarter Ended
                                                                  ---------------------------------
                                                                  March 30,                March 31,
                                                                     2003                    2002
                                                                  ---------                --------
                                                                            (In thousands)
Sales:
Mobile and Desktop Storage Products:
   Zip                                                            $  73,309               $ 143,066
   Optical                                                           15,346                  22,597
   Jaz                                                                1,884                   5,873
   PocketZip                                                            107                      19
   Other Mobile and Desktop Storage Products                         13,256                   7,235
                                                                  ---------               ---------
      Total Mobile and Desktop Storage Products                     103,902                 178,790
                                                                  ---------               ---------
Network Storage Systems                                              2,280                     107
                                                                  ---------               ---------
      Total sales                                                 $ 106,182               $ 178,897
                                                                  =========               =========

PPM (Product Loss):
Mobile and Desktop Storage Products:
   Zip                                                            $  29,356               $  57,312
   Optical                                                              235                      69
   Jaz                                                                1,263                   1,944
   PocketZip                                                            191                     737
   Other Mobile and Desktop Storage Products                           (113)                 (4,227)
                                                                  ---------               ---------
      Total Mobile and Desktop Storage Products                      30,932                  55,835
                                                                  ---------               ---------
Network Storage Systems                                             (4,044)                   (673)
                                                                  ---------               ---------
New Technologies                                                     (4,858)                 (1,121)
                                                                  ---------               ---------
      Total PPM                                                      22,030                  54,041

Common Expenses:
   General corporate expenses                                       (14,866)                (27,659)
   Restructuring reversal                                                78                       -
   Interest and other income, net                                     1,888                     216
                                                                  ---------               ---------
      Income before income taxes                                  $   9,130               $  26,598
                                                                  =========               =========`

18

---

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

## (4)
Restructuring Charges/Reversals

Third Quarter 2001 Restructuring Actions

During the third quarter of
2001, the Company recorded pre-tax restructuring charges of $33.3 million. In
the fourth quarter of 2001, the Company recorded a net reversal of $0.2 million
with respect to the third quarter 2001 restructuring actions. The restructuring
charges in the third quarter of 2001 included $17.4 million associated with
exiting lease facilities, of which $9.8 million related to leasehold
improvements, furniture and information technology asset write-downs and $7.6
million was associated with lease termination costs, and $15.9 million related
to the reduction of 1,234 regular and temporary personnel worldwide, or
approximately 37% of the Companys worldwide workforce. During the fourth
quarter of 2001, the Company reversed $0.5 million related to lease termination
costs and recorded additional charges of $0.3 million related to severance and
benefits with respect to employees that were identified as part of the third
quarter 2001 restructuring actions but who were not notified of their
termination until the fourth quarter of 2001.

Of the $33.3 million in
total third quarter 2001 restructuring charges, $27.9 million related to
restructuring activities within North America, $2.6 million for restructuring
activities within the Asia Pacific region (excluding Malaysia), $2.3 million for
restructuring activities within Europe and $0.5 million for restructuring
activities within Malaysia.

The North America
activities consisted of outsourcing the Companys distribution center in
North Carolina and terminating the related lease, closing several sales offices
in the United States and consolidating operations at the Companys North
America facilities (primarily Roy, Utah), all of which resulted in a workforce
reduction of 760 regular employees and temporary staff across all business
functions and across all levels of the organization. At September 30, 2001, of
the 760 individuals whose positions were identified for termination in the third
quarter of 2001, 193 individuals were scheduled to continue to work on a
transition basis through various identified dates ending no later than December
31, 2001. Transition pay was not a part of the restructuring charges but rather
was reported in normal operations as incurred. In compliance with the WARN Act,
affected employees were given pay in lieu of 60-day advance notice. Pay in lieu
of notice was paid on a continuous basis for a 60-day notice period and
separation payments were paid in lump sum at the end of the 60-day period or
after the last day of employment for transition employees. Separation pay was
based on years of service, job level and transition time, and included health
insurance continuance payments. This workforce reduction resulted in charges of
$12.7 million for severance and outplacement costs. The North America
restructuring actions also resulted in charges of $8.9 million related to asset
write-downs (leasehold improvements, furniture and information technology
assets) and $6.3 million related to lease termination costs. Lease termination
costs are being paid on their regular monthly rent payment schedule.

The Asia Pacific activities
consisted of the closure of several sales offices and the transfer of certain
inventory operations and finance activities from Singapore to Malaysia, which
resulted in a workforce reduction of 85 regular employees and temporary staff
across all business functions and across all levels of the organization. At
September 30, 2001, of the 85 individuals whose positions were identified for
termination in the third quarter, 12 individuals were scheduled to continue to
work on a transition basis through various identified dates ending no later than
December 31, 2001. This workforce reduction resulted in charges of $0.8 million
for severance and outplacement costs. The Asia Pacific restructuring actions
also resulted in charges of $0.7 million related to asset write-downs and $1.1
million related to lease termination costs.

19

---

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

During the fourth quarter
of 2001, the 12 transition employees in the Asia Pacific region were notified
that their positions were being terminated, resulting in additional charges of
$0.3 million in the fourth quarter of 2001. These employees were identified for
termination at September 30, 2001. However, since the employees had not been
notified, the Company did not accrue the severance and benefit costs associated
with these individuals in the original third quarter 2001 restructuring charges.
Additionally, in the fourth quarter of 2001, $0.7 million of lease termination
accruals were reversed due to the Company unexpectedly locating a tenant for one
of the vacated facilities and being released from future rent obligations. In
light of prevailing poor economic conditions, the Company had originally assumed
it would not be able to sublet the facility.

The Europe activities
consisted of the outsourcing of call center activities, closure of several sales
offices and consolidation of operations in Switzerland, Ireland and the
Netherlands, which resulted in a workforce reduction of 94 regular employees and
temporary staff across all business functions and across all levels of the
organization. At September 30, 2001, of the 94 individuals whose positions were
identified for termination in the third quarter, 28 individuals were scheduled
to continue to work on a transition basis through December 31, 2001 and 21
individuals were scheduled to work on a transition basis through March 31, 2002
to manage operations that were outsourced effective April 1, 2002. This
workforce reduction resulted in charges of $1.9 million for severance and
outplacement costs. The Europe restructuring actions also resulted in charges of
$0.2 million related to asset write-downs and $0.2 million related to lease
termination costs.

During the fourth quarter
of 2001, it was determined that an additional $0.2 million was required for
Europe lease termination costs as a result of the Company not being able to
locate a new tenant in Ireland in the timeframe originally estimated in the
third quarter of 2001.

The Malaysia activities
consisted of a workforce reduction of 295 regular employees across almost all
business functions (the majority of which were direct labor employees) at almost
all levels of the organization. All of the 295 individuals whose positions were
identified for termination were dismissed in the third quarter of 2001. This
workforce reduction resulted in charges of $0.5 million for severance and
outplacement costs, all of which were paid during the third quarter of 2001.

20

---

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

Remaining restructuring
reserves in the amount of $3.5 million and $0.4 million are included in the
Companys other current liabilities and fixed asset reserves, respectively,
as of March 30, 2003. Utilization of and other activity relating to the third
quarter 2001 restructuring reserves during the three months ended March 30, 2003
are summarized below:

`Third Quarter 2001                            Balance            Utilized                                 Balance
                                                           ---------------------
Restructuring Actions                         12/31/02      Cash        Non-Cash        Reversal         03/30/03
----------------------                        --------     ------       --------        --------         --------
                                                                      (In thousands)

North America Reorganization:
   Severance and benefits (a)                 $    78      $    -        $   -           $ (78)           $     -
   Lease cancellations (a)                      3,194        (311)           -               -              2,883
   Leasehold improvements and
      furniture (b)                               431           -          (33)              -                398
                                              -------      ------        -----           -----            -------
                                                3,703        (311)         (33)            (78)             3,281
                                              -------      ------        -----           -----            -------

Europe Reorganization:
   Lease cancellations (a)                        727         (66)           -               -                661
                                              -------      ------        -----           -----            -------
                                              $ 4,430      $ (377)       $ (33)          $ (78)           $ 3,942
                                              =======      ======        =====           =====            =======

Balance Sheet Breakout:
   Other current liabilities (a)              $ 3,999      $ (377)       $   -           $ (78)           $ 3,544
   Fixed asset reserves (b)                       431           -          (33)              -                398
                                              -------      ------        -----           -----            -------
                                              $ 4,430      $ (377)       $ (33)          $ (78)           $ 3,942
                                              =======      ======        =====           =====            =======


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

As of March 30, 2003, the
remaining leasehold improvements are associated with subleased facilities and
cannot be disposed of until the subleases expire. The last sublease will expire
in March 2006. Lease payments are being made on a continuous monthly basis and
the Company is still trying to sublease one of the leases which does not expire
until 2009. During the first quarter of 2003, severance and benefit reserves of
$0.1 million were reversed due to the original estimates being higher than what
was utilized.

21

---

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

## (5)
Commitments and Contingencies

Litigation

Except as set forth below,
in managements opinion, there are no 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 ongoing business or financial condition, except that, as
indicated below, the settlement of, or adverse judgment with respect to, certain
of these lawsuits could have a material adverse effect on the operating results
reported by the Company for the specific period(s) in which any such adverse
judgment occurs or settlement occurs or is implemented.

On March 23, 2001, the
Company initiated litigation against Advanced Mass Memories, formerly named 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 claimed could be used with certain of the Companys Zip
drives. The complaint requested monetary damages and other relief against
further infringement by AMM. The Company filed a motion for a preliminary
injunction against AMM, which was granted on July 24, 2001, thus restraining AMM
from further manufacturing or commercialization of the Swap 100MB disk. In
August 2001, AMM appealed the injunction and moved to stay enforcement of the
injunction. On September 17, 2001, AMM filed for bankruptcy protection, while
continuing its appeal. On October 31, 2001, the Paris Appeals Court denied
AMMs appeal and ruled that the injunction would remain in effect while the
underlying infringement case continued on the merits. On March 27, 2003, a
judgment was issued in favor of the Company ordering a permanent injunction
against AMM and awarding damages to the Company of 85,000 euro (approximately
USD $96,000).

Nomai S.A.
(Nomai) is a French subsidiary of the Company that was acquired
during the third quarter of 1998. Nomai is engaged in certain litigation matters
that revolve around (1) Nomais acquisition of certain assets of RPS Media
S.A. (RPS) in bankruptcy in 1997 and its organization of AMM as a
subsidiary to operate such assets and (2) Nomais subsequent disposition of
AMM in September 1999.

On February 18, 2000, the
bankruptcy trustee for RPS Media S.A. filed a lawsuit against Nomai. The trustee
claimed that Nomai had 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 in bankruptcy. The action sought a daily penalty against
Nomai of FF 100,000 (approximately USD $19,300) until Nomai invested FF 48
million (approximately USD $9.2 million) and hired 100 people in Albi, France.
On February 16, 2001, the trustee 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 USD $19,300) for each day of
noncompliance. On November 23, 2001, the Court ordered Nomai to proceed with the
required investments and to put in place the technical and human means to which
it is engaged, subject to a daily penalty of FF 50,000 (approximately USD
$9,600) for non-compliance. The Toulouse Court of Appeals issued its ruling on
May 2, 2002, upholding the Albi Court ruling. Nomai filed a notice of appeal of
the Toulouse Court of Appeals ruling to the French Cour de Cassation on June 10,
2002; this further appeal has not been decided, but the disputes between the
trustee for RPS and the Company have been settled, as described below.

22

---

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

On
October 11, 2002, the Commercial Court of Albi issued a ruling in connection
with the prior complaint by the bankruptcy trustee for RPS, finding that Iomega
Corporation, Iomega International and AMM were liable in connection with
Nomais failure to make investments in Albi. The Commercial Court of Albi
assessed damages of 8.5 million euros (approximately USD $9.6 million) in favor
of the trustee for RPS and Iomega filed an appeal to the Toulouse Court of
Appeals. Subsequently, in December 2002, the parties executed a settlement
agreement, calling for Nomai to transfer rights to a vacant building in Albi and
requiring a payment of an aggregate of 1.0 million euros (approximately USD $1.1
million), to be divided among 99 former employees of RPS. Presently 34 of those
former employees are not cooperating with the settlement and have filed a
separate lawsuit, seeking approximately $1.8 million U.S. dollars, against the
Company, Iomega International and Nomai, among other parties. On January 24,
2003, however, the Commercial Court of Albi issued its approval of the
settlement. Under the settlement, the bankruptcy trustee for RPS agreed to
release all claims of RPS and to seek to obtain executed releases from the
former employees of that company. Any former employee who refuses to sign such a
release, including those mentioned above who have filed a separate lawsuit, will
lose the right to participate in the distribution of the 1.0 million euros
(approximately USD $1.1 million) called for in the settlement. The settlement
terminates the trustees right to attempt to enforce the 8.5 million euro
(approximately USD $9.6 million) judgment from October 11, 2002 and all daily
penalties that had accrued. The Company intends to vigorously defend against the
remaining claims involving the former employees, and the Company expects the
pending case before the Toulouse Court of Appeals to be dismissed, in light of
the settlement agreement.

On May 30, 2001, AMM filed
a lawsuit against Iomega International and Iomega Corporation, before the
Commercial Court of Albi, claiming that Iomega International and Iomega
Corporation jointly committed fraudulent acts against AMM and that, as a result,
AMM suffered damages of FRF 129 million (approximately USD $24.8 million). This
case was subsequently consolidated with the RPS case discussed above. On October
11, 2002, the Commercial Court of Albi issued a ruling that Iomega International
and Iomega Corporation were liable to AMM in the amount of 1.9 million euros
(approximately USD $2.1 million). This amount is in addition to the 8.5 million
euro (approximately USD $9.6 million) amount discussed in the foregoing
paragraph and Iomega filed an appeal to the Toulouse Court of Appeals. During
the first quarter of 2003, the parties engaged in settlement discussions and
reached an agreement in principle to resolve the litigation, including the 1.9
million euro (approximately USD $2.1 million) judgment. As of March 12, 2003,
the settlement, which calls for Iomega to pay an amount of 450,000 euros
(approximately USD $506,000), is being finalized among the parties. This
settlement, if finalized by the parties, will be subject to
approval by French courts and possible appeals.

Although the Company does
not expect the Nomai/AMM litigation described above to have a material adverse
effect on the Companys ongoing business or financial condition,
enforcement of the adverse judgment or settlement of these claims could have a
material adverse effect on the operating results reported by the Company for the
specific period(s) in which any such adverse judgment or settlement occurs (or
is implemented).

23

---

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

## (6) Other
Matters

Goodwill and Other Intangible Assets

The Company performed the
annual impairment test required under Statement of Financial Accounting
Standards No. 142, Accounting for Goodwill and Intangible Assets
(SFAS 142), in the first quarter of 2003 and determined that the
Companys goodwill, all of which is associated with the Zip product line,
was not impaired.

At March 30, 2003, the
Company had $6.1 million in net intangible assets, all of which are subject to
amortization. The Companys intangible assets all relate to intellectual
property. Intangible assets are amortized using the straight-line method over
the estimated useful life of the asset, subject to periodic review for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. During the quarter ended
March 30, 2003, amortization expense was $0.7 million. Amortization expense for
each of the next five fiscal years is anticipated to be approximately $1.3
million for the remainder of 2003, $2 million in 2004, $2 million in 2005, $0.5
million in 2006 and zero thereafter. As of March 30, 2003, the weighted average
useful life of the Companys intangible assets is approximately 3 years.

`March 30,             December 31,
                                                            2003                   2002
                                                         ---------             -----------
                                                                  (In thousands)
Intangible Assets:
   Gross value (1)                                        $ 11,791               $ 12,955
   Accumulated amortization                                 (5,706)                (6,200)
                                                          --------               --------
      Net intangible assets                               $  6,085               $  6,755
                                                          ========               ========`

| | (1) | The change in the gross
value of intangible  assets between  December 31, 2002 and March 30, 2003 resulted
from $1.2  million of  intellectual  property  that was fully  amortized  and removed
from the books during the first quarter of 2003.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Significant Customers

During the quarter ended
March 30, 2003, sales to Ingram Micro, Inc. and Tech Data Corporation accounted for 16% and
11% of consolidated sales, respectively. Ingram Micro, Inc. accounted for 18% of
consolidated sales for the quarter ended March 31, 2002. No other single
customer accounted for more than 10% of consolidated sales for these periods.

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 accounting principles generally accepted in the United
States of America, impact the condensed consolidated statements 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
exposure or expected exposure, not for speculation or trading purposes.
Currently, the Company is using forward contracts only to hedge net balance
sheet exposure. The contracts are primarily in European currencies and the
Singapore dollar. The Company enters into contracts throughout the month as
necessary. These contracts have maturities that do not exceed 40 days.

24

---

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

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

At March 30, 2003,
outstanding forward exchange buy/(sell) contracts, which all mature in May 2003,
were as follows (rates are quoted as other currency unit per one United States
dollar):

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

      British Pound                              (700,000)               0.6392                0.6392
      European Currency Unit                  (13,500,000)               0.9301                0.9301
      Singapore Dollar                            900,000                1.7711                1.7711
      Swiss Franc                               3,600,000                1.3712                1.3712`

On the last trading day of
each fiscal month, the Company replaces expiring forward contracts with new
forward contracts at the contracted forward rate. These contracts are then
revalued at the fiscal month-end forward 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.

Legal Settlements

On January 22, 2003, the
Company signed a settlement agreement resolving a dispute with an insurance
carrier over coverage related to a lawsuit which was settled in 2002. The
settlement payment from the insurance carrier was for $7.5 million and was
received by the Company on January 28, 2003. The payment included approximately
$1 million that was previously recorded as a receivable and resulted in a $6.5
million gain in the Companys results for the first quarter of 2003. During
the first quarter of 2003, the Company also recorded a $0.5 million litigation
expense. Both the $6.5 million gain and the $0.5 million expense were reflected
in selling, general and administrative expense in the Companys condensed
consolidated statement of operations

25

---

# IOMEGA
CORPORATION AND SUBSIDIARIES

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

## Overview

The Company designs and
markets storage systems that help people protect, secure, capture and share
their valuable digital information. The Companys products are organized
into two broad business categories: a) Mobile and Desktop Storage Products and
b) Network Storage Systems. Mobile and Desktop Storage Products include Zip
drives and disks, optical drives including CD-RW and DVD rewritable drives as
well as portable and desktop hard disk drives (HDD), Iomega Mini USB
drives and various software titles. Network Storage Systems currently consists
of a wide selection of network attached storage (NAS) servers with
capacities of 120GB to 1.4TB that supplement the storage capacity of company
networks in small and medium-size businesses and enterprise workgroups.

During the first quarter of
2003, the Company reported net income of $5.3 million on sales of $106.2 million
compared to net income in the first quarter of 2002 of $31.2 million on sales of
$178.9 million. Net income for the first quarter of 2003 was favorably impacted
by $3.7 million of after-tax net legal settlements, while net income for the
first quarter of 2002 included a $15.8 million decrease in the Companys
valuation allowance for net deferred tax assets and $2.1 million of unfavorable
after-tax net legal settlements.

The sales decline in the
first quarter of 2003 resulted primarily from the continued contraction of the
Zip business. Two of the Companys sourced branded products  CD-RW
and Iomega Mini USB drives were profitable for the first quarter of 2003
(portable and desktop HDD drives were not profitable). Even though NAS sales
decreased $2.3 million during the first quarter of 2003 when compared to the
fourth quarter of 2002, management still believes that with the new high-end
product offerings launched early in the second quarter of 2003 and other planned
future new product offerings that the Company will be able to grow its NAS
sales.

During 2003, the Company
plans to continue working on a number of key initiatives, including the goal of
creating destination storage for the Companys retail, catalog
and online customers. Anchored around Zip
products, the Company plans to leverage its retail brand equity and its product
management expertise to offer, in one location, multiple storage products in the
mobile and desktop storage category. However, due to the uncertainties and
competitiveness of the retail and catalog channels and the economics among the
Companys retail and catalog customers, there can be no assurance that the
destination storage initiative will be embraced by any retail or catalog
partners or fully deployed by those who do initiate it. The Company is also
planning in the second half of 2003 to refresh its mid-range NAS product
offerings and to introduce two new NAS products in the low-end category which,
along with the new high-end product offerings launched early in the second
quarter of 2003, will enable the Company to address all three major NAS market
segments. The Company is also continuing to focus its research and development
resources on its two new removable magnetic storage technologies, Digital
Capture Technology (DCT) and Removable Rigid Disk System
(RRD). With these two new product developments, the Company is now
working to develop original equipment manufacture (OEM) and other
channel partnerships with the goal to enable widespread adoption of these new
technologies in 2004. The Company does not expect any sales from these new
technologies until 2004.

The Company has significant
cash and cash equivalent balances (cash reserves). The Company
believes that these cash reserves are in excess of what is required to operate
the existing business on an ongoing basis. The Company is continuing to analyze
and explore all of its strategic opportunities, both in and outside the storage
industry, with the goal to obtain the maximum benefit for the Companys
stockholders.

26

---

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

The Companys
profitability for the remainder of 2003 depends upon its ability to minimize, to
the extent possible, the decline in Zip unit volumes and sales. For example,
during the first quarter of 2003, the product profit margin (PPM)
for the Zip business was $29.4 million compared to a product loss of $7.3
million on all other products. Management still anticipates that sales and
operating profits for 2003 will decline compared to 2002 as it will take time
for the various initiatives that the Company has underway in sourced branded
products, Network Storage Systems and New Technologies to generate significant
amounts of sales to offset the decline in Zip sales. Management also believes
that the gross margin percentages reported for the first quarter of 2003 will be
difficult to achieve in future periods. With declining Zip sales and the
Companys decision to invest in NAS and the new technologies, making an
operating profit for each of the remaining quarters of 2003 will be a
considerable challenge for the Company. Moreover, unless the Company sees an
improvement in Zip product sales in the second quarter, over the first quarter
of 2003, then an operating profit in the second quarter is unlikely.

## Application of
Critical Accounting Policies

The Companys
discussion and analysis of its financial condition and results of operations are
based upon the Companys condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these condensed consolidated
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the condensed consolidated
financial statements and the reported amounts of sales and expenses during the
reporting periods. Areas where significant judgments are made that are highly
uncertain at the time the estimate is made and are susceptible to material
changes from period to period include revenue recognition, price protection and
rebate reserves, marketing program accruals, allowance for doubtful accounts and
inventory valuation reserves. Actual results could differ materially from these
estimates. For a more detailed explanation of the judgments included in these
areas, refer to the Companys Annual Report on Form 10-K for the year ended
December 31, 2002.

## Business
Segment Information

The Company has seven
reportable segments based primarily on the nature of the Companys
customers and products: Zip, Optical (formerly called CD-RW), Jaz, PocketZip,
Other Mobile and Desktop Storage Products, Network Storage Systems and New
Technologies. Jaz, PocketZip and some of the Other Mobile and Desktop Storage
Products have been discontinued, as further discussed below. The Zip segment
involves the development, distribution and sale of Zip drives and disks to
retailers, distributors, resellers and OEMs throughout the world. The
Companys Optical segment involves the distribution and sale of CD-RW
drives to retailers, distributors and resellers throughout the world and the
distribution and sale of DVD Rewritable drives to distributors which began on a
limited basis during the first quarter of 2003. Sales of DVD Rewritable drives
will be expanded to retailers and resellers during the second quarter of 2003.
The Optical segment also includes HotBurn software which is bundled with CD-RW
and DVD Rewritable drives and sold on a stand-alone basis on the Companys
website. The Jaz segment involved the development, manufacture, distribution and
sale of professional storage products and applications, including Jaz disk and
drive systems to resellers, distributors and retailers throughout the world. The
PocketZip segment involved the development, manufacture, distribution and sale
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 and resellers throughout the world.

27

---

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

The Other Mobile and
Desktop Storage Products category (formerly included in Other)
includes: Peerless drive systems; sourced branded products such as HDD, which
began shipping during the second quarter of 2002, Iomega Mini USB drives, which
began shipping during the fourth quarter of 2002; Iomega software products such
Iomega Automatic Backup software and other miscellaneous items. The Other Mobile
and Desktop Storage Products category also includes products that have been
discontinued, such as FotoShow digital image centers (FotoShow),
Iomega Microdrive miniature hard drives, Iomega CompactFlashand
Iomega SmartMedia memory cards.

The Network Storage
Systems segment (formerly included in Other) currently consists of
the distribution and sale of NAS servers targeted toward small and medium-size
businesses and enterprise workgroups.

The New Technologies
segment includes the research and development of other high capacity removable
storage devices, including a small-form factor removable flexible magnetic
storage device, DCT, that is expected to have a capacity of about 1.5GB and a
removable hard disk storage system, RRD, that is expected to have a capacity of
approximately 35GB. There have been no sales associated with New Technologies
and no sales are expected before 2004.

In early 2002, the Company
discontinued the Jaz drive and PocketZip product line, including HipZip, which
was being reported in the PocketZip segment. Under the Other Mobile and Desktop
Storage Products category, the Company also discontinued in early 2002 its
FotoShow, Microdrive, CompactFlash and SmartMedia products. The Company has
continued to sell disks for Jaz and PocketZip products to support the installed
drive base of these products.

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

28

---

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

The information in the
following table was derived directly from the segments internal financial
information used for corporate management purposes. Network Storage Systems
were previously presented in Other products and all 2002 amounts have been
reclassified for consistent presentation. New Technologies were previously
presented in general corporate expenses and all 2002 amounts have been
reclassified for consistent presentation.

## Reportable
Operating Segment Information:

`For the Quarter Ended
                                                                  ---------------------------------
                                                                  March 30,                March 31,
                                                                     2003                    2002
                                                                  ---------                --------
                                                                            (In thousands)
Sales:
Mobile and Desktop Storage Products:
   Zip                                                            $  73,309               $ 143,066
   Optical                                                           15,346                  22,597
   Jaz                                                                1,884                   5,873
   PocketZip                                                            107                      19
   Other Mobile and Desktop Storage Products                         13,256                   7,235
                                                                  ---------               ---------
      Total Mobile and Desktop Storage Products                     103,902                 178,790
                                                                  ---------               ---------
Network Storage Systems                                              2,280                     107
                                                                  ---------               ---------
      Total sales                                                 $ 106,182               $ 178,897
                                                                  =========               =========

PPM (Product Loss):
Mobile and Desktop Storage Products:
   Zip                                                            $  29,356               $  57,312
   Optical                                                              235                      69
   Jaz                                                                1,263                   1,944
   PocketZip                                                            191                     737
   Other Mobile and Desktop Storage Products                           (113)                 (4,227)
                                                                  ---------               ---------
      Total Mobile and Desktop Storage Products                      30,932                  55,835
                                                                  ---------               ---------
Network Storage Systems                                             (4,044)                   (673)
                                                                  ---------               ---------
New Technologies                                                     (4,858)                 (1,121)
                                                                  ---------               ---------
      Total PPM                                                      22,030                  54,041

Common Expenses:
   General corporate expenses                                       (14,866)                (27,659)
   Restructuring reversal                                                78                       -
   Interest and other income, net                                     1,888                     216
                                                                  ---------               ---------
      Income before income taxes                                  $   9,130               $  26,598
                                                                  =========               =========`

29

---

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

`For the Quarter Ended
                                                            --------------------------------------
                                                            March 30,  2003         March 31, 2002
                                                            ---------------         --------------
                                                            (In thousands, except Network Storage
                                                                           Systems)
Drive units:
Mobile and Desktop Storage Products:
   Zip                                                             600                   1,116
   Optical                                                         159                     154
   Jaz                                                               -                       2
   PocketZip                                                         -                      12
   Other Mobile and Desktop Storage Products                       106                      16
Network Storage Systems                                         1,273                      79


Disk units:
Mobile and Desktop Storage Products:
   Zip                                                           4,676                   9,099
   Jaz                                                              24                      72
   PocketZip                                                         2                       8
   Other Mobile and Desktop Storage Products                         8                      22`

## Seasonality

The Company sells its
products primarily through computer product and consumer electronic
distributors, retailers, value added resellers (VARs) and OEMs. The
Companys Zip products are targeted primarily to the retail consumer,
personal computer OEMs and business industries including government, education,
health care, business services and manufacturing. The Companys Optical
products are targeted primarily to the retail consumer. The Companys HDD
products are targeted primarily to the retail consumer and business markets.
The Companys Mini USB drives are targeted primarily to the retail consumer
market. The Companys NAS products are targeted primarily to the small to
medium-size business market and sold through catalogs and distributors who in
turn sell to VARs.

The largest markets for the
Companys Zip products (which accounted for 69% of the Companys sales
during the first quarter of 2003) are education and government. Typically Zip
sales for the education market are strongest during the third and fourth
quarters and Zip sales are strongest for the government market during the fourth
quarter. The Companys retail business is also strongest during the fourth
quarter.

There can be no assurance
that this historic pattern will continue and moreover this pattern could be
affected by the significant weakness and uncertainty that currently exists in
the United States and global economies and consumer confidence levels.
Accordingly, sales for any prior quarter are not necessarily indicative of the
sales to be expected in any future quarter.

30

---

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

## Results of
Operations

The Company reported net
income of $5.3 million, or $0.10 per diluted share, for the quarter ended March
30, 2003. Net income for the quarter was favorably impacted by $3.7 million of
after-tax net legal settlements. This compares to a first quarter 2002 net
income of $31.2 million, or $0.61 per diluted share, which included $15.8
million attributable to a decrease in the Companys valuation allowance for
net deferred tax assets. Results for the first quarter of 2002 also included a
$1.7 million release of pre-tax marketing accruals.

## Sales

Sales for the quarter ended
March 30, 2003 of $106.2 million decreased $72.7 million, or 41%, when compared
to sales of $178.9 million for the quarter ended March 31, 2002. This decrease
was primarily a result of lower Zip drive and disk sales.

Zip product sales for the
first quarter of 2003 totaled $73.3 million, representing a decrease of $69.8
million, or 49%, compared to sales of $143.1 million for the first quarter of
2002. Sales of Zip products represented 69% of total sales for the first quarter
of 2003, compared to 80% for the first quarter of 2002. Zip drive sales of $40.2
million for the first quarter of 2003 decreased by $41.3 million, or 51%, while
Zip drive units decreased by 46% from the first quarter of 2002. Zip drive sales
decreased more than Zip drive units primarily due to increased promotional and
rebate activity during the first quarter of 2003 and from Zip 100MB and Zip
250MB price decreases that occurred in the third quarter of 2002 following the
introduction of the Zip 750MB. Zip OEM drive units accounted for approximately
48% of total Zip drive units in the first quarter of 2003 compared to
approximately 51% in the first quarter of 2002. Zip disk sales of $33.1 million
for the first quarter of 2003 decreased by $28.2 million, or 46%, while Zip disk
units decreased by 49% from the first quarter of 2002. Zip disk sales decreased
less than Zip disk units primarily due to a change in product mix trending away
from lower priced Zip 100MB disks towards higher priced Zip 250MB and Zip 750MB
disks. The decrease in Zip disk sales and units was also impacted by a
significant drop in private label sales and units in the first quarter of 2003
compared to the first quarter of 2002 which management believes was due to
decisions on the part of the private label partner to reduce inventories during
the quarter. While it is difficult to precisely calculate the sales impact of
product mix changes, price changes and volume changes, the following is the
Companys best estimate of those impacts. When compared to the first
quarter of 2002, the decrease in Zip product sales resulted primarily from lower
unit volumes (net of product mix) of approximately $64 million and lower drive
and disk prices of approximately $6 million.

Optical product sales for
the first quarter of 2003 totaled $15.3 million, representing a decrease of $7.3
million, or 32%, compared to sales of $22.6 million for the first quarter of
2002. Sales of Optical products represented 15% of total sales for the first
quarter of 2003, compared to 13% for the first quarter of 2002. Optical units
increased 3% compared to the first quarter of 2002. During the first quarter of
2003, the Company began shipping a limited quantity of DVD Rewritable drives.
The decrease in Optical sales resulted primarily from a reduction of CD-RW stock
keeping units (skus) as the Company begins the transition to
selling DVD-based products. While it is difficult to precisely calculate the
sales impact of product mix changes, price changes and volume changes, the
following is the Companys best estimate of those impacts. When compared to
the first quarter of 2002, lower prices of approximately $7 million, taken to
meet competitive pressures, were slightly offset by a small increase in unit
volumes and accounted for the decrease in Optical sales.

31

---

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

Jaz product sales for the
first quarter of 2003 totaled $1.9 million, representing a decrease of $4.0
million, or 68%, compared to sales of $5.9 million for the first quarter of
2002. Sales of Jaz products represented 2% of total sales for the first quarter
of 2003, compared to 3% for the first quarter of 2002. Jaz drive and disk units
decreased by 100% and 67%, respectively, when compared to the first quarter of
2002. The lower volumes resulted from the Companys decision in early 2002
to discontinue the Jaz drive.

PocketZip product sales of
$0.1 million for the first quarter of 2003 increased $0.1 million, compared to
the first quarter of 2002. The Company discontinued the PocketZip product line
in early 2002.

Other Mobile and Desktop
Storage Products sales for the first quarter of 2003 totaled $13.3 million,
representing an increase of $6.1 million, or 83%, compared to sales of $7.2
million for the first quarter of 2002. The increase in Other Mobile and Desktop
Storage Products sales resulted primarily from a $4.0 million increase in
external hard drive product sales and from Mini USB drive sales of $2.7 million
which began shipping late in the fourth quarter of 2002. These increases were
partially offset by lower sales of CompactFlash, Microdrive, SmartMedia and
FotoShow, all of which were discontinued in early 2002.

Network Storage Systems
sales for the first quarter of 2003 totaled $2.3 million, representing a $2.2
million increase, compared to sales of $0.1 million for the first quarter of
2002. The increase was due to the launching in the late first quarter of 2002 of
the Companys NAS products.

Geographically, sales in
the Americas totaled $65.2 million, or 61% of total sales, in the first quarter
of 2003, compared to $110.7 million, or 62% of total sales, in the first quarter
of 2002. The decrease in sales dollars in the Americas was due primarily to
lower Zip sales and to a lesser extent, lower CD-RW sales. Sales in Europe
totaled $31.8 million, or 30% of total sales, in the first quarter of 2003,
compared to $55.9 million, or 31% of total sales, in the first quarter of 2002.
The decrease in sales dollars in Europe was due primarily to lower Zip sales.
Sales in Asia totaled $9.2 million, or 9% of total sales, in the first quarter
of 2003, compared to $12.3 million, or 7% of total sales, in the first quarter
of 2002. The decrease in sales dollars in Asia was due primarily to lower Zip
sales.

## Gross Margin

The Companys overall
gross margin of $37.1 million, or 34.9%, in the first quarter of 2003 compares
to $72.5 million, or 40.5%, in the first quarter of 2002. The decrease in the
gross margin percentage was primarily due to a lower proportion of sales from
the higher margin Zip products, price promotions on Zip drives during the first
quarter of 2003 and from Zip 100MB and Zip 250MB price decreases that occurred
in the third quarter of 2002 following the introduction of the Zip 750MB. The
Zip gross margin percentage was 46.5% in the first quarter of 2003 compared to
48.6% in the first quarter of 2002. This decrease resulted primarily from lower
volumes and higher promotional activities on Zip drives, partially offset by a
lower percentage of OEM business. Zip gross margins in the first quarter of 2003
decreased $35.4 million from the first quarter of 2002, primarily from the lower
volumes.

Management believes that
the gross margin percentages reported for the first quarter of 2003 will be
difficult to achieve in the second quarter due to increasing unit costs of Zip
drives resulting from volume based pricing adjustments for Zip drives that were
purchased from the Companys contract manufacturer, Venture Manufacturing
Ltd. (Venture) during the first quarter. This unfavorable pricing
adjustment resulted from a sharp drop off in the volume of drives sold in the
first quarter of 2003. Most of these higher priced drives remain in inventory
and will reduce margins as they are sold in the second quarter of 2003. In
addition, in the longer term, it will be difficult to maintain the gross margin
percentage as the product mix shifts from Zip products to NAS and other sourced branded
products such as CD-RW, DVD Rewritable and HDD, which have materially
lower gross margins.

32

---

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

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

## Product
Segment PPM

Zip PPM for the first
quarter of 2003 was $29.4 million and decreased by $27.9 million, or 49%,
compared to Zip PPM of $57.3 million for the first quarter of 2002. The decrease
in Zip PPM resulted primarily from lower gross margins (see Zip gross margin
discussion above for more details), partially offset by lower operating expenses
resulting from a reduction and redeployment of resources. Zip PPM as a
percentage of Zip sales remained flat for the first quarter of 2003 at 40%
compared to the first quarter of 2002, as the lower gross margin percentages
were offset by a reduction and redeployment of operating expenses, such as sales
and marketing and research and development. The Company redirected research and
development resources away from Zip and toward the development of the new
technologies, DCT and RRD.

Optical PPM for the first
quarter of 2003 was $0.2 million and improved by $0.1 million compared to an
Optical PPM of $0.1 million for the first quarter of 2002. Optical PPM as a
percentage of Optical sales increased to 2% in the first quarter of 2003 from
less than 1% in the first quarter of 2002. The Optical PPM improvement in the
first quarter was a result of lower operating expenses partially offset by lower
gross margin dollars.

Jaz PPM for the first
quarter of 2003 was $1.3 million and decreased by $0.6 million compared to Jaz
PPM of $1.9 million for the first quarter of 2002. The lower Jaz PPM resulted
primarily from lower units reflecting the Companys decision in early 2002
to discontinue the Jaz drive. Jaz PPM as a percentage of Jaz sales increased to
67% for the first quarter of 2003, compared to 33% for the first quarter of
2002, primarily due to no lower margin drive sales in the first quarter of 2003.

PocketZip PPM of $0.2
million decreased $0.5 million in the first quarter of 2003, compared to
PocketZip PPM of $0.7 million in the first quarter of 2002. The decrease
resulted primarily from the favorable settlement in the first quarter of 2002 of
certain supplier inventory claims. In the first quarter of 2003, PocketZip PPM
of $0.2 million was slightly higher than PocketZip sales of $0.1 million
primarily due to warranty accrual releases. In the first quarter of 2002,
PocketZip PPM of $0.7 million was higher than PocketZip sales by almost $0.7
million primarily from the favorable settlement of certain supplier claims.

Other Mobile and Desktop
Storage Products had a product loss of $0.1 million in the first quarter of 2003
which represented an improvement of $4.1 million, or 97%, compared to a product
loss of $4.2 million in the first quarter of 2002. The lower product loss
resulted primarily from lower product losses on external hard drives of $3.6
million and from a $0.4 million PPM on Mini USB drives, which began shipping
late in the fourth quarter of 2002.

33

---

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

Network Storage Systems
had a product loss of $4.0 million in the first quarter of 2003 which
represented an increase of $3.3 million, or 501%, compared to a product loss of
$0.7 million in the first quarter of 2002. The increased product loss resulted
primarily from higher research and development and sales and marketing spending
designed to broaden the Companys NAS product offering beginning in the
second quarter of 2003 and from under-absorbed operational overhead due in
relation to lower than planned volumes in the first quarter of 2003.

New Technologies product
loss of $4.9 million increased by $3.8 million, or 333%, in the first quarter of
2003 compared to a product loss of $1.1 million in the first quarter of 2002.
The higher losses resulted from increased spending (primarily research and
development) on the two new technologies under development, DCT and RRD. The
Company does not anticipate any sales from these products until 2004.

General corporate expenses
that were not allocated to PPM of $14.9 million in the first quarter of 2003,
decreased $12.8 million, or 46%, compared to $27.7 million for the first quarter
of 2002. The $12.8 million decrease resulted primarily from favorable net legal
settlements of $9.4 million (a net settlement of $6.0 million during the first
quarter of 2003, compared to a net legal settlement expense of $3.4 million
during the first quarter of 2002), lower bonus and profit sharing costs of $2.0
million, lower professional fees of $1.3 and $0.1 million from other cost
reductions.

## Selling,
General and Administrative Expenses

Selling, general and administrative
expenses of $23.3 million for the first quarter of 2003 decreased by $14.9
million, or 39%, compared to $38.2 million for the first quarter of 2002. The
$14.9 million decrease was comprised of favorable net legal settlements of $9.4
million (a net settlement of $6.0 million during the first quarter of 2003,
compared to a net legal settlement expense of $3.4 million during the first
quarter of 2002), a $2.3 million decrease in marketing expenses (see below for
more detail), a $1.7 million decrease in professional fees, a $1.1 million
decrease in depreciation due primarily to reduced spending on new capital assets
in the past several years, a $1.1 million decrease in bonus and profit sharing
costs, partially offset by a $0.7 million increase in other costs.

As the Company attempted to
reverse the declining trends of revenue in 2000 and 2001, the volume of
marketing programs increased significantly. The volume of marketing programs
decreased during 2002. During 2002, the Company evaluated the marketing programs
and the related processes, accruals and deductions. Based on these efforts which
occurred throughout 2002, the Company revised its estimate of required marketing
program accruals during the first quarter of 2002 and released approximately
$1.7 million in marketing program accruals that related primarily to changes in
estimates associated with prior period programs (included in the $2.3 million
decrease in marketing expenditures described above).

Selling, general and
administrative expenses increased as a percentage of sales to 22% for the first
quarter of 2003, from 21% in the first quarter of 2002, as sales declined at a
faster rate than overall selling, general and administrative costs.

Selling, general and
administrative expenses are anticipated to increase since the first quarter of
2003 contained net legal settlements of $6.0 million that are not expected to be
repeated in future quarters.

34

---

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

## Bad Debt

For the first quarter of
2003, a bad debt credit of $2.0 million was recorded, reflecting a $1.3 million,
or 185%, increase compared to a bad debt credit of $0.7 million for the first
quarter of 2002. The $1.3 million increased credit in bad debt resulted
primarily from lower trade receivable balances and from improved collections
during the first quarter of 2003. At March 30, 2003, the Company had $0.6
million in trade receivables in excess of 180 days past due compared to $1.8
million at December 31, 2002.

## Research and
Development Expenses

Research and development expenses
of $8.6 million for the first quarter of 2003 were flat when compared to the
first quarter of 2002. Lower research and development expenses on Zip were
offset by increased research and development expenses on DCT and RRD. Research
and development expenses increased as a percentage of sales to 8% in the first
quarter of 2003, compared to 5% in the first quarter of 2002 due primarily to
lower sales in 2003.

## Restructuring
Charges/Reversals

Third Quarter 2001 Restructuring Actions

During the third quarter of
2001, the Company recorded pre-tax restructuring charges of $33.3 million. For
more information on the third quarter 2001 restructuring actions, see Note 4 of
the notes to the condensed consolidated financial statements. Remaining
restructuring reserves in the amount of $3.5 million and $0.4 million are
included in the Companys other current liabilities and fixed asset
reserves, respectively, as of March 30, 2003. Utilization of and other activity
relating to the third quarter 2001 restructuring reserves during the three
months ended March 30, 2003 are summarized below:

`Third Quarter 2001                            Balance            Utilized                                 Balance
                                                           ---------------------
Restructuring Actions                         12/31/02      Cash        Non-Cash        Reversal         03/30/03
----------------------                        --------     ------       --------        --------         --------
                                                                      (In thousands)

North America Reorganization:
   Severance and benefits (a)                 $    78      $    -        $   -           $ (78)           $     -
   Lease cancellations (a)                      3,194        (311)           -               -              2,883
   Leasehold improvements and
      furniture (b)                               431           -          (33)              -                398
                                              -------      ------        -----           -----            -------
                                                3,703        (311)         (33)            (78)             3,281
                                              -------      ------        -----           -----            -------

Europe Reorganization:
   Lease cancellations (a)                        727         (66)           -               -                661
                                              -------      ------        -----           -----            -------
                                              $ 4,430      $ (377)       $ (33)          $ (78)           $ 3,942
                                              =======      ======        =====           =====            =======

Balance Sheet Breakout:
   Other current liabilities (a)              $ 3,999      $ (377)       $   -           $ (78)           $ 3,544
   Fixed asset reserves (b)                       431           -          (33)              -                398
                                              -------      ------        -----           -----            -------
                                              $ 4,430      $ (377)       $ (33)          $ (78)           $ 3,942
                                              =======      ======        =====           =====            =======


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

35

---

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

As of March 30, 2003, the
remaining leasehold improvements are associated with subleased facilities and
cannot be disposed of until the subleases expire. The last sublease will expire
in March 2006. Lease payments are being made on a continuous monthly basis and
the Company is still trying to sublease one of the leases which does not expire
until 2009. During the first quarter of 2003, severance and benefit reserves of
$0.1 million were reversed due to the original estimates being higher than what
was utilized.

## Interest and
Other Income and Expense

Interest income of $1.9
million in the first quarter of 2003 decreased $0.4 million, or 20%, from $2.3
million in the first quarter of 2002. The decrease in interest income resulted
from significantly lower interest rates that were partially offset by higher
average cash, cash equivalents and temporary investment balances.

Interest and other income
and expense of less than $0.1 million during the first quarter of 2003 improved
$2.2 million from a net expense of $2.1 million in the first quarter of 2002.
The decrease in these expenses resulted primarily from lower other expense (the
first quarter of 2002 included $0.5 million for the partial write-down of a
research and development venture investment), lower interest expense and
improved foreign currency gains/losses.

## Income Taxes

For the quarter ended March
30, 2003, the Company recorded an income tax provision of $3.8 million on
pre-tax income of $9.1 million resulting in an effective tax rate of 42%. This
compares to an income tax benefit of $4.6 million on a pre-tax income of $26.6
million reflecting a $15.8 million decrease in the valuation allowance for net
deferred tax assets partially offset by an income tax provision of $11.2 million
for the first quarter of 2002. Excluding the $15.8 million decrease in the
valuation allowance, the adjusted effective tax rate for the first quarter of
2002 was 42%.

At March 30, 2003, the
Company had $34.9 million of deferred tax assets related to net operating loss
carryforwards (NOLs). Of the total NOL deferred tax asset, $28.1
million related to U.S. federal NOLs and $6.8 million related to state NOLs. The
federal NOLs reflect a tax benefit of approximately $80.2 million in future U.S.
federal tax deductions. The state NOLs reflect a tax benefit of approximately
$170 million in future state tax deductions. The difference in the amount of
future federal and state tax deductions related to the NOLs is largely the
result of differences between federal and state NOL carryback rules. The U.S.
federal NOLs expire at various dates beginning in 2022 and the state NOLs expire
at various dates beginning in 2004.

The Company continues to
maintain a full valuation allowance of $13.0 million for deferred tax assets
related to foreign NOLs, which reflect the tax benefit of approximately $35.3
million in future foreign tax deductions. These NOLs expire at various dates
beginning in 2004. These deferred tax assets remain fully reserved because their
realization is dependent on earning future foreign taxable income in the tax
jurisdictions to which the NOLs were generated. The largest of these foreign
NOLs relate to the Companys French subsidiary, Nomai S.A. This
subsidiarys operations have been shut down and therefore, the foreign NOL
related to Nomai S.A. is not likely to be realized in the future.

Net deferred tax
liabilities for the Company at March 30, 2003 were $30.7 million. As of March
30, 2003, deferred tax liabilities for estimated U.S. federal and state taxes of
$110.0 million have been accrued on unremitted foreign earnings of $282.0
million.

36

---

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

## Liquidity and
Capital Resources

At March 30, 2003, the
Company had total cash, cash equivalents and temporary investments of $460.7
million, compared to $453.9 million at December 31, 2002, an increase of $6.8
million or 2%. At March 30, 2003, $0.2 million of the total cash on deposit was
restricted in its use, compared to $3.8 million at December 31, 2002 (see below
for more details).

At March 30, 2003, $167.5
million of cash, cash equivalents and temporary investments were on deposit in
the U.S., compared to $168.7 million at December 31, 2002.

At March 30, 2003, the
remaining $293.2 million of total cash, cash equivalents and temporary
investments were on deposit in foreign countries (primarily Western Europe),
compared to $285.2 million at December 31, 2002. Cash dividends of foreign
earnings (such as the repatriation of any of the $293.2 million of foreign cash)
to the U.S. would be considered taxable in the U.S. for federal and state tax
purposes at a rate of approximately 39%. However, the amount of cash ultimately
required for U.S. federal and state taxes would be less than the approximate 39%
rate due to the Companys existing NOLs and other tax credit carryforwards.
Also, any taxes paid on the repatriation of cash to the U.S. would not impact
the statement of operations as taxes have already been provided on these foreign
earnings.

Working capital of $437.7
million at March 30, 2003 increased by $6.0 million, or 1%, compared to $431.7
million at December 31, 2002. The increase in working capital resulted primarily
from higher cash, cash equivalents and temporary investments. Lower accounts
payable and lower other current liabilities were mostly offset by lower trade
receivables, lower inventories and lower current deferred income taxes.

For the quarter ended March
30, 2003, cash provided by operating activities amounted to $13.5 million, a
decrease of $3.7 million compared to cash provided by operating activities of
$17.2 million for the quarter ended March 31, 2002. The lower cash provided from
operating activities resulted primarily from lower net income partially offset
by changes in current assets and current liabilities as described below and the
receipt of $7.5 million from a legal settlement in the first quarter of 2003.

Accounts receivable
decreased in the quarter ended March 30, 2003 primarily from lower sales and
improved collections. Days sales outstanding (DSO) (DSO is
calculated by multiplying the March 30, 2003 receivables balance by 90 and
dividing that amount by the sales for the quarter ended March 30, 2003) in
receivables improved to 27 days at March 30, 2003, compared to 32 days at
December 31, 2002. The DSO improvement was primarily due to lower receivables,
accruals for price promotions on Zip drives and continuing strong collections.
The Company believes that it will be difficult to maintain DSO in receivables at
this level. Accounts payable decreased primarily from approximately $20 million
in initial purchases of inventory from the Companys former Penang
manufacturing subsidiary (which was sold on November 1, 2002) that were not due
as of December 31, 2002. Other current liabilities decreased primarily from
lower margin on deferred sales and lower marketing accruals. Inventory decreased
primarily due to lower levels of Zip inventories and a concentrated program to
lower inventory in light of declining sales.

During the quarter ended
March 30, 2003, the Company did not repurchase any shares of the Companys
Common Stock. For the quarter ended March 31, 2002, the Company repurchased
340,400 shares of the Companys Common Stock for $2.9 million. As of March
30, 2003, approximately $122.3 million remained available for future repurchases
under the stock repurchase plan authorized by the Companys Board of
Directors on September 8, 2000. Any repurchase of shares is expected to be
funded using the Companys available working capital.

37

---

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

At March 30, 2003, the
Company had $0.2 million of cash to cover foreign bank guarantees for value
added taxes (VAT). At December 31, 2002, the Company had classified
a total of $3.8 million as restricted cash, of which $3.6 million of
cash was set aside to secure a letter of credit. This letter of credit expired
in March 2003 and therefore this cash is no longer restricted. These amounts are
reported separately as restricted cash in the condensed consolidated
balance sheets.

The Company believes that
its balance of unrestricted cash, cash equivalents and temporary investments,
together with cash flows from future operations, will be sufficient to fund the
Companys anticipated working capital requirements, capital expenditures,
previously announced stock repurchase program and cash required for other
activities during the next twelve months. However, cash flow from future
operations, investing activities and the precise amount and timing of the
Companys future financing needs, cannot be determined at this time and
will depend on a number of factors, including the market demand for the
Companys products, the future volume of Zip products sold, the
Companys ability to stop its sales decline, competitive price pressures,
worldwide economic conditions, the availability of critical components, the
adequate supply of products from the Companys sourcing partners, the
progress of the Companys product development efforts, the financial
stability of the Companys customers, the necessity for future
restructuring or other charges which might consume cash and the success of the
Company in managing its inventory, forecasting accuracy, trade receivables and
accounts payable. Should the Company be unable to meet its cash needs from its
current balance of unrestricted cash, cash equivalents and temporary investments
and future cash flows from operations, the Company would most likely seek
financing from other sources or incur additional restructuring charges to adjust
the Companys expenditures to a level that its cash flows could support.

The Companys current
balance of unrestricted cash, cash equivalents and temporary investments is its
primary source of liquidity. The Company currently does not have a credit
facility in place and given the status of current capital markets and the
Companys recent history of sales declines, there is no assurance that, if
needed, the Company would be able to obtain financing from external sources.

## Other Matters

Securities and Exchange Commission Review

As previously disclosed in
the Companys Annual Reports on Form 10-K for the years ended December 31,
2000, December 31, 2001 and December 31, 2002, in connection with a review of
the Companys periodic Securities and Exchange Commission (SEC)
reports, the Company has received comments from the staff of the SEC requesting
various supplemental information and certain additional disclosures. The staff
also has 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.

38

---

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

The Companys
management believes that the Companys accounting for each of these matters
is in accordance with accounting principles generally accepted in the United
States of America. 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 consolidated financial statements in order to adjust the
manner in which it has accounted for the Nomai acquisition in 1998, the
subsequent evaluation in 1999 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.

Recent Accounting Pronouncements

In November of 2002, the
Emerging Issues Task Force (EITF) reached a consensus on Issue No.
00-21, Revenue Arrangements with Multiple Deliverables (EITF
00-21). EITF 00-21 addresses certain aspects of accounting for
arrangements whereby a vendor performs multiple revenue-generating activities.
EITF 00-21 also discusses how to determine whether an arrangement involving
multiple deliverables contains more than one unit of accounting and how the
related revenue should be measured and allocated to the separate units of
accounting. EITF 00-21 is effective for revenue arrangements entered into for
fiscal periods beginning after June 15, 2003. The Company plans on adopting EITF
00-21 on June 30, 2003. The Company believes that the effect of EITF 00-21 on
the Companys results of operations, financial position or liquidity will
not be material as the Company currently has few multiple deliverable revenue
arrangements.

## Factors
Affecting Future Operating Results

Demand for the Company's Products

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

- Market demand for digital storage products in general;
- Price, performance, quality and other characteristics of the Companys
products and of competing and substitute products rumored, announced or
introduced by other vendors;
- Emergence of any competing solutions as industry standards;
- Success of the Company in
meeting targeted availability dates for new and enhanced products;
- Success of
the Company in establishing and maintaining OEM arrangements and meeting OEM
quality, supply and other requirements;
- Willingness of OEMs to
promote computers and other products containing the Companys drives;
- Success of the Companys efforts to provide and maintain customer service
and satisfaction;
- Public perception of the Company and its products, including
statements made by industry analysts or consumers
and adverse publicity resulting from such statements or from litigation filed
against the Company;
- Worldwide economic conditions, including overall market demand for personal
computers and other products with which the Companys products can be used;
- Ability of the Company to maintain profitable relationships with distributors,
retailers and other resellers of the Companys products;
- Ability of the Company to comply with applicable laws, regulations, ordinances
and other legal requirements in the numerous countries in which it does
business;
- Ability of the Company to successfully manage litigation, including enforcing
its rights, protecting its interests and defending itself from claims made
against it and
- Ability of the Company to maintain an appropriate cost structure and to minimize
unforeseen and extraordinary expenses.

39

---

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

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

Zip Drives and Disks

Since 1996, sales of Zip
products have accounted for a significant majority of the Companys sales
and profits. However, these sales have declined significantly over the past
several years. For example, in the first quarter of 2003, worldwide Zip sales
decreased $69.8 million, or 49%, from the first quarter of 2002. The
Companys first quarter 2003 Zip drive units decreased 0.5 million units
from the first quarter of 2002 and Zip disk units decreased 4.4 million units
over the same time period.

The Companys sales of
its proprietary Zip drives and disks (both in terms of unit volumes and in terms
of sales dollars) have been declining on a year-over-year basis in recent years.
The Company is developing new products, has launched a line of NAS products and
is attempting to broaden its line of sourced branded products (for example,
optical and USB flash drives) in an attempt to create additional revenue
streams. In the meantime, the Companys profitability remains dependent on
maximizing, to the extent possible, sales of Zip drives and disks, which
generate significantly higher gross and product profit margins than other
Company products. If the Company fails to minimize year-over-year declines in
Zip drive and disk sales, the Companys profitability and/or results of
operations would be adversely affected. Factors which could lead to accelerated
rates of decline in Zip drive and disk sales include the following:

- The prevalence of CD-RW drives being built into new computers, their
availability in the aftermarket and the low cost of CD-R and CD-RW media;
- The emergence of DVD Rewritable drives;
- The continued proliferation of other low cost storage devices and media such as
external hard drives and USB flash drives;
- The Company may not
succeed in its strategy to maintain Zip disk usage by existing Zip drive
customers;
- The sales mix and tie rate between Zip disks and Zip
drives may fall below levels anticipated by the Company;
- Another party may succeed in producing or marketing drives and disks that are
compatible with the Companys Zip drive products without infringing the
Companys proprietary rights;
- The Company may not
succeed in maintaining shelf space or skus with retailers or distributors;
- Price reductions or promotions on Zip drives or disks may fail to produce a
commensurate increase in demand, thereby reducing anticipated sales and
- Disruptions in the supply of Zip drives and disksfrom the Companys
suppliers, in the distribution process, in the Companys relationships with
key retailers, distributors or resellers or other factors that could result in
product unavailability.

40

---

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

As the Companys Zip
drive and disk sales have declined, it has become increasingly difficult for the
Company to maintain its presence and shelf space with its key resellers and
retailers. Management anticipates continued challenges in this area throughout
2003. Although the Company attempts to offer competitive sales and marketing
programs to induce channel partners to continue to purchase Zip products and
other offerings, there is no assurance that the Company will be successful.

The Company sells a
significant volume of Zip drives to a relatively small number of computer OEMs.
The Companys OEM customers are not obligated to purchase any minimum
volume of Zip drives. Moreover, the fact that the number of OEM customers is
relatively small presents a risk that the loss of one or more key OEM accounts
would have an immediate, material adverse effect on the Companys financial
condition or operating results. There is a growing trend among personal computer
OEM customers to adopt CD-RW and DVD Rewritable drives as standard product
features. This trend has had a material adverse impact on the Companys Zip
business. In order to maintain a profitable level of Zip drive sales to OEMs,
the Company must successfully maintain market demand for Zip drives and reduce
the cost of Zip drives. There can be no assurance that the Company will be able
to do so. The Companys largest OEM customer, Dell Computer, previously
decided that it would not offer the Companys recently introduced Zip 750MB
internal drive as a standard option on Dell PCs. Rather, Dell carries the
external USB Zip 750MB drive as an aftermarket peripheral device and may also
build the internal Zip 750MB drive into personal computers on a special order
basis. There can be no assurance that the Company will successfully encourage
Dell to change its decision and agree to offer the Zip 750MB internal drive as a
standard option on Dell PCs.

Notwithstanding the
foregoing challenges and risks, the Companys ability to minimize, to the
extent possible, the decline in Zip unit volumes and sales will be critical to
the Companys future profitability. For example, during the first quarter
of 2003, the PPM for the Zip business was $29.4 million compared to a combined
product loss of $7.3 million on all other products. Despite all of the
Companys efforts to promote the Zip business, it has continued to decline
and the Company expects that Zip sales will be lower in 2003 compared to 2002.
Although the decline is expected to continue, the Company has been unable to
accurately forecast and predict the actual rate of decline over time. Any
significant negative change in the rate of the decline, from quarter to quarter,
would likely have a negative impact on financial results because the Company may
be unable to quickly make a corresponding reduction in operating expenses or
other costs. In particular, the Company has been unable to affect fixed manufacturing
overhead cost
reductions at its Zip product contract manufacturer, Venture and, as a result,
is experiencing material product price increases on Zip drives and disks.
Consequently, there is no assurance that the Company will be able to maintain
its Zip business and profitability.

Optical Products

The vast majority of sales
of the Companys Optical products are currently CD-RW drives. The Company
began shipping on a limited basis in the first quarter of 2003 DVD Rewritable
drives. The Companys Optical business strategy differs fundamentally from
its Zip product strategy. Differences between the Optical and Zip product
businesses include the following: a) the Company does not own any significant
intellectual property relating to optical drives; b) optical drives use very
low-cost, non-proprietary discs available from many sources; c) there is intense
competition between different providers of optical drives and d) the Company
obtains significantly lower overall gross margins on sales of optical drives
than on Zip drives. The overall Optical business is characterized by low gross
margins, the frequent introduction of performance upgrades and intense
competition from both brand name and generic, low-cost competitors. In light of
these factors, the Company must closely monitor its inventory levels, product
transitions, sales channel inventory, purchase commitments, advertising and
other marketing expenses in order to compete effectively and profitably. There
is no assurance that the Company can achieve these objectives and historically
it has had difficulty in doing so. The Company has reported product losses or
only a nominal PPM on its Optical business since it entered the optical market
in 1999.

41

---

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

In spite of these
challenges, the Company believes it must maintain a presence in the optical
market in order to achieve its overall objective to be viewed as a full line
supplier of digital Mobile and Desktop Storage Products for the Companys retail, catalog and
online customers and in order to achieve its goal of creating destination
storage in the retail and catalog channels. The Companys Optical
business activities are focused on reducing product costs and operating
expenses, improving inventory management processes, more favorable contract
terms, improving product life cycle management and revising channel marketing
programs with the ultimate goal to minimize product losses. However, there is no
assurance that the Companys activities in this regard will be successful.
The suppliers, as the original manufacturers, have certain competitive
advantages over the Company in the marketplace, including the ability at any
time to sell substantially identical drives at lower prices than the Company. In
addition, the Company believes that the overall market for aftermarket external
CD-RW drives is shrinking, due to factors such as the following: a) OEMs
continue to offer, and customers continue to choose, internal CD-RW drives as a
standard product feature, thereby minimizing market demand for external CD-RW
drives; b) aftermarket internal drives are now significantly less expensive than
external CD-RW drives and c) customers are beginning to transition from CD-RW
drives to DVD Rewritable-Recordable drives.

Iomega HDD, Iomega Mini USB Drives and Other Sourced Branded Products

In 2002, the Company began
shipping a series of portable and desktop HDD drives and, in November 2002, the
Company began shipping a series of USB flash drives. The Company may ship
additional sourced branded products (finished products which contain little or
no Iomega intellectual property and are procured from third party suppliers) in
2003. The Company will face many of the same challenges with these sourced branded
products that it has in the optical market. For example, a) the Company
does not own any significant intellectual property relating to HDD and USB flash
drives and is unlikely to own significant intellectual property rights in other
sourced branded products; b) there is intense competition between different
providers of HDD and USB flash drives and such competition is likely to exist
between suppliers of other sourced branded products and c) there is a need to
continually requalify new drives and products as existing drives and products
come into short supply or become obsolete.

There are other risks
associated with shipping sourced branded products. Such products may infringe
another partys protected intellectual property, may lack adequate quality,
or may otherwise expose the Company to liability. The overall sourced product
market is characterized by low gross margins, the frequent introduction of
upgraded products and intense competition from both brand name and generic,
low-cost competitors. In order to successfully compete in this market, the
Company must secure quality products, meet aggressive product price and
performance targets, create market demand for its particular brand of products
and avoid holding excessive inventory. There is no assurance that the Company
can or will be able to achieve profitability on these product lines. For
example, the Company has reported product losses on its HDD business since it
entered the market in 2002.

42

---

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

Network Storage Systems

During 2002, the Company
introduced NAS devices with capacities ranging from 160GB to 720GB. During 2003,
the Company plans to expand its NAS product offerings by introducing a 1.4TB
capacity server in the second quarter of 2003 and with other new NAS product
introductions planned throughout 2003. The NAS market is dominated by large
computer providers (including Dell, IBM and Hewlett Packard/Compaq), is highly
price competitive, primarily relies upon VARs and requires core competencies in
server, software and networking technologies. The Company has little historic
expertise in these areas and is attempting to implement a strategy to address
these requirements and challenges. The NAS market is an emerging market and
there is no assurance that the market will develop as anticipated. For example,
Gartners estimate of the NAS market for 2002 was approximately 20% smaller
than it had originally estimated in the segment for NAS units with price points
below $25,000. Moreover, the Company has not yet demonstrated an ability to
operate profitably in this market. In 2002, the Company incurred start-up
expenses relating to NAS product qualification, launch and customer support in
excess of its expectations. In the first quarter of 2003, the Company recorded a
product loss of $4.0 million on its NAS operations due to higher research and
development and sales and marketing spending designed to broaden the
Companys NAS product offerings and from under-absorbed operational
overhead due to lower than planned volumes. As a result, the Company has
recorded NAS product losses in each quarter it has shipped the product. There
can be no assurance that the Company will successfully develop the necessary
core competencies to compete in this market segment, that the Companys NAS
products will be successful, that the Company will be successful in implementing
its Network Storage Systems strategy or that the Company will
achieve profitability on this product line in 2003 or thereafter.

Development and Introduction of New Products and New Revenue Streams

During 1999, 2000 and 2001,
the Company invested significant resources in developing and launching new
products, including Peerless, PocketZip, HipZip, FotoShow and Microdrive
products. The Company was unable to sell any of these products profitably and
has exited the market with each of these products. In 2002, the Company
introduced desktop and portable HDD drives, NAS and Iomega Mini-USB drives.
Moreover, most of the Companys current non-Zip storage products, including
HDD drives, NAS and CD-RW, were unprofitable at the PPM level during 2002.
During the first quarter of 2003, only CD-RW and Iomega Mini-USB drives were
profitable. Notwithstanding these negative results, the Company believes that it
must develop or acquire new product lines in order to remain viable. In addition
to NAS products and new HDD products, as described above, the Company expects to
review new business opportunities in multiple areas including digital storage,
software, disks, tape drives, networking, services and other related areas. The
Company may spend significant resources a) attempting to develop new
technologies products, or applications; b) attempting to acquire new
technologies, products or applications or c) attempting to market new products
incorporating such products or applications. The Company continues to focus its
development efforts in 2003 on two new high capacity removable storage devices,
including a small-form factor removable flexible magnetic storage device, DCT,
that is expected to have a capacity of about 1.5GB and a removable hard disk
storage system, RRD, that is expected to have a capacity of approximately 35GB.
There is no assurance that the Company will be successful in any of these
endeavors. Moreover, introduction of new products entails risks relating to
factors such as the following:

- Unforeseen manufacturing and technical challenges;
- Performance,  quality or other issues that are only  discovered  in the context of usage by large  numbers
         of end users;
- Lack of defensible intellectual property;
- Lack of relevant core competencies or market expertise;
- Intense competition from substitute technologies;
- Accelerated declines in Zip;
- Lack of market acceptance;
- Significant product
launch and sales and marketing expenses which could cause on-going product
losses;
- Significant expenditures for tooling and inventory before any market
demand is validated and
- Risk that third parties may assert intellectual
property claims against new products.

43

---

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

General Economic Conditions

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

The Company believes that
economic conditions in the personal computer industry have deteriorated and this
downturn has affected the computer resellers, distributors and retailers who
sell the Companys products. In addition, worldwide economic conditions are
unsettled. The hostilities in Iraq, instability in North Korea, political
tensions in other areas of the world, recent terrorist and counter terrorist
activities, the SARS outbreak in Asia and other events continue to create an
atmosphere of uncertainty. The Company believes that these events and continued
economic weakness have adversely affected the Company. In the case of SARS in
particular, it is directly impacting Singapore and Hong Kong, two of our largest
Asian markets.

Collection Risks

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

Company Operations

The Company has experienced
and may in the future experience significant fluctuations in its quarterly
operating results. Moreover, because the Companys expense levels
(including budgeted selling, general and administrative and research and
development expenses) are based in part on expectations of future sales levels,
a shortfall in expected sales could result in a disproportionate adverse effect
on the Companys net income and cash flow.

44

---

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

Inventory Management

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

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

Customers may increase
orders during times of shortages, cancel orders if the channel is filled with
currently available products or delay orders in anticipation of new products.
Excess inventories could force the Company to reduce prices, write down such
inventory or take other actions which in turn could adversely affect the
Companys results of operations.

Product Procurement

On November 1, 2002, the
Company sold its Penang manufacturing subsidiary to a third party, Venture. The
Company entered into a five-year manufacturing services agreement with Venture
for the manufacture and supply of Zip drives and certain other products. There
is no assurance that this transaction will allow the Company to reduce costs or
otherwise be beneficial to the Company. As a result of this transaction, the
Company faces new risks including the following:

- The Company will no longer have direct control over the manufacturing processes
of Zip drives and other products;
- The Companys
ability to quickly increase or decrease production rates may be impaired;
- The Company may face product shortages;
- The Company may incur continuing increased product or operational costs.
Specifically, the product prices
agreed to with Venture are contingent upon the Company purchasing certain
volumes. The Company has already incurred incremental costs, of approximately
$3.2 million in the first quarter of 2003, as a result of not meeting the
targeted volumes on Zip drives and such increased costs will continue unless the
volume targets are achieved;
- The Company faces new
risks related to order management, supply and distribution issues;
- The Companys lack of control over its manufacturing process may increase the
risk that quality or reliability
problems may arise with respect to its products;
- Possible turn-over of
knowledgeable personnel or loss of technical skill sets;
- Transition of
computer systems or information systems that impede communication or supply
management;
- Distribution risks in the Asia Pacific region and
- Other risks associated with the fact that Venture owns the only manufacturing
facility producing Zip drives and thus plays a key role in the Companys
supply and sale of Zip drives, increasing the significance of any difficulties
encountered at that facility.

45

---

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

Product Procurement Costs

The Company believes that
it must reduce the procurement costs of its products. However, with the sale of
the Companys Penang manufacturing subsidiary, the Company has limited
involvement in the manufacturing of any of the products it sells. Thus, in order
to reduce product costs, the Company believes that it must successfully
negotiate lower product procurement costs from suppliers, including Venture and
certain other key suppliers. In the case of Zip in particular, Venture may not
be able to meet contractual obligations to reduce operational overhead, or
introduce business from other non-Iomega, sources rapidly enough to offset the
decline in Zip unit production, causing further price adjustments. The Company
is evaluating the consolidation of Zip disk manufacturing with the goal to
reduce costs. In the event the Company implements any such consolidation, the
Company may be required to record charges for discontinuing certain
manufacturing relationships. There is no assurance that the Company will be able
to do so particularly in light of declining volumes.

Distribution and Logistics

The Company has outsourced
its distribution and logistics centers and, consequently, has become more
reliant upon the computer systems of its outsourcing partners. The Company faces
risks that these systems may have communication, control or reliability
problems. In the outsourcing of its European and Asia Pacific distribution and
logistics function, disparate computer systems between the Company and its
outsourcing partners necessitated the creation of manual processes in order to
record certain transactions. Manual processes are more prone to error than
automated processes and the Company is working to reautomate these processes but
this effort has not been completed.

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

Other Outsourcing

The Company expects that it
will evaluate and implement additional outsourcings of business functions in the
future. Any such outsourcing initiatives may pose risks of delays and business
disruption including risks similar to those discussed in the foregoing
paragraphs entitled Product Procurement and Distribution and
Logistics. The Company is currently evaluating the outsourcing of the
Companys information technology function and is currently outsourcing its
collections function which is expected to be completed approximately at the end
of the second quarter of 2003.

Reporting of Channel Inventory and Product Sales by Channel Partners.

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

46

---

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

Obsolescence Risks

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

Component Supplies

Although the Company has
sold its Penang manufacturing subsidiary, the Company has retained
responsibility for the supply of certain key components. The Company has
experienced difficulty in the past and may experience difficulty in the future,
in obtaining a sufficient supply of many key components on a timely and cost
effective basis. Many components incorporated or used in the manufacture of the
Companys products are currently available only from single or sole source
suppliers or from a limited number of suppliers and are purchased by the Company
without guaranteed supply arrangements. In addition, the Company has only one
supplier of certain key products. From time to time, suppliers of critical
components announce their intention to discontinue manufacturing. In such cases,
the Company attempts to make an end-of-life purchase on the required
component(s) based on its estimates of all future requirements. There is no
assurance that an end-of-life purchase option will be available from a supplier
who has chosen to discontinue a component or that the Companys estimates
of future requirements will be accurate or that the components purchased would
not be subsequently lost, become defective or be otherwise damaged. 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. Moreover, there can be no
assurance that the Company will not purchase in excess of its eventual
requirements and then later incur write-offs of excess inventory.

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

- The Company might be
unable to produce sufficient quantities of its products to satisfy market
demand;
- In the case of a component purchased exclusively from one supplier,
the Company could be prevented from
producing any quantity of the affected product(s) until such component becomes available
from an alternative source;
- The Company might be forced to delay product shipments;
- The Company's material costs might increase;
- Most of the Companys key suppliers are in Asia and the SARS virus could
impact supply and has already impeded travel to visit key suppliers and
- The Company could experience an imbalance in the inventory levels of certain
components, which could increase costs, slow or stop production or cause the
Company to modify the design of its products to use a more readily available
component, with uncertain consequences.

47

---

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

Any or all of these
problems could in turn result in the loss of customers, provide an opportunity
for competing products to achieve market acceptance and otherwise adversely
affect the Companys business and financial results.

The purchase orders under
which the Company buys many of its components and sourced products generally
extend one to three quarters in the future based on the lead times associated
with the specific component or sourced product. The quantities on the purchase
order are based on estimated sales requirements. In the case of new products or
products with declining sales, it is difficult to forecast product demand, which
could result in either insufficient or excess products and/or purchase
commitments. The Company has recorded significant charges in the past relating
to supplier purchase commitments and inventory reserves. The Company may be
required to take similar charges attributable to forecasting inaccuracies in the
future.

Intellectual Property Risks

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

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

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

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

48

---

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

Legal Risks

The Company has entered
into multiple agreements, including service, supply, resale, distribution,
development and other agreements in multiple jurisdictions throughout the world.
In addition, as of March 30, 2003, the Company employed 790 people throughout
the world. Although the Company attempts to fulfill all of its obligations and
enforce all of its rights under these agreements and relationships, there is no
assurance that it will be able to do so. The Company has been sued and may be
sued, under numerous legal theories, including breach of contract, tort,
products liability, intellectual property infringement and other theories.
Complaints have been filed and may be filed, against the Company by contract
partners, third parties, employees and other individuals or entities. Such
litigation may have an adverse effect upon the Companys profitability or
public perception.

Restructuring and Other Cost Reduction Activities

The Company recorded
significant restructuring and other charges in 2001 in connection with
restructuring and other actions intended to reduce the Companys break-even
point, improve operating cash flow, streamline the Companys supply chain
and logistics strategy and otherwise improve Company efficiency, profitability
and viability. Additional restructuring actions may be necessary in the future.
There can be no assurance that any further restructuring activities will have
their desired effects.

Although the Company has
reduced operational expenses, there is no assurance that these reductions are
sustainable. Management expects that prior restructuring and other actions will
reduce future operational expenses. However, management anticipates the need to
implement additional operational cost reductions. There is no assurance that the
Company will be successful in this regard. In carrying out these actions, the
Company is at risk that key personnel and experience may be lost. The Company
may experience disruptions of information technology systems and other business
operations or may lose institutional knowledge. The Company may incur legal
liability and claims associated with the restructuring activities and layoffs.
Any such disruption could adversely affect the Companys financial results.

Retention of Key Employees

The Companys success
depends in large part upon the services of a number of key employees. The loss
of the services of one or more of these key employees could have a material
adverse effect on the Company. In June 2001, Werner T. Heid joined the Company
as President and Chief Executive Officer. Virtually all of the Companys
senior management employees, including the Vice President, Finance and Chief
Financial Officer; Vice President, General Counsel and Secretary; Executive Vice
President, Operations and Research and Development; Vice President, Human
Resources and Facilities; Vice President and General Manager, Mobile and Desktop
Solutions; Vice President and General Manager, Americas and several other
officers, joined the Company after that date. The Companys success will
depend in part on its ability to attract and retain highly skilled personnel and
to maintain continuity and stability within the Companys senior management
team.

Other Risk Factors

During the third quarter of
1999, the Company announced plans to cease its Nomai manufacturing operations in
Avranches, France and ceased such operations shortly thereafter. In connection
therewith, the Company recorded restructuring charges in 1999. The Company may
be forced to incur additional legal or other costs relating to this matter. See
Note 5 of the notes to condensed consolidated financial statements in Part I,
Item 1, for more information concerning Nomai litigation.

49

---

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

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

Doing business outside the
United States can be difficult to manage or to properly execute. American
executives may overlook local trends outside the U. S., market ineffectively in
countries outside of the U.S., institute efforts from an American perspective
that are unsuccessful outside the U.S. or be unaware of customs or laws in other
countries, with resulting legal exposure, complaints, cost inefficiencies or
weak sales.

The Company has substantial
balances of cash, cash equivalents and temporary investments. Significant
portions of these balances are invested in investment grade instruments and
securities, including commercial paper and corporate bonds. The Company monitors
these investments in accordance with the Companys investment policies.
Adverse events or developments in regard to a particular issuer could have a
material adverse affect on the Companys financial position or operating
results.

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 $20.00 (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. At
March 30, 2003, there were approximately 100,000 options subject to variable
plan accounting. 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.

Effective January 1, 2003,
the Company began expensing the cost of stock options that the Company grants to
employees. The Company is expensing stock options under the prospective method,
which is one of the three transition methods allowed by Statement of Financial
Accounting Standards (SFAS) No. 148 Accounting for Stock Based
Compensation  Transition and Disclosure. Under the prospective
method, the Company will begin expensing under the fair value method prescribed
by SFAS No. 123 Accounting for Stock-Based Compensation only stock
options that are granted or modified after January 1, 2003. It is difficult to
estimate the impact that expensing stock options will have on the Companys
statement of operations as this expense is dependent upon variables that are
difficult to predict, such as the number of options to be granted during a
period, the price of the Companys Common Stock at the time of grant, the
stock price volatility, the risk free interest rate during the period and the
expected average life of the option. A slight change in any one of these
variables can materially affect the amount of expense to be recorded.

50

---

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

In summary, a number of
factors could adversely affect the Company or could cause actual events or
results to differ materially from those indicated by any forward-looking
statements. Such factors include the ability of management to manage an
increasingly complex business in a highly competitive environment,
transportation issues, product and component pricing, changes in analysts
earnings estimates, competition, technological changes and advances, adoption of
technology or communications standards affecting the Companys products,
intellectual property rights, litigation, general economic conditions,
seasonality and changes or slowdowns in overall market demand for personal
computer products and other consumer products which utilize the Companys
products.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:

The Company is exposed to
various interest rate risks including foreign currency, interest rate and
securities price risks. The Company is exposed to various foreign currency
exchange rate risks that arise in the normal course of business. The
Companys functional currency is the U.S. dollar. The Company has
international operations resulting in receipts and payments in currencies that
differ from the functional currency of the Company. The Company attempts to
reduce foreign currency exchange rate risks by utilizing financial instruments,
including derivative transactions pursuant to Company policies. The Company uses
forward contracts to hedge those net assets and liabilities that, when
remeasured according to accounting principles generally accepted in the United
States of America, impact the 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 and the Singapore dollar. The Company enters
into contracts throughout the month as necessary. These contracts have
maturities that do not exceed 40 days.

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

The fair value of the
Companys forward contracts is subject to change as a result of potential
changes in market rates and prices. If the U.S. dollar were to strengthen or
weaken against these foreign currencies by 10%, the hypothetical value of the
contracts would have increased or decreased by approximately $1.2 million at
March 30, 2003. However, these forward exchange contracts are hedges,
consequently any market value gains or losses arising from these foreign
exchange contracts should be offset by foreign exchange losses or gains on the
underlying net assets and liabilities. Calculations of the above effects assume
that each rate changed in the same direction at the same time relative to the
U.S. dollar. The calculations reflect only those differences resulting from
mechanically replacing one exchange rate with another. They do not factor in any
potential effects that changes in currency exchange rates may have on statement
of operations translation, sales volume and prices and on local currency costs
of production. As of March 30, 2003, the Companys analysis indicated that
such market movements, given the offsetting foreign currency gains or losses on
the underlying net assets and liabilities, would not have a material effect on
the Companys consolidated financial position, net income or cash flows.
Factors that could impact the effectiveness of the Companys hedging
programs include volatility of the currency and interest rate markets,
availability of hedging instruments and the Companys ability to accurately
project net asset or liability positions. Actual gains and losses in the future
may differ materially from the Companys analysis depending on changes in
the timing and amount of interest rate and foreign exchange rate movements and
the Companys actual exposures and hedges.

51

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)

The Company did not have
any significant debt outstanding at March 30, 2003. Should the Company need to
borrow funds in the future, it would be subject to credit based interest rate
risks. The Company is also subject to interest rate risks on its current cash,
cash equivalents and temporary investment balances. For example, if the interest
rate on the Companys interest bearing investments were to change 1%,
interest income would have hypothetically increased or decreased by $1.1 million
during the first quarter of 2003. This hypothetical analysis does not take into
consideration the effects of the economic conditions that would give rise to
such an interest rate change or the Companys response to such hypothetical
conditions. The Company minimizes its credit risk associated with temporary
investments by using investment grade, liquid securities. The Company has
classified all of its temporary investments as available-for-sale securities.
Temporary investments at March 30, 2003 primarily consisted of corporate
obligations, U.S. treasuries, U.S. agencies, taxable and non-taxable municipal
obligations, asset backed securities and mortgage backed securities. None of the
Companys temporary investments have an effective maturity greater than 24
months and at March 30, 2003, the average duration of the Companys
temporary investments was just under one year. The Companys temporary
investments are purchased with maturities in excess of three months. Cash and
cash equivalents include all marketable securities purchased with maturities of
three or fewer months. Cash equivalents consist primarily of investment grade
corporate obligations, money market funds, repurchase agreements, asset backed
securities, mortgage backed securities, U.S. agencies, U.S. treasuries and
taxable and non-taxable municipal obligations.

## ITEM 4.
CONTROLS AND PROCEDURES

The Company maintains
disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 of the
Exchange Act) that are designed to ensure that information required to be
disclosed in the Companys Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the SECs
rules and forms and that such information is accumulated and communicated to the
Companys management, including the Companys Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives and management necessarily was required
to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.

Within 90 days prior
to the filing date of this report, the Company carried out an evaluation, under
the supervision and with the participation of the Companys management,
including the Companys Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Companys
disclosure controls and procedures. Based on the foregoing, the Companys
Chief Executive Officer and Chief Financial Officer concluded that the
Companys disclosure controls and procedures were effective.

There have
been no significant changes in the Companys internal controls or in other
factors that could significantly affect the internal controls subsequent to the
date that the Company completed its most recent evaluation.

52

---

# IOMEGA
CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION

## ITEM 1. LEGAL
PROCEEDINGS:

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

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

The Company did not sell
any equity securities during the first quarter of 2003 that were not registered
under the Securities Act of 1933.

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

|(a) | Exhibits.  The  exhibits  listed on the  Exhibit  Index filed as a part of
this  Quarterly  Report on Form 10-Q are incorporated herein by reference.                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(b) | Reports on Form 8-K. No reports on Form 8-K were filed or furnished during the quarter for which
this report on Form 10-Q is filed. On April 17, 2003, the Company furnished a Form 8-K
announcing the Company's financial results for the quarter ending March 30, 2003 under
Item 9. Regulation FD Disclosure (Information furnished pursuant to Item 12, Disclosure
of Results of Operations and Financial Condition).  Financial statements were included
in this Form 8-K.

---

# IOMEGA CORPORATION AND SUBSIDIARIES
SIGNATURES

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

|Dated: May 12, 2003
Dated: May 12, 2003 | IOMEGA CORPORATION
        (Registrant)/s/ Werner T. Heid
    Werner T. Heid
    President and Chief Executive Officer    /s/ Barry Zwarenstein
Barry Zwarenstein
    Vice President, Finance and
    Chief Financial Officer
|--------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

# IOMEGA CORPORATION AND SUBSIDIARIES

CERTIFICATION

I, Werner T. Heid, certify that:

|1. | I have reviewed this quarterly report on Form 10-Q of Iomega Corporation;
|-- | -------------------------------------------------------------------------

|2. | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | a) | designed such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this
quarterly report is being prepared;
| |  | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | b) | evaluated the effectiveness of the registrant's disclosure controls and procedures as of
a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date);
and
| |  | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date;
| |  | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | a) | all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| |  | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | b) | any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal controls; and
| |  | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Dated: May 12, 2003 | /s/ Werner T. Heid
    Werner T. Heid
    President and Chief Executive Officer
|------------------- | -------------------------------------------------------------------------------

---

# IOMEGA CORPORATION AND SUBSIDIARIES

CERTIFICATION

I, Barry Zwarenstein, certify that:

|1. | I have reviewed this quarterly report on Form 10-Q of Iomega Corporation;
|-- | -------------------------------------------------------------------------

|2. | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | a) | designed such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this
quarterly report is being prepared;
| |  | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | b) | evaluated the effectiveness of the registrant's disclosure controls and procedures as of
a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date);
and
| |  | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date;
| |  | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | a) | all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| |  | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | b) | any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal controls; and
| |  | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Dated: May 12, 2003 | /s/ Barry Zwarenstein
    Barry Zwarenstein
    Vice President, Finance and
    Chief Financial Officer
|------------------- | -------------------------------------------------------------------------------------------------------

---

## IOMEGA CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX

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

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

|10.23 | Agreement Regarding Lease, dated February
14,2003, between the Company, JNI Corp. and Pacific Plaza Carmel Valley LLC; and Assignment and
Assumption Agreement, dated February 27, 2003, between the Company and JNI Corp.
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|99.2 | Certification letter from Werner T. Heid, President
and Chief Executive Officer.
|---- | --------------------------------------------------------------------------------

|99.3 | Certification letter from Barry Zwarenstein, Vice President, Finance
and Chief Financial Officer.
|---- | -------------------------------------------------------------------------------------------------