`
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 27, 1998


                         COMMISSION FILE NUMBER 1-12333



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

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

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

                                 (801) 778-1000
              (Registrant's telephone number, including area code)

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


                                    Yes    X     No
                                        ------        ------

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of September 27, 1998.

Common Stock, par value $.03 1/3                                  267,087,105
     (Title of each class)                                    (Number of shares)
<PAGE>


                                                    
                               IOMEGA CORPORATION
                                TABLE OF CONTENTS
                                                                           Page
                          PART I - FINANCIAL STATEMENTS
Item 1.  Financial Statements

         Condensed consolidated balance sheets at September 27, 1998
              and December 31, 1997......................................     3

         Condensed consolidated statements of operations for the three months
              ended September 27, 1998 and September 28, 1997............     5

         Condensed consolidated statements of operations for the nine months
              ended September 27, 1998 and September 28, 1997 ...........     6

         Condensed consolidated statements of cash flows for the nine months
              ended September 27, 1998 and September 28, 1997............     7

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

Item 2.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations........................    17


                           PART II - OTHER INFORMATION
Item 1.  Legal Proceedings...............................................    32

Item 2.  Changes in Securities and Use of Proceeds.......................    33

Item 6.  Exhibits and Reports on 8-K.....................................    33

Signatures...............................................................    34

Exhibit Index............................................................    35

This  Quarterly  Report  on Form  10-Q  contains  a  number  of  forward-looking
statements,   including   statements   relating  to  the   expected   return  to
profitability  in the fourth quarter of 1998;  the expected  sufficiency of cash
and cash  equivalent  balances and  available  sources of  financing;  projected
effective  tax  rates;  the  anticipated  impact on gross  margins  of the sales
volumes of disks,  sales mix between disks and drives, the mix between OEM sales
and  sales  through  other  channels,  and the mix  between  Zip,  Jaz and Ditto
products;  anticipated  expenditures  (and the level of such  expenditures  as a
percentage  of sales) for  selling,  general  and  administrative  purposes  and
research and development  activities;  timetable for introducing Clik! products;
the anticipated  negative  impact on gross margins due to Clik!  start-up costs;
the possible  impact on future sales of  potential  quality  issues or component
shortages; expected gross margin percentages for the remainder of 1998; expected
sales levels due to seasonal demand; possible effects of Asian economic downturn
on future sales; expected cash flows in the fourth quarter of 1998; the possible
effects of an adverse outcome in legal  proceedings  described in Item 1 of Part
II; estimated additional  expenditures  associated with the Company's transition
to new  computer  systems;  and the  anticipated  Year 2000  compliance  of such
systems and the Company's hardware and utility software products. Any statements

<PAGE>

contained  herein that are not statements of historical fact may be deemed to be
forward-looking   statements.   Without   limiting  the  foregoing,   the  words
"believes", "anticipates", "plans", "expects", "intends" and similar expressions
are  intended  to  identify  forward-looking  statements.  There are a number of
important factors that could cause actual events or the Company's actual results
to differ  materially from those indicated by such  forward-looking  statements.
These factors include,  without  limitation,  those set forth under the captions
"Liquidity and Capital Resources,"  "Factors Affecting Future Operating Results"
and "Year 2000 Readiness" included under  "Management's  Discussion and Analysis
of Financial  Condition and Results of  Operations"  in Item 2 of Part I of this
Quarterly  Report on Form 10-Q, and those set forth in Item 1 of Part II of this
Quarterly Report on Form 10-Q.















<PAGE>

<TABLE>


                               IOMEGA CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                     ASSETS

                                 (In thousands)

                                            September 27,          December 31,
                                                     1998                  1997
                                            -------------          ------------
                                             (Unaudited)
<S>                                         <C>                    <C>

CURRENT ASSETS:
     Cash and cash equivalents              $      45,557          $    159,922
     Temporary investments                              -                36,319
     Trade receivables, net                       225,016               280,182
     Inventories                                  195,571               246,383
     Income taxes receivable                       47,536                     -
     Deferred tax assets                           54,518                47,996
     Other current assets                          20,716                11,982
                                            -------------          ------------
         Total current assets                     588,914               782,784
                                            -------------          ------------
PROPERTY, PLANT AND EQUIPMENT, at cost            348,656               272,219
     Less:  Accumulated depreciation and 
             amortization                        (147,921)              (96,550)
                                            -------------          ------------
     Net property, plant and equipment            200,735               175,669
                                            -------------          ------------

INTANGIBLE AND OTHER ASSETS, net                   39,460                 3,186
                                            -------------          ------------

                                            $     829,109          $    961,639
                                            =============          ============


</TABLE>






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


<PAGE>


                               IOMEGA CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      LIABILITIES AND STOCKHOLDERS' EQUITY

                        (In thousands, except share data)
<TABLE>
                                            September 27,          December 31,
                                                     1998                  1997
                                            -------------          ------------
                                              (Unaudited)
<S>                                         <C>                    <C>

CURRENT LIABILITIES:
     Related party notes payable (Note 5)   $      40,000          $          -
     Current portion of notes payable                 500                     -
     Accounts payable                             133,798               257,281
     Accrued payroll, vacation and bonus           19,784                31,728
     Deferred revenue                              17,848                42,423
     Income taxes payable                               -                22,440
     Accrued advertising                           31,663                32,628
     Other accrued liabilities                     60,448                52,613
     Current portion of capitalized 
       lease obligations                            5,060                 5,505
                                            -------------          ------------
         Total current liabilities                309,101               444,618
                                            -------------          ------------

CAPITALIZED LEASE OBLIGATIONS,
     net of current portion                         3,542                 2,939
                                            -------------          ------------
NOTES PAYABLE, net of current portion              61,091                     -
                                            -------------          ------------
DEFERRED INCOME TAXES                              13,580                10,334
                                            -------------          ------------
CONVERTIBLE SUBORDINATED NOTES,
     6.75%, due 2001                               45,683                45,683
                                            -------------          ------------

STOCKHOLDERS' EQUITY:
     Preferred Stock, $.01 par value; 
        authorized 4,750,000 shares,
        none issued                                     -                     -
     Series C, Junior Participating
        Preferred Stock, authorized
        250,000 shares, none issued                     -                     -
     Common Stock, $.03 1/3 par value;
        authorized  400,000,000  shares,
        issued 267,908,354 and 
        262,264,830 shares at September 27, 1998
        and December 31, 1997, respectively         8,929                 8,741
     Additional paid-in capital                   284,690               273,826
     Less:  821,249 and 829,210 Common
        Stock treasury shares
        at September 27, 1998 and 
        December 31, 1997, respectively,
        at cost                                    (6,177)               (6,099)
     Deferred compensation                              -                  (336)
     Retained earnings                            108,670               181,933
                                            -------------          ------------
         Total stockholders' equity               396,112               458,065
                                            -------------          ------------

                                            $     829,109          $    961,639
                                            =============          ============
</TABLE>

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

                               IOMEGA CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)


                                                  For the Three Months Ended
                                            September 27,         September 28,
                                                     1998                  1997
                                             ------------          ------------
<S>                                         <C>                   <C>
                                                        (Unaudited)

SALES                                        $    391,766          $    431,700

COST OF SALES                                     304,119               291,373
                                             ------------          ------------
     Gross margin                                  87,647               140,327
                                             ------------          ------------

OPERATING EXPENSES:
     Selling, general and administrative           72,587                72,631
     Research and development                      23,741                22,571
     Purchased in-process technology               11,100                     -
                                             ------------          ------------
         Total operating expenses                 107,428                95,202
                                             ------------          ------------

OPERATING INCOME (LOSS)                           (19,781)               45,125
     Interest and other income
       (expense), net                              (2,877)                1,055
                                             ------------          ------------

INCOME (LOSS) BEFORE INCOME TAXES                 (22,658)               46,180
     Benefit (provision) for income taxes           7,881               (16,172)
                                             ------------          ------------

NET INCOME (LOSS)                            $    (14,777)         $     30,008
                                             ============          ============

NET INCOME (LOSS) PER COMMON SHARE (Note 1):
     Basic                                   $      (0.06)         $       0.12
                                             ============          ============
     Diluted                                 $      (0.06)         $       0.11
                                             ============          ============

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (Notes 1 and 2)                266,920               259,688
                                             ============          ============

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - Assuming Dilution 
   (Notes 1 and 2)                                266,920               283,322
                                             ============          ============


</TABLE>




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



<PAGE>
<TABLE>



                               IOMEGA CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)


                                                 For the Nine Months Ended
                                            September 27,         September 28,
                                                     1998                  1997
                                             ------------          ------------
                                                        (Unaudited)
<S>                                          <C>                   <C>

SALES                                        $  1,193,097          $  1,193,206

COST OF SALES                                     909,090               828,141
                                             ------------          ------------
     Gross margin                                 284,007               365,065
                                             ------------          ------------

OPERATING EXPENSES:
     Selling, general and administrative          304,928               187,807
     Research and development                      77,177                54,295
     Purchased in-process technology               11,100                     -
                                             ------------          ------------
         Total operating expenses                 393,205               242,102
                                             ------------          ------------

OPERATING INCOME  (LOSS)                         (109,198)              122,963
     Interest and other income (expense), net      (3,358)               (1,219)
                                             ------------          ------------

INCOME (LOSS) BEFORE INCOME TAXES                (112,556)              121,744
     Benefit (provision) for income taxes          39,293               (42,513)
                                             ------------          ------------

NET INCOME (LOSS)                            $    (73,263)         $     79,231
                                             ============          ============

NET INCOME (LOSS) PER COMMON SHARE (Note 1):
     Basic                                   $      (0.28)         $       0.31
                                             ============          ============
     Diluted                                 $      (0.28)         $       0.29
                                             ============          ============

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (Notes 1 and 2)                265,032               258,673
                                             ============          ============

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - Assuming Dilution 
   (Notes 1 and 2)                                265,032               282,048
                                             ============          ============


</TABLE>







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



<PAGE>
<TABLE>


                               IOMEGA CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (In thousands)

                                                    For the Nine Months Ended
                                                  September 27,   September 28,
                                                           1998            1997
                                                      ---------       ---------
                                                              (Unaudited)
<S>                                                  <C>              <C>
Cash Flows from Operating Activities:
     Net Income (Loss)                                $ (73,263)      $  79,231
     Non-Cash Revenue and Expense Adjustments:
         Depreciation and amortization                   48,379          26,701
         Purchased in-process technology                 11,100               -
         Deferred income tax benefit                     (3,276)         (1,513)
         Tax benefit from dispositions of
            employee stock                                6,462           2,616
         Other                                            5,583              19
     Changes in Assets and Liabilities:
         Trade receivables, net                          62,875         (53,451)
         Inventories                                     53,896         (16,504)
         Other current assets                            (6,677)         15,996
         Accounts payable                              (135,503)         60,413
         Accrued liabilities                            (36,823)         22,364
         Income taxes                                   (69,976)         23,431
                                                      ---------       ---------
             Net cash provided by (used in) 
               operating activities                    (137,223)        159,303
                                                      ---------       ---------

Cash Flows from Investing Activities:
     Purchase of property, plant and equipment          (67,617)        (52,094)
     Purchase of Nomai S.A., net of cash acquired       (41,579)              -
     Sale of temporary investments                       36,319               -
     Net (increase) decrease in other assets             (3,410)            173
                                                      ---------       ---------
         Net cash used in investing activities          (76,287)        (51,921)
                                                      ---------       ---------

Cash Flows from Financing Activities:
     Proceeds from sale of Common Stock                   4,758           2,564
     Proceeds from issuance of notes payable            120,000          87,295
     Payments on notes payable and capitalized 
        lease obligations                               (25,148)       (137,793)
     Purchase of Common Stock                              (465)         (1,736)
                                                      ---------       ---------
         Net cash provided by (used in)
            financing activities                         99,145         (49,670)
                                                      ---------       ---------
Net Increase (Decrease)  in Cash and Cash Equivalents  (114,365)         57,712
Cash and Cash Equivalents at Beginning of Period        159,922         108,312
                                                      ---------       ---------
Cash and Cash Equivalents at End of Period            $  45,557       $ 166,024
                                                      =========       =========

</TABLE>

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


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

                                 (In thousands)


                                                    For the Nine Months Ended
                                                  September 27,   September 28,
                                                           1998            1997
                                                      ---------       ---------
                                                             (Unaudited)
<S>                                                  <C>          <C>
Supplemental Schedule of Non-Cash
Investing and Financing Activities:

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

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

     Conversion of Subordinated Notes to Common Stock $       -       $      50
                                                      =========       =========


</TABLE>





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


                               IOMEGA CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(1)      SIGNIFICANT ACCOUNTING POLICIES

         In the opinion of the Company's management,  the accompanying condensed
         consolidated  financial statements reflect all adjustments  (consisting
         only of normal  recurring  adjustments)  which are necessary to present
         fairly the  financial  position of the Company as of September 27, 1998
         and  December 31, 1997,  the results of  operations  for the three- and
         nine-month periods ended September 27, 1998 and September 28, 1997, and
         cash flows for the  nine-month  periods  ended  September  27, 1998 and
         September 28, 1997.

         The results of operations for the three- and  nine-month  periods ended
         September 27, 1998 are not necessarily  indicative of the results to be
         expected for the entire year or for any future period.

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

         Principles  of  Consolidation  - The condensed  consolidated  financial
         statements   include  the  accounts  of  Iomega   Corporation  and  its
         majority-owned   subsidiaries   after   elimination   of  all  material
         intercompany accounts and transactions.

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

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

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

         Revenue   Recognition  -  The  Company's   customers  include  original
         equipment manufacturers,  end users, retailers,  distributors and value
         added manufacturers.  Revenue,  less reserves for returns, is generally
         recognized upon shipment to the customer.

         In addition to reserves for returns,  the Company defers recognition of
         revenue on estimated  excess  inventory in the  distribution and retail
         channels. For this purpose, excess inventory is the amount of inventory
         which  exceeds  the  channels'  30 day  requirements  as  estimated  by
         management.  The gross margin  associated  with deferral of revenue for
         

<PAGE>


                               IOMEGA CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


         returns  and estimated excess channel  inventory  totaled $17.8 million
         and  $42.4  million  at  September  27,  1998 and  December  31,  1997,
         respectively,  and is included  in deferred revenue in the accompanying
         condensed consolidated balance sheets.

         Price  Protection and Volume Rebates - The Company has agreements  with
         certain of its customers which, in the event of a price decrease, allow
         those customers  (subject to certain  limitations)  credit equal to the
         difference  between the price  originally paid and the reduced price on
         units in the customers'  inventories at the date of the price decrease.
         When a price decrease is anticipated,  the Company establishes reserves
         against  gross  accounts   receivable  for  amounts   estimated  to  be
         reimbursed to the qualifying customers.

         In addition,  the Company records  reserves at the time of shipment for
         estimated  volume rebates.  These reserves for volume rebates and price
         protection credits totaled $52.3 million and $28.5 million at September
         27, 1998 and December 31, 1997,  respectively,  and are netted  against
         accounts receivable in the accompanying  condensed consolidated balance
         sheets.

         Cash  Equivalents  and  Temporary  Investments  - For  purposes  of the
         statements of cash flows, the Company  considers all highly liquid debt
         instruments  purchased  with  maturities of three or fewer months to be
         cash equivalents.  Cash equivalents primarily consist of investments in
         money market  mutual funds,  commercial  paper,  option rate  preferred
         stock and taxable  municipal  bonds and notes and are recorded at cost,
         which  approximates  market.  Instruments  with maturities in excess of
         three months are classified as temporary  investments.  The Company has
         classified  its entire  portfolio of temporary  investments at December
         31, 1997, as held-to-maturity.  These temporary  investments  consisted
         primarily of  commercial  paper and  municipal  bonds.  At December 31,
         1997, all temporary investments had maturities of less than six months.
         There were no temporary investments at September 27, 1998.

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

                               September 27,       December 31,
                                        1998               1997
                                 -----------        -----------
         <S>                   <C>                 <C>

         Raw materials           $    93,013        $   130,049
         Work-in-process              11,489             18,714
         Finished goods               91,069             97,620
                                 -----------        -----------
                                 $   195,571        $   246,383
                                 ===========        ===========


</TABLE>

<PAGE>


                               IOMEGA CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


         Net Income (Loss) Per Common Share - Basic net income (loss) per common
         share  (Basic EPS)  excludes  dilution  and is computed by dividing net
         income  (loss)  by  the  weighted   average  number  of  common  shares
         outstanding  during the  period.  Diluted  net income per common  share
         (Diluted EPS) reflects the potential dilution that could occur if stock
         options or other  contracts  to issue  common  stock were  exercised or
         converted into common stock.  Diluted EPS for the three- and nine-month
         periods ended September 28, 1997, were determined  under the assumption
         that the  convertible  subordinated  notes were converted on January 1,
         1997.  The  computation  of  Diluted  EPS does not assume  exercise  or
         conversion of securities that would have an antidilutive  effect on net
         income per common share.  In periods where losses are recorded,  common
         stock  equivalents  would decrease the loss per share and are therefore
         not added to the weighted average shares outstanding. Net income (loss)
         per common share  amounts and share data have been restated for 1997 to
         reflect Basic and Diluted EPS and the stock split described in Note 2.

         Following is a reconciliation of the numerator and denominator of Basic
         EPS to the  numerator  and  denominator  of Diluted EPS for all periods
         presented (in thousands, except per share data):
<TABLE>

                                          Net
                                     Income (Loss)      Shares        Per Share
                                       (Numerator)   (Denominator)       Amount
                                     ------------    ------------     ---------  
         <S>                         <C>             <C>              <C>

         For the Three Months Ended

         September 27, 1998
         Basic EPS                   $    (14,777)        266,920     $   (0.06)
            Effect of options                   -               -
            Effect of convertible
               subordinated notes               -               -
                                     ------------    ------------
         Diluted EPS                 $    (14,777)        266,920     $   (0.06)
                                     ============    ============

         September 28, 1997
         Basic EPS                   $     30,008         259,688     $    0.12
            Effect of options                   -          14,382
            Effect of convertible 
               subordinated notes             501           9,252
                                     ------------    ------------
         Diluted EPS                 $     30,509         283,322     $    0.11
                                     ============    ============

</TABLE>


<PAGE>


                               IOMEGA CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                 Net Income (loss) Per Common Share (continued)
<TABLE>

                                          Net
                                     Income (Loss)      Shares        Per Share
                                       (Numerator)   (Denominator)       Amount
                                     ------------    ------------     ---------  
         <S>                         <C>             <C>              <C>

         For the Nine Months Ended

         September 27, 1998
         Basic EPS                   $    (73,263)        265,032     $   (0.28)
            Effect of options                   -               -
            Effect of convertible 
               subordinated notes               -               -
                                     ------------    ------------
         Diluted EPS                 $    (73,263)        265,032     $   (0.28)
                                     ============    ============


         September 28, 1997
         Basic EPS                   $     79,231         258,673     $    0.31
            Effect of options                   -          14,120
            Effect of convertible 
               subordinated notes           1,503           9,255
                                     ------------    ------------
         Diluted EPS                 $     80,734         282,048      $   0.29
                                     ============    ============

</TABLE>

         Recent  Accounting   Pronouncements  -  In  June  1997,  the  Financial
         Accounting  Standards  Board issued  Statement of Financial  Accounting
         Standards No. 131  "Disclosures  about  Segments of an  Enterprise  and
         Related Information" (SFAS 131). SFAS 131 establishes new standards for
         public companies to report information about their operating  segments,
         products  and  services,  geographic  areas and major  customers.  This
         statement is effective for financial statements issued for fiscal years
         beginning  after  December  15,  1997.  In  June  1998,  the  Financial
         Accounting  Standards  Board issued  Statement of Financial  Accounting
         Standards No. 133  "Accounting  for Derivative  Instruments and Hedging
         Activities"  (SFAS  133).  SFAS  133  establishes  new  accounting  and
         reporting   standards  for  companies  to  report   information   about
         derivative   instruments,   including  certain  derivative  instruments
         embedded in other contracts,  (collectively referred to as derivatives)
         and for hedging  activities.  This statement is effective for financial
         statements  issued for all fiscal  quarters of fiscal  years  beginning
         after June 15, 1999.

         The Company plans to adopt SFAS 131 in its December 31, 1998  financial
         statements. The Company has not determined when it will adopt SFAS 133.
         The Company  does not expect  these  pronouncements  to have a material
         impact on the Company's  results of operations,  financial  position or
         liquidity.


<PAGE>



                               IOMEGA CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


(2)      STOCK SPLIT

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

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

(3)      ACQUISITION

         On July 1, 1998,  the Company  purchased a majority  interest in Nomai,
         S.A.  ("Nomai"),  a  France-based  manufacturer  of  removable  storage
         systems,  from Nomai's principal and other major shareholders,  for 188
         French francs per share, or approximately $21 million.  The interest in
         Nomai owned by Iomega as of July 1, 1998 constituted  approximately 54%
         of the total shares of Nomai  outstanding  on that date. As required by
         French law, the Company  conducted a tender  offer,  offering all other
         shareholders  of Nomai the  opportunity  to sell their shares to Iomega
         for 188 French  francs per share.  The tender  offer was  completed  in
         August 1998,  and resulted in the Company owning  approximately  98% of
         Nomai's outstanding shares. On July 1, 1998, Iomega also acquired,  for
         a purchase price of $3 million, certain non-infringing technology owned
         by Nomai and used in the  manufacture of disk products Nomai claimed to
         be compatible  with certain of the  Company's  Zip and Jaz drives.  The
         total purchase price of the acquisition was  approximately  $45 million
         ($42 million, net of cash acquired).

         The transaction was accounted for as a purchase and, on this basis, the
         excess  purchase  price over the  estimated  fair value of net tangible
         assets  has  been  allocated,  based  upon an  independent  third-party
         valuation, to purchased in-process technology and goodwill.  During the
         third quarter,  the Company recorded a non-cash pre-tax charge of $11.1
         million related to purchased  in-process  technology,  representing the
         appraised value of technology  still in the development  stage that was
         not  considered to have reached  technological  feasibility  and had no
         alternative  future use.  Goodwill of approximately $32 million arising
         from the acquisition is being  amortized on a straight-line  basis over
         seven  years.  The results of  operations  of Nomai are included in the
         Company's  consolidated condensed financial statements from the date of
         acquisition.  Nomai's sales of approximately $24.1 million for the year
         ended  December 31, 1997 are not  considered  material to the Company's
         consolidated financial statements.




<PAGE>


                               IOMEGA CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


 (4)     INCOME TAXES

         For the three- and  nine-months  ended  September 27, 1998, the Company
         recorded an income tax benefit at an  effective  rate of  approximately
         35%. This tax rate is based on the Company's  projected mix of domestic
         and foreign pre-tax income (loss) for 1998.

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

         Cash paid for income taxes  was $28.3 million for the first nine months
         of 1998 and $16.9 million for the corresponding period in 1997.

(5)      DEBT

         Notes  Payable - On March 11,  1997,  the Company  entered  into a $200
         million  Senior  Secured  Credit  Facility with Morgan  Guaranty  Trust
         Company of New York,  Citibank,  N.A. and a syndicate of other lenders.
         During  1998,  the  Company  and the  lenders  have  agreed to  several
         amendments to and waivers under the Senior Secured Credit  Facility (as
         most recently amended, effective July 15, 1998, the "Credit Facility").
         The Credit Facility is a $150 million secured  revolving line of credit
         that expires on July 14, 2000,  and is secured by accounts  receivable,
         domestic   inventory,    domestic   intellectual   property,    general
         intangibles,  equipment,  personal property, investment property, and a
         pledge of 65% of the stock of  certain of the  Company's  subsidiaries.
         Borrowing  availability under the Credit Facility is based on an agreed
         upon  advance  rate on  receivables  and  inventory  not to exceed $150
         million with a floor of $110 million through May 1999. Under the Credit
         Facility, the Company may borrow at a base rate, which is the higher of
         prime or the sum of 0.5% plus the  Federal  funds rate plus a margin of
         .88% to 1.63%,  for the first year,  and  thereafter  between  0.0% and
         1.63% depending on the Company's  profitability  and utilization of the
         Credit  Facility,  or at LIBOR plus a margin of 2.0% to 2.75%,  for the
         first year,  and  thereafter  between 1.25% and 2.75%  depending on the
         Company's  profitability and utilization of the Credit Facility.  Total
         availability  under the Credit  Facility at September 27, 1998 was $150
         million of which $60 million was outstanding. Among other restrictions,
         the Credit Facility treats a change of control (as defined) as an event
         of  default  and  requires  the   maintenance   of  minimum  levels  of
         consolidated tangible net worth and earnings.

         In July 1998,  the Company  borrowed a total of $40 million from Idanta
         Partners  Ltd.  and  another  entity  affiliated  with  David J.  Dunn,
         Chairman  of the Board,  Iomega  Corporation,  pursuant  to a series of
         three senior  subordinated notes. The principal and interest associated
         with these notes are payable on March 31,  1999.  The initial  interest
         rate is 8.7% per  annum,  increasing  through  January  1,  1999 to the
         greater  of 12.7%  per  annum  or the  weighted-average  interest  rate
         charged under the Credit Facility at January 1, 1999 plus 2% per annum.
         The  proceeds of these notes were used for the cash  purchase of Nomai.
         In  addition,  the  Company  assumed  debt  obligations  as part of the
         purchase of Nomai.  The Company  assumed $1.6 million of notes payable,
         of which the current  and  long-term  portions at  September  27, 1998,
         were $0.5  million and $1.1  million, respectively.
<PAGE>

                               IOMEGA CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         Capital  Leases - The Company has entered  into various  agreements  to
         obtain   capital   lease   financing   for  the   purchase  of  certain
         manufacturing   equipment,   software,   office   furniture  and  other
         equipment.  The leases have terms  ranging  from 36- to  60-months  and
         mature at various dates from July 1998 to January  2001.  Principal and
         interest  payments under the various  agreements are payable monthly or
         quarterly.  Interest rates are fixed and range from 7.1% to 10.2%.  The
         leases are secured by the  underlying  leased  equipment,  software and
         furniture.  The  Company  assumed  $3.8  million of  capitalized  lease
         obligations  as a part of the  purchase of Nomai,  of which the current
         and  long-term  portions at September  27, 1998,  were $1.0 million and
         $2.8 million, respectively.

         Cash paid for interest was $6.5 million and $4.8 million, respectively,
         for the  first  nine  months of 1998 and 1997,  including  interest  on
         capital leases.  Included in interest expense for the first nine months
         of 1998 and 1997,  respectively,  was $0.7  million and $0.6 million of
         amortization of deferred charges associated with obtaining the debt.

(6)      OTHER MATTERS

         Significant  Customers - During the three  months and nine months ended
         September  27,  1998,  sales  to  Ingram  Micro,  Inc.   accounted  for
         approximately  19.0% and 14.8%,  respectively,  of consolidated  sales.
         During the three months and nine months ended September 28, 1997, sales
         to Ingram Micro,  Inc.  accounted for 12.0% of  consolidated  sales. No
         other  single  customer  accounted  for more than 10% of the  Company's
         sales for these periods.

         Forward  Exchange  Contracts - The Company has  commitments to sell and
         purchase foreign  currencies  relating to forward exchange contracts in
         order to hedge against future currency fluctuations.

         At September 27, 1998  outstanding  forward  exchange sales  (purchase)
         contracts, which all mature in December 1998, were as follows:




<PAGE>


                               IOMEGA CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


<TABLE>

                                                          Contracted
                  Currency             Amount            Forward Rate
                  <S>                  <C>               <C>

                  British Pound         (1,350,000)              1.67
                  Dutch Guilder         (6,050,000)              1.89
                  French Franc          33,600,000               5.63
                  German Mark           (2,500,000)              1.68
                  Irish Punt              (300,000)              1.48
                  Japanese Yen         465,000,000             134.40
                  Singapore Dollar      (3,100,000)              1.73
                  Swiss Franc           (2,100,000)              1.38

</TABLE>

         The contracts are revalued at the month-end spot rate. Gains and losses
         on foreign  currency  contracts  intended to be used to hedge operating
         requirements  are  reported  currently  in income.  Gains and losses on
         foreign  currency  contracts  intended  to meet  firm  commitments  are
         deferred  and are  recognized  as part  of the  cost of the  underlying
         transaction  being hedged.  At September 27, 1998, all of the Company's
         foreign   currency   contracts  were  being  used  to  hedge  operating
         requirements.  The Company's  theoretical risk in these transactions is
         the cost of replacing,  at current market rates, these contracts in the
         event of default by the counterparty.



<PAGE>


                               IOMEGA CORPORATION

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


RESULTS OF OPERATIONS

The Company  reported sales of $391.8 million and a net loss,  before a non-cash
special  charge,  of $7.6 million,  or $(0.03) per diluted  share,  in the third
quarter of 1998.  This  compares  to sales of $431.7  million  and net income of
$30.0 million,  or $0.11 per diluted share, in the third quarter of 1997. In the
third quarter of 1998, the Company recorded a pre-tax non-cash special charge of
$11.1  million,  related  to  purchased  in-process  technology,  as part of its
acquisition of Nomai,  S.A.,  ("Nomai").  The total after-tax loss for the third
quarter of 1998, including this special charge, was $14.8 million or $(0.06) per
diluted share. For the first nine months of 1998, sales were $1.2 billion with a
net loss, including the third quarter special charge and a special charge in the
second quarter relating to cost reduction efforts,  of $73.3 million, or $(0.28)
per diluted  share,  compared  to sales of $1.2  billion and net income of $79.2
million or $0.29 per diluted share for the first nine months of 1997.

SALES

Sales for the three months ended  September 27, 1998 decreased by $39.9 million,
or 9.3%,  when  compared to the  corresponding  period of 1997,  primarily  as a
result of price  reductions on Zip and Jaz disk and drive products.  Total drive
sales of $228.1  million  decreased by 10.6% as compared to the third quarter of
1997.  Total unit drive  shipments for the three months ended September 27, 1998
increased by 23.2% as compared to the third quarter of 1997. Total disk sales of
$164.0 million decreased by 7.2% as compared to the third quarter of 1997. Total
unit disk  shipments for the three months ended  September 27, 1998 increased by
25.4% as compared to the third quarter of 1997.

Sales of Zip products in the third quarter of 1998 totaled  $279.2  million,  or
71.3% of total  sales,  and were flat with the third  quarter of 1997.  Zip unit
drive  shipments  increased by 38.7% from the third  quarter of 1997,  while Zip
unit disk shipments  increased by 30.1%.  Sales of Zip OEM drives  accounted for
over 50% of total Zip drive shipments in the third quarter of 1998,  compared to
approximately 40% in the third quarter of 1997.

Jaz product sales in the third quarter of 1998 were $95.5  million,  or 24.4% of
total sales,  representing  a 23.9% decrease from the third quarter of 1997. Jaz
unit drive  shipments  decreased  by 33.9% as compared  to the third  quarter of
1997, while Jaz unit disk shipments decreased by 8.9%.

Ditto product sales in the third quarter of 1998 were $13.2 million,  or 3.4% of
total sales,  representing a 49.2% decline from the third quarter of 1997. Ditto
unit drive  shipments  decreased  by 59.9% as compared  to the third  quarter of
1997, while Ditto unit disk shipments decreased by 36.6%.

Geographically,  sales in the Americas  were $268.2  million,  or 68.5% of total
sales, in the third quarter of 1998, as compared to $286.7 million,  or 66.4% of
total sales,  in the third quarter of 1997.  Sales in Europe were $90.6 million,
or 23.1% of total  sales,  in the third  quarter of 1998,  as compared to $108.2
million,  or 25.1% of total sales,  in the third quarter of 1997.  Sales in Asia
were $33.0  million,  or 8.4% of total sales,  in the third  quarter of 1998, as
compared to $36.8 million, or 8.5% of total sales, in the third quarter of 1997.
<PAGE>

                               IOMEGA CORPORATION

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


Sales  for the  nine  months  ended  September  27,  1998  were  equal  with the
corresponding period of 1997 despite price reductions or rebates for all product
lines.  Sales of Zip products  totaled $829.8 million,  or 69.5% of total sales,
representing a 10.3% increase from the corresponding period of 1997. Jaz product
sales totaled $292.6  million,  or 24.5% of total sales,  representing  an 15.8%
decrease from the corresponding  period of 1997. Sales of Ditto products totaled
$64.7  million,  or 5.4% of total sales,  representing a 28.5% decrease from the
corresponding period of 1997.

By geographic  region,  sales in the Americas were $823.8  million,  or 69.0% of
total sales in the first nine months of 1998, as compared to $760.5 million,  or
63.7% of total  sales,  for the first nine months of 1997.  Sales in Europe were
$273.1  million,  or 22.9% of total sales,  in the first nine months of 1998, as
compared to $323.0 million,  or 27.1% of total sales,  for the first nine months
of 1997. Sales in Asia were $96.2 million,  or 8.1% of total sales, in the first
nine months of 1998, as compared to $109.6 million,  or 9.2% of total sales, for
the first nine months of 1997.

GROSS MARGIN

The  Company's  overall  gross margin was 22.4% in the third quarter of 1998, as
compared to 32.5% in the third quarter of 1997.  Overall gross margin percentage
for the first nine months of 1998 was 23.8%,  as compared to 30.6% for the first
nine months of 1997.  This  decrease in gross margin for both the third  quarter
and the first nine months of 1998, when compared to the corresponding periods of
1997,  was due  primarily  to  price  decreases  on Zip and Jaz  drive  and disk
products.  In addition,  a higher  percentage  of Zip drives  shipped to the OEM
channel, where prices and margins are lower than drives sold to distribution and
retail channels, contributed to the decline in the gross margin percentage.

Future gross margin percentage will continue to be impacted by the percentage of
OEM drive sales versus  retail and  distribution  sales.  Gross  margins for the
remainder of 1998 will also depend on sales volumes of Zip and Jaz disks,  which
generate  significantly higher gross margins than the corresponding  drives, and
on the mix between  disks and drives,  and between Zip, Jaz and Ditto  products.
Additionally, management expects that the planned introduction of Clik! products
during the fourth quarter of 1998 will initially have a negative impact on gross
margins due to start-up costs associated with early production  volumes.  In the
event of a delay in the planned commercial  availability of Clik!, such negative
impact may be greater. The Company expects gross margin percentages to be in the
mid twenty  percent  range for the remainder of 1998.  However,  there can be no
assurance that such expected margin percentages will be realized.
<PAGE>

                               IOMEGA CORPORATION

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


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling,  general and administrative expenses were flat in the third quarter and
increased by $117.1 million in the first nine months of 1998, respectively, when
compared to the corresponding periods of 1997, and  increased as a percentage of
sales to 18.5% and 25.6% in the third  quarter  and first  nine  months of 1998,
respectively,  from 16.8% and 15.7%, respectively,  in the corresponding periods
of 1997. Included in selling,  general and administrative  expenses in the first
nine months of 1998 was a special  pre-tax  charge of $9.4 million in the second
quarter,   representing   expenses   associated  with  cost  reduction  measures
implemented  by the  Company  to  improve  financial  performance  and  included
employee severance and outplacement  charges,  cash and non-cash  write-offs for
facility related assets and other miscellaneous charges.  Excluding this charge,
selling,  general and  administrative  expenses  increased by $107.7 million and
represented 24.8% of sales in the first nine months of 1998,  respectively.  The
increase  was  primarily  due to a  combination  of  substantial  marketing  and
advertising  program  expenditures  in the first and  second  quarters  of 1998,
increased  spending  on  other,  non-advertising  related  sales  and  marketing
activities  primarily  due to  international  expansion,  increased  spending on
customer   satisfaction   programs   and  an  increase  in  other   general  and
administrative expenses, comprised mainly of information system expenditures and
legal  fees.   Management  is  focused  on  maintaining  selling,   general  and
administrative  expenses  at a  range  of  15% to 20%  of  sales.  However,  the
Company's  success  in  achieving  this  depends  in part on the levels of sales
achieved  during the  remainder of 1998 and there can be no  assurance  that the
Company's cost reduction  measures,  reorganization  and other efforts to reduce
the  percentage  of sales  represented  by selling,  general and  administrative
expenses will be successful.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses for the third quarter and first nine months of
1998  increased  by  $1.2  million,  or  5.2%,  and  $22.9  million,  or  42.1%,
respectively,  when compared to the third quarter and first nine months of 1997,
and  increased as a percentage of sales to 6.1% and 6.5%,  respectively,  in the
third quarter and first nine months of 1998,  from 5.2% and 4.6%,  respectively,
in the third quarter and first nine months of 1997. The increase in research and
development  expense for the third  quarter and first nine months of 1998,  when
compared to the  corresponding  periods of 1997,  was primarily due to increased
spending for Clik! development during the periods. The remainder of the increase
was  the  result  of  expenditures  related  to the  continued  development  and
enhancement  of Zip and Jaz  products.  Management  is  targeting  the  level of
spending for research and development  during the remainder of 1998 to be in the
range  of 3% to 5% of sales to  support  planned  new  product  development  and
existing product enhancements.  However, the Company's success in achieving this
depends in part on the levels of sales achieved during the remainder of 1998 and
there can be no  assurance  that  efforts  to  reduce  the  percentage  of sales
represented by research and development expenses will be successful.

ACQUISITION AND PURCHASED IN-PROCESS TECHNOLOGY

During the  quarter,  the  Company  acquired a  majority  interest  in Nomai for
approximately  $45 million of which  approximately $32 million was classified as
goodwill.  The goodwill is being amortized on a  straight-line  basis over seven
years.  The  Company's  current  plans for Nomai  include:  1)  enhancement  and
distribution  of Nomai's  existing CD-RW drive,  2) production of Iomega's Clik!
disks following their  introduction,  3) continued  production of 1.44 MB floppy
disks and 4) development  and production of other potential  products.  However,
there can be no assurance  that the Company will be successful  in  implementing
these plans or achieving profitability from Nomai operations.  In the event that
the Company is not successful,  the goodwill may not be realizable and therefore
may require a writedown.

<PAGE>

                               IOMEGA CORPORATION

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



Upon completion of the Nomai acquisition, the Company immediately expensed $11.1
million representing  purchased  in-process  technology that has not yet reached
technological  feasibility  and has no  alternative  future  use (see  Note 3 to
condensed consolidated  financial  statements).  The value of the technology was
based upon an independent third-party valuation.

OTHER INCOME AND EXPENSE

The Company  recorded  interest  income of $0.8  million and $3.4 million in the
third  quarter  and first nine months of 1998,  as compared to $2.2  million and
$4.7 million in the third  quarter and first nine months of 1997,  respectively.
Lower average cash  balances  during the third quarter and the first nine months
of 1998,  resulted  in a  decrease  in  interest  income  when  compared  to the
corresponding  periods  of 1997.  Interest  expense  was $3.6  million  and $7.0
million in the third  quarter  and first nine months of 1998,  respectively,  as
compared to $1.4  million and $5.1  million in the third  quarter and first nine
months of 1997, respectively.  The increase in interest expense during the third
quarter  and the first  nine  months of 1998 was  primarily  due to the  Company
entering into a debt  agreement  with Idanta  Partners,  Ltd. and another entity
affiliated with David J. Dunn, Chairman of the Board, Iomega Corporation,  under
which the Company  borrowed $40 million pursuant to a series of three notes. The
increase  was also due to increased  average  borrowings  outstanding  under the
Company's Credit Facility during the period. These factors were partially offset
by the  retirement  of a  promissory  note  for the  purchase  of the  Company's
manufacturing  facility in Malaysia and the repayment of other term notes during
1997.

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

INCOME TAXES

For the first nine months of 1998, the Company recorded an income tax benefit of
$39.3 million,  representing an effective income tax rate of approximately  35%.
The Company  expects its effective tax rate to remain at  approximately  35% for
the remainder of 1998. However,  differences  between the currently  anticipated
mix and the actual mix of foreign income versus domestic income,  along with the
ability of the Company to  permanently  invest foreign  earnings  outside of the
U.S. and its ability to meet the  requirements  for  favorable  tax treatment in
certain  jurisdictions  outside of the U.S. could impact the Company's effective
tax rate.

SEASONALITY

The Company's Zip products are targeted  primarily to the retail consumer market
and personal  computer  OEMs.  The Company's Jaz and Ditto products are targeted
primarily to the retail consumer market. Management believes the markets for the
Company's products are generally  seasonal,  with a higher proportional share of
total  sales  occurring  in the  fourth  quarter  and sales  slowdowns  commonly
occurring during the first quarter and summer months. Accordingly,  revenues and
growth  rates  for any  prior  quarter  are not  necessarily  indicative  of the
revenues or growth rates to be expected in any future quarter.

<PAGE>

                               IOMEGA CORPORATION

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



LIQUIDITY AND CAPITAL RESOURCES

At  September  27,  1998,  the  Company had cash and cash  equivalents  of $45.6
million,  working  capital of $279.8  million,  and a ratio of current assets to
current  liabilities  of 1.9 to 1.  During  the first nine  months of 1998,  the
Company used a total of $114.4 million of cash and cash equivalents. The primary
components  were the acquisition of Nomai,  the purchase of property,  plant and
equipment and the reduction of accounts payable,  accrued liabilities and income
taxes payable that were partially offset by decreases in accounts receivable and
inventory.  These items were partially  funded by debt and the sale of temporary
investments.

Accounts  payable  decreased  by  $135.5  million,  due  primarily  to timing of
inventory  receipts  and  related  payments  to  vendors.   Accrued  liabilities
decreased by $36.8  million due  primarily  to  decreases  in deferred  revenue,
accrued  payroll and related  liabilities.  Income taxes  payable  decreased and
income  taxes  receivable  increased  as a result of the  payment of 1997 income
taxes and the Company  recognizing a benefit for income taxes during 1998. These
uses of cash were partially  offset by a $62.9 million  decrease in net accounts
receivable,  due  primarily  to  decreased  sales  and the  timing  of sales and
collections  during the respective  periods and a decrease in inventory of $53.9
million.  The decrease in inventory was due  primarily to improved  supply chain
management and changes to the Company's procurement and manufacturing  processes
to a demand pull model in the first nine months of 1998.

The Company used $76.3 million of cash in investing  activities during the first
nine months of 1998, primarily in the purchase of property,  plant and equipment
and the Company's acquisition of Nomai during the third quarter of 1998 that was
partially  offset  by the  sale  of  temporary  investments.  Cash  provided  by
financing activities totaled $99.1 million during the first nine months of 1998,
and included $80.0 million of proceeds from  borrowings on the Company's  Credit
Facility  that  were  partially  offset  by $25.1  million  in  payments  on the
Company's Credit facility and capitalized  lease  obligations for a net increase
in borrowings on the Credit  Facility of $60 million.  The Company also borrowed
$40.0 million from Idanta  Partners  Ltd., and another  entity  affiliated  with
David J.  Dunn,  Chairman  of the Board,  Iomega  Corporation,  to  finance  the
acquisition of Nomai.

On March 11, 1997, the Company entered into a $200 million Senior Secured Credit
Facility with Morgan  Guaranty Trust Company of New York,  Citibank,  N.A. and a
syndicate of other lenders. During 1998, the Company and the lenders have agreed
to several amendments to and waivers under the Credit Facility (as most recently
amended, effective July 15, 1998, the "Credit Facility"). The Credit Facility is
a $150 million  secured  revolving line of credit that expires on July 14, 2000,
and is secured by accounts receivable, domestic inventory, domestic intellectual
property,  general  intangibles,   equipment,   personal  property,   investment
property,  and a  pledge  of  65% of  the  stock  of  certain of  the  Company's



<PAGE>


                               IOMEGA CORPORATION

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


  
subsidiaries.  Borrowing  availability  under the Credit Facility is based on an
agreed upon advance rate on receivables and inventory not to exceed $150 million
with a floor of $110 million through May 1999.  Under the Credit  Facility,  the
Company  may borrow at a base  rate,  which is the higher of prime or the sum of
0.5% plus the Federal  funds rate plus a margin of .88% to 1.63%,  for the first
year,  and  thereafter  between  0.0%  and  1.63%  depending  on  the  Company's
profitability and utilization of the Credit Facility,  or at LIBOR plus a margin
of 2.0% to 2.75%,  for the first year,  and  thereafter  between 1.25% and 2.75%
depending on the Company's profitability and utilization of the Credit Facility.
Total  availability  under the Credit  Facility at  September  27, 1998 was $150
million of which $60 million was  outstanding.  Among  other  restrictions,  the
Credit  Facility  treats a change of control (as defined) as an event of default
and requires the  maintenance  of minimum  levels of  consolidated  tangible net
worth and earnings.  Depending on its financial  performance in future quarters,
the Company may be required to seek further  covenant  waivers  under the Credit
Facility.  There can be no assurance that the Company will be able to obtain any
such waivers on terms  acceptable to the Company,  if at all. Loss of the Credit
Facility  would  require  the Company to find an  alternative  source of funding
which  could  have a  material  adverse  effect on the  Company's  business  and
financial results.

The current and long-term portions of capitalized lease obligations at September
27, 1998 were $5.1  million  and $3.5  million,  respectively.  During the third
quarter  of  1998,  the  Company  assumed  $3.8  million  of  capitalized  lease
obligations  as part of the  Company's  acquisition  of Nomai.  The  current and
long-term  portions of such lease  obligations at September 27, 1998,  were $1.0
million and $2.8 million,  respectively.  During the second quarter of 1997, the
Company paid the entire $18 million obligation,  plus accrued interest, relating
to the purchase of its Malaysian manufacturing facility. In addition, during the
second and third quarters of 1997, the Company paid off all remaining other term
notes relating to equipment purchases.

The current and  long-term  portions of notes payable at September 27, 1998 were
$40.5  million  and $61.1  million,  respectively.  In July,  1998,  the Company
borrowed a total of $40 million from Idanta  Partners  Ltd.  and another  entity
affiliated  with  David J. Dunn,  Chairman  of the  Board,  Iomega  Corporation,
pursuant to a series of three  senior  subordinated  notes.  The  principal  and
interest  associated with these notes are payable on March 31, 1999. The initial
interest  rate is 8.7% per  annum,  increasing  through  January  1, 1999 to the
greater of 12.7% per annum or the  weighted-average  interest rate charged under
the Credit Facility at January 1, 1999 plus 2% per annum.  The proceeds of these
notes were used for the cash purchase of Nomai. In addition, the Company assumed
$1.6 million of notes  payable from the purchase of Nomai,  of which the current
and  long-term  portions  at  September  27,  1998,  were $0.5  million and $1.1
million, respectively.

The Company had $45.7 million of convertible  subordinated  notes outstanding at
September  27, 1998,  which bear  interest at 6.75% per year and mature on March
15,  2001.  Additions  to property,  plant and  equipment  during the first nine
months of 1998  totaled  $68.8  million,  partially  offset by $1.2  million  in
proceeds from capital leases.


<PAGE>


                               IOMEGA CORPORATION

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


The Company  expects to generate  positive  cash flow for the fourth  quarter of
1998, but anticipates being cash flow negative for the year. The Company expects
that its balance of cash and cash equivalents,  together with current and future
sources  of  available  financing,  will be  sufficient  to fund  the  Company's
operations  during the next twelve  months.  However,  whether the Company  will
achieve a positive  cash flow for the fourth  quarter of 1998,  and the  precise
amount and timing of the Company's future  financing needs,  including the funds
necessary to repay the senior  subordinated  notes due March 31, 1999 related to
the Nomai  transaction,  cannot be determined at this time, and will depend on a
number of factors,  including the market demand for the Company's products,  the
availability  of critical  components,  the  progress of the  Company's  product
development  efforts and the success of the Company in managing  its  inventory,
accounts receivable and accounts payable.

OTHER MATTERS

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No.  131  "Disclosures  about  Segments  of an
Enterprise  and  Related  Information"  (SFAS  131).  SFAS 131  establishes  new
standards  for public  companies  to report  information  about their  operating
segments,  products and services,  geographic  areas and major  customers.  This
statement  is  effective  for  financial  statements  issued  for  fiscal  years
beginning  after  December  15, 1997.  In June 1998,  the  Financial  Accounting
Standards  Board  issued  Statement of Financial  Accounting  Standards  No. 133
"Accounting for Derivative  Instruments and Hedging Activities" (SFAS 133). SFAS
133 establishes  new accounting and reporting  standards for companies to report
information  about  derivative   instruments,   including   certain   derivative
instruments   embedded  in  other  contracts,   (collectively   referred  to  as
derivatives)  and for  hedging  activities.  This  statement  is  effective  for
financial  statements  issued for all fiscal  quarters of fiscal years beginning
after June 15, 1999.

The  Company  plans  to adopt  SFAS  131 in its  December  31,  1998,  financial
statements.  The Company  has not  determined  when it will adopt SFAS 133.  The
Company  does not  expect  these  statements  to have a  material  impact on the
Company's results of operations, financial position or liquidity.

FACTORS AFFECTING FUTURE OPERATING RESULTS

Because the Company is relying on its Zip and Jaz products  for the  substantial
majority of its sales in 1998 and 1999, the Company's future  operating  results
will  depend in large  part on the  success  of those  products  in the  market.
Although  the  Company  believes  there is a market  demand for  removable  data
storage  solutions for personal  computers,  there can be no assurance  that the
Company  will  be  successful  in  establishing  Zip  and  Jaz as the  preferred
solutions  for that  market  need.  The extent to which Zip and Jaz  achieve and
maintain a  significant  market  presence  will depend upon a number of factors,


<PAGE>

                               IOMEGA CORPORATION

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



including:  the price,  performance,  quality and other  characteristics  of the
Company's  products  and  of  competing   solutions   (existing,   announced  or
unannounced)  introduced by other vendors,  including,  without limitation,  the
LS-120, or SuperDisk (product co-developed by the consortium of Compaq Computer,
Imation O.R.  Technology  and MKE), the SyJet 1.5 GB, EZ Flyer 230 and SparQ 1.0
GB  (products  of Syquest  Technology,  Inc.),  the Shark 250 (product of Avatar
Peripherals,  Inc.),  HiFD (product in development by Sony  Corporation and Fuji
Photo Film Co., Ltd.),  the UHD144  (Product in development by Caleb  Technology
Corporation),  CD-R and CD-RW drives,  announced  developments of rewritable DVD
drives and media, and announced products in development by Terastor Corporation;
the success of any third party in creating and marketing  media intended for use
with the  Company's  drive  products;  the  success  of the  Company  in meeting
targeted availability dates for enhanced products; the success of the Company in
establishing and maintaining OEM  arrangements  and meeting OEM quality,  supply
and other  requirements;  the willingness of OEMs to promote  computer  products
containing the Company's drives; the ability of the Company to create demand for
Zip  and  Jaz,  including  demand  from  leading  personal  computer  and  other
manufacturers;  the  success of the  Company in  educating  consumers  about the
existence  and  possible  uses of Zip and Jaz products as storage  devices;  the
success of the  Company's  efforts to make  continued  improvements  to customer
service and satisfaction; the public perception of the Company and its products,
including  statements  made  by  industry  analysts  or  consumers  and  adverse
publicity  resulting  from such  statements or from consumer  class action suits
filed against the Company;  and the overall market demand for personal computers
with which the Company's products can be used.

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

Sales of Zip products in 1997 and the first nine months of 1998  accounted for a
significant majority of the Company's revenues in these periods.  However, these
sales  may  not  be  indicative  of  the  long-term  demand  for  Zip  products.
Accordingly,  the sales  levels  experienced  by the  Company in 1997 and in the
first nine  months of 1998 should not be assumed to be an  indication  of future
sales levels.  In addition,  the Company has  experienced  and may in the future
experience   significant   fluctuations  in  its  quarterly  operating  results.
Moreover,  because the Company's  expense levels  (including  budgeted  selling,
general, and administrative and research and development  expenses) are based in
part on expectations of future sales levels, a shortfall in expected sales could
result in a disproportionate adverse effect on the Company's net income and cash
flow.  For example,  in the first nine months of 1998,  the Company's  operating
expenses as a percentage of sales fell outside of  management's  operating model
resulting in a net  operating  loss for the period.  In addition,  the Company's
stock  price,  like other  high-technology  companies'  stock  prices,  could be
subject to  fluctuations  in response  to actual or  anticipated  variations  in
operating  results,   as  well  as  changes  in  analysts'  earnings  estimates,
announcements of new products or developments by the Company or its competitors,
market  conditions in the information  technology  industry,  as well as general
economic conditions and other factors external to the Company.


<PAGE>

                               IOMEGA CORPORATION

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


Inventory  management has become increasingly  complex.  The Company's customers
constantly  adjust  their  ordering  patterns  in  response  to various  factors
including:  the Company's  perceived  ability to meet demand,  the Company's and
competitors' inventory supply in the retail and distribution channel,  timing of
new  product  introductions,   seasonal   fluctuations,   Company  and  customer
promotions,  and the consolidation of customer distribution  centers.  Customers
may increase  orders during times of shortages,  cancel orders if the channel is
filled with currently available products, or delay orders in anticipation of new
products.  Any excess  supply could  result in price  reductions  and  inventory
writedowns,  which in turn  could  adversely  affect  the  Company's  results of
operations.

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

During the second quarter of 1998, the Company announced the implementation of a
comprehensive   series  of  cost  reductions   intended  to  improve   financial
performance.  During the third quarter of 1998,  the Company  reduced  operating
expenses by  approximately  $49 million when  compared to the second  quarter of
1998 as a result  of  efforts  to  decrease  advertising  and  other  sales  and
marketing  expenses,   legal  expenses,   information  system  costs  and  other
discretionary  spending.   Although  the  Company  was  successful  in  reducing
operating expenses during the third quarter,  there can be no assurance that the
Company will be successful in  maintaining  these cost reduction  measures,  and
other efforts to reduce  operating  expenses in future  periods.  The Company is
also in the process of implementing  Six Sigma quality  initiatives  intended to
make  substantial  product and process  quality  improvements  and reduce costs.
However,  there can be no assurance that the Company's quality  initiatives will
be successful in providing  substantial product and process  improvements and in
reducing costs.

A  significant  portion of the  Company's  revenues are  generated in Europe and
Asia. The Company's existing infrastructure outside of the United States is less
mature and developed than in the United States.  Consequently,  future sales and
operating  income  from these  regions are less  predictable  than in the United
States. In addition,  operating expenses may increase as those operations mature
and  increase  in size.  The  Company's  international  sales  transactions  are
generally  denominated  in U.S.  dollars.  Fluctuation  in the value of  foreign
currencies  relative  to the U.S.  dollar  that are not  sufficiently  hedged by
foreign  customers  could  result in lower  sales and have an adverse  effect on
future operating results.  For example,  management  believes that sales in Asia
were  adversely  affected  during the fourth  quarter of 1997 and the first nine
months of 1998 and will  continue  to be  adversely  affected  due to a regional
economic downturn and the devaluation of certain Asian currencies  vis-a-vis the
U.S. dollar. The Company cannot predict with any certainty the impact that these
or other such events could have on its foreign operations.


<PAGE>


                               IOMEGA CORPORATION

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


On  January  1,  1999,  several  member  countries  of the  European  Union will
establish fixed  conversion rates between their existing  currencies,  and adopt
the Euro as their new common  legal  currency.  As of that  date,  the Euro will
trade on currency  exchanges and the legacy  currencies will remain legal tender
in the  participating  countries for a transition period between January 1, 1999
and January 1, 2002. During the transition period,  parties can elect to pay for
goods and  services  and  transact  business  using  either the Euro or a legacy
currency.  Between January 1, 2002 and July 1, 2002, the participating countries
will introduce  Euro bills and coins and withdraw all legacy  currencies so that
they will no longer be available.  The Euro  conversion may affect  cross-border
competition by creating cross-border price transparency. Iomega is assessing its
pricing/marketing  strategy in order to insure that it remains  competitive in a
broader  European  market.  Iomega is also assessing  whether  certain  existing
contracts  may require  modification  in addition to assessing  its  information
technology  systems to allow for  transactions  to take place in both the legacy
currencies and the Euro and the eventual  elimination of the legacy  currencies.
Iomega's  currency risk and risk  management  for  operations  in  participating
countries may be reduced as the legacy currencies are converted to the Euro. The
Company will continue to evaluate  issues  involving  introduction  of the Euro.
Based on the Company's assessment from current information, the Company does not
expect the Euro  conversion to have a material  adverse  effect on the Company's
business or financial condition.  There can be no assurance,  however,  that the
Euro  conversion  will not  have a  material  adverse  effect  on the  Company's
European sales or otherwise adversely affect the Company's business,  results of
operations or financial condition.

The  Company  continues  to refine the design of its Zip and Jaz  products in an
effort to  improve  product  performance  and  reduce  manufacturing  costs.  In
addition,  the Company depends on independent parties for the supply of critical
components for its Zip and Jaz products.  Certain of these  suppliers are or may
become competitors of the Company.  As a result of these and other factors,  the
Company may  experience  problems  relating to the quality,  reliability  and/or
availability of certain of its products.  For example,  in the second quarter of
1997 the  Company  recalled  a limited  number of its Jaz disks and in the third
quarter  of 1997 the  Company  experienced  manufacturing  interruptions  due to
supplier  quality  problems.  Any product  availability,  quality or reliability
problems  experienced  by the  Company,  or consumer  class  action  suits filed
against the Company as a result of these problems,  could have an adverse effect
on the  Company's  sales and net  income,  result  in  damage  to the  Company's
reputation in the marketplace,  and/or subject the Company to damage claims from
its customers.  In addition,  component problems,  shortages,  quality issues or
other factors  affecting the supply of the Company's  products  could provide an
opportunity for competing products to increase market share.

All of the factors  described  above for Zip and Jaz  products  are, or will be,
relevant to new products introduced by the Company in future periods,  including
Clik!, a miniaturized  removable-media  storage solution for use in a variety of
handheld electronic  devices.  In addition to such factors,  demand from digital
camera and other  similar  consumer  electronics  manufacturers  will affect the
extent to which Clik!  achieves a significant market presence.  The Company will
be entering in to additional or alternate  sales channels with the  introduction
of Clik!  products.  Because the Company does not have prior experience in these
new channels,  there are additional risks that the Company or the Clik! products
will not be successful.


<PAGE>


                               IOMEGA CORPORATION

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


In addition  to the risks  surrounding  existing  products,  the  Company  faces
development,  manufacturing,  demand and market  acceptance risks with regard to
recently introduced and future products.  The Company's future operating results
will depend in part on its success in introducing enhanced and new products in a
timely and competitively  effective manner. For example,  the Company's Jaz 2 GB
product,  originally  scheduled for shipment in the fourth  quarter of 1997, did
not ship  until  February  1998 and thus had a  material  adverse  effect on the
results of  operations  for the fourth  quarter of 1997 and the first quarter of
1998.  Future  operating  results will also depend on the  Company's  ability to
effectively  manage  obsolescence risks associated with products that are phased
out,  and its  success  in  ramping  to  volume  production  of new or  enhanced
products. Future operating results will also depend on intellectual property and
antitrust matters  including the possibility that  infringement  claims asserted
from time to time against the Company could require the Company to pay royalties
to a third party in order to continue  to market and  distribute  one or more of
the Company's  current or future products,  and the possibility that the Company
would be required to devote unplanned  resources to developing  modifications to
its products or marketing programs.

The Company's success will depend in large part upon the services of a number of
key  employees.  The loss of the services of one or more of these key  employees
could have a material adverse effect on the Company.  The Company's success will
also depend in  significant  part upon its ability to continue to attract highly
skilled  personnel to fill a number of vacancies.  Effective March 24, 1998, Kim
B. Edwards  resigned as President  and Chief  Executive  Officer of the Company.
Effective  October 22, 1998, the Company  announced the  appointment of Jodie K.
Glore as President  and Chief  Executive  Officer of the Company.  Mr. Glore was
also elected to serve as a member of the Company's Board of Directors. Effective
June 5, 1998,  Leonard C. Purkis resigned as Senior Vice President,  Finance and
Chief Financial Officer. Dan E. Strong, Vice President and Corporate Controller,
has  assumed  the role of interim  Chief  Financial  Officer  while the  Company
conducts a search for a new Senior Vice  President,  Finance and Chief Financial
Officer.  The Company is also  seeking to fill other key  management  vacancies.
There can be no assurance  that the Company  will be  successful  in  attracting
and/or retaining key employees.

The Company recently  transitioned to new computer hardware and software for its
financial,   accounting,  inventory  control,  order  processing,  supply  chain
management and other management information systems. The successful operation of
these new  systems  is  crucial  to the  efficient  operation  of the  Company's
business.  There can be no  assurance  that the new systems  will be adequate to
support the Company's  operations or that they will operate without interruption
or failure.  Problems  with  initial  operation  of the new systems  could cause
substantial  difficulties  in  operations,  planning,  financial  reporting  and
management  and thus  could  have a  material  adverse  effect on the  Company's
business, financial condition and results of operations.



<PAGE>



                               IOMEGA CORPORATION

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



Factors  other than those  discussed  above that could  cause  actual  events or
actual results to differ materially from those indicated by any  forward-looking
statements  include the ability of  management to manage  increasing  volumes of
production and an increasingly complex business,  transportation issues, product
and component pricing, competition, technological changes and advances, adoption
of technology standards affecting the Company's products,  intellectual property
rights,  litigation  (see "Legal  Proceedings"),  general  economic  conditions,
changes or slowdowns in overall market demand for personal computer products and
any  difficulties  experienced by the Company as a result of the Year 2000 issue
(see "Year 2000 Readiness" below).

YEAR 2000 READINESS

In general,  the Year 2000 issue  relates to computers  and other  systems being
unable to  distinguish  between  the years  1900 and 2000  because  they use two
digits,  rather  than  four,  to define  the  applicable  year.  The  Company is
currently  addressing the Year 2000 issue in the following  areas:  (i) hardware
and  software  products  sold by the  Company;  (ii) the  Company's  information
technology ("IT") systems; (iii) the Company's non-IT systems (i.e.,  machinery,
equipment  and devices  which utilize  technology  which is  "built-in"  such as
embedded  microcontrollers);  and (iv) third-party suppliers and customers.  The
Company is undertaking its Year 2000 review in the following  phases:  Awareness
(education and sensitivity to the Year 2000 issue),  Inventory  (identifying the
equipment,  processes or systems which are  susceptible to the Year 2000 issue),
Assessment  (determining  the  potential  impact of Year 2000 on the  equipment,
processes and systems  identified  during the Inventory  phase and assessing the
need for testing and remediation), Testing/Verification (testing to determine if
an item is Year  2000  ready  or the  degree  to  which  it is  deficient),  and
Implementation  (carrying  out necessary  remedial  efforts to address Year 2000
readiness, including validation of upgrades, patches or other Year 2000 fixes).

The Company has completed  testing of the current  release  versions of its Zip,
Jaz and Ditto  drive  products  and the related  software  tools and drivers for
windows  based  personal  computers  (with the  exception of Windows 98 as noted
below).  The  hardware  products  were tested by the National  Software  Testing
Laboratories  ("NSTL") according to NSTL developed standards or guidelines (NSTL
YMark  2000  test,  Version  97.08.15).  NSTL  is  an  independent  organization
dedicated exclusively to testing the functionality, usability and performance of
hardware and software.  The software tools were tested internally by the Company
according to the Software  Engineering  Institute /  Capability  Maturity  Model
("SEI/CMM")  standards and  guidelines.  In general,  the results of these tests
indicate that such products are Year 2000 ready when used in an operating system
or with other products which are themselves Year 2000 ready. Specifically,  NSTL
has tested and  verified  as Year 2000 ready the  Company's  Zip,  Jaz and Ditto
drive products (except for the Ditto 2 GB external drive which is expected to be
tested during the first quarter of 1999). With respect to the Company's software
utility tools, the Company  has tested the following  software tools  on Windows
3.1,  Windows 95,  Windows 95 R2, NT 3.5.1 and NT 4.0 operating  systems and has

<PAGE>


                               IOMEGA CORPORATION

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


confirmed  Year 2000 readiness for each based on SEI/CMM  guidelines,  or, where
necessary,  has  provided  Year 2000  updates  (except  for the  Findit and Copy
Machine  software tools for which an upgrade is anticipated by the end of 1998):
Zip software tools versions 5.2, 5.3 and 5.3.1;  Zip Plus software tools version
5.4.1;  Jaz 1 GB software tools versions 5.2 and 5.3.1;  Jaz 2 GB software tools
version  5.5.1;  Ditto software  tools version 3.2 (English  version only);  and
Iomegaware  software tools version 1.0. Testing of the Company's current release
versions  of its  software  tools  on the  Macintosh,  Windows  98 and IBM  OS/2
operating  systems is expected  to be  completed  by the first  quarter of 1999.
Testing of the Buz Multimedia Producer product should be completed by the end of
the first  quarter of 1999.  The Company is also in the process of assessing the
Year  2000  readiness  of prior  release  versions  of its  products,  including
Bernoulli  products.  Software  upgrades and drivers developed by the Company to
address Year 2000 issues are available on the Company's web site without charge.
In  addition,  the Company  plans to  continue  to post on its web site  updated
information about the Year 2000 readiness of the Company's products.

During  1998,  the  Company  implemented  new HP  computer  hardware  and Oracle
software for its financial,  accounting,  inventory  control,  order processing,
supply chain management and other management  information systems.  According to
the respective  vendors,  the currently installed hardware operating systems and
software are in various stages of Year 2000 readiness, and, when identified, the
respective  vendors  are  providing  Year 2000  software  upgrades.  The Company
anticipates  to start  testing  the  hardware  operating  systems  and  software
applications  in January  1999 to confirm Year 2000  readiness.  The Company has
identified other hardware and  applications  software used in its IT systems and
is in the  process  of  obtaining  Year  2000  compliance  information  from the
providers of such hardware and applications software. The Company has identified
one internally  developed  software  application  for time  management  which is
currently being modified to make the software  application Year 2000 ready. Upon
completion of the planned modifications, the software application will be tested
for Year 2000 readiness.

The Company has substantially  completed  inventorying its non-IT systems.  Once
completed,  the Company  will assess the Year 2000 issues  regarding  its non-IT
systems  and  determine   appropriate  testing  and  remediation.   The  Company
anticipates  completing  the  inventorying  and  assessment  of its major non-IT
systems by the end of 1998 and to start any necessary testing and implementation
efforts for business critical non-IT systems in the first quarter of 1999.

The Company has  significant  relationships  with various  third  parties  (many
located  outside of the U.S.) and the failure of any of these  third  parties to
achieve  Year 2000  compliance  could  have a material  impact on the  Company's
business, operating results and financial condition. These third parties include
energy and  utility  suppliers,  financial  institutions,  material  and product
suppliers,  transportation  providers,  communications vendors,  including value
added  network  vendors,  and the  Company's  significant  customers.  While the
Company has received Year 2000 readiness  statements from its major  third-party
suppliers which in general  indicate Year 2000 readiness,  the Company is in the
process of conducting an audit/questionnaire with each major supplier and vendor
to confirm  their Year 2000  readiness.  The  audit/questionnaire  process  will
continue into the first and second quarters of 1999.
<PAGE>

                               IOMEGA CORPORATION

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

Through the third quarter of 1998,  the Company has incurred  approximately  $33
million in costs to improve the Company's IT systems and for Year 2000 readiness
efforts.  Of this  amount,  98%  represents  the costs of  transitioning  to new
computer hardware and software for its financial, accounting, inventory control,
order  processing,  supply chain  management  and other  management  information
systems,  of which  approximately  one-half is being  capitalized  and  one-half
expensed.  This system  hardware  and software  was  implemented  to upgrade and
improve the  Company's IT systems and to  facilitate  Year 2000  readiness.  The
Company  anticipates  incurring an additional $8 million in connection  with the
Year 2000 readiness efforts,  including professional fees and testing costs. The
Company has set a goal of having  substantially  all Year 2000 readiness efforts
completed by the third quarter of 1999.

The Company is in the process of preparing  contingency plans for critical areas
to address Year 2000 failures if remedial efforts are not fully successful.  The
Company's contingency plans are expected to target the Company's most reasonably
likely  worst  case  scenarios  and to  include  items  such as  maintaining  an
inventory   buffer,   providing  for  redundant  IT  systems  and   establishing
alternative third-party logistics. The Company's contingency plans will be based
in part on the results of third-party  supplier  audits,  and thus are not fully
developed at this time.  Completion of initial contingency plans is targeted for
the third  quarter of 1999 (which plans will  thereafter be revised from time to
time as deemed appropriate).

To supplement the Company's  efforts  described  above,  the Company has engaged
outside IT and legal  advisors to conduct  independent  reviews of the Company's
Year 2000 plans.

The Company recently  acquired  approximately 98% of Nomai S.A. and is presently
in the  process  of  raising  the  awareness  of,  as well as  inventorying  and
assessing,  the Year 2000 issues  applicable  to Nomai and its  operations.  The
Company anticipates having substantially  completed in the first quarter of 1999
the inventory and assessment of Year 2000 issues for its subsidiary Nomai.

No  assurance  can be given that the Company  will not be  materially  adversely
affected by Year 2000 issues. Although the Company is not currently aware of any
material  operational  issues with  preparing its internal IT and non-IT systems
for the Year 2000, the Company may experience  material  unanticipated  problems
and costs caused by  undetected  errors or defects in its internal IT and non-IT
systems. In addition,  the failure of third-parties to timely address their Year
2000 issues  could have a material  adverse  impact on the  Company's  business,
operations  and  financial  condition.  If, for example,  third party  suppliers
become unable to deliver  necessary  components,  the Company would be unable to
timely manufacture products.  Similarly,  if international  shipping and freight
forwarders  were unable to ship product,  the Company would be unable to deliver
product to sales channels.

Additionally, there can be no assurance that the Company will not be the subject
of lawsuits  regarding the failure of the Company's products (former or present)
in the event they are not Year 2000 ready.  Despite the testing and  remediation
efforts undertaken by the Company,  the Company's products may contain errors or
defects associated with the Year 2000. Known or unknown errors or defects in the
Company's  products  could  result  in delay or loss of  revenue,  diversion  of
development  resources,  damage to the Company's reputation or increased service
and warranty costs, any of which could materially adversely affect the Company's
business,  operating results and financial condition.  In addition,  because the
computer  systems in which the  Company's  products are used  involve  different
hardware, software and firmware components from different manufacturers,  it may
be difficult to determine  which component in a system caused a Year 2000 issue.
As a  result,  the  Company  may be  subjected  to Year  2000  related  lawsuits
independent  of whether its products are Year 2000 ready.  Any Year 2000 related
suits,  if adversely  determined,  could have a material  adverse  affect on the
Company's business, operating results and financial condition.
<PAGE>

                               IOMEGA CORPORATION

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

The  foregoing   discussion  of  the  Company's  Year  2000  readiness  includes
forward-looking statements,  including estimates of the timeframes and costs for
addressing the known Year 2000 issues  confronting the Company,  and is based on
management's current estimates,  which were derived using numerous  assumptions.
There can be no  assurance  that these  estimates  will be  achieved  and actual
events and results  could differ  materially  from those  anticipated.  Specific
factors that might cause such material  differences include, but are not limited
to, the availability of personnel with required  remediation skills, the ability
of the  Company to  identify  and correct  all  relevant  computer  code and the
success of third parties with whom the Company does business in addressing their
Year 2000 issues.





<PAGE>


 IOMEGA CORPORATION

PART II - OTHER INFORMATION

Item 1.           Legal Proceedings

Except as set forth below,  or in the  Company's  Annual Report on Form 10-K for
the year ended  December  31,  1997 and  Quarterly  Reports on Form 10-Q for the
periods ended March 29, 1998 and June 28, 1998, in management's  opinion,  there
are  no  material  pending  legal  proceedings,   other  than  ordinary  routine
litigation  incidental  to its  business,  to which  the  Company  or any of its
subsidiaries is a party or to which any of their property is subject.

On June 29, 1998,  the Company  announced  that it had entered into a definitive
settlement  agreement  with  Nomai  S.A.  ("Nomai"),  a French  manufacturer  of
removable storage systems,  settling all litigation,  in several  jurisdictions,
between  Iomega and Nomai and their  respective  affiliates.  The litigation was
described  in the  Company's  Annual  Report  on Form  10-K for the  year  ended
December 31, 1997 and  Quarterly  Report on Form 10-Q for the period ended March
29, 1998 and the settlement was described in the Company's  Quarterly  Report on
Form 10-Q for the period ended June 28, 1998.

In  accordance  with the terms of the  settlement  agreement  between  Nomai and
Iomega,  all legal actions  between the companies  and/or their  affiliates have
either  been  dismissed  or are  expected  to be  dismissed  shortly,  following
approval by the local court of the proposed  dismissal.  On August 31, 1998, the
European Commission issued a letter closing the claims filed by Nomai in October
and December 1997.

As reported in the Company's  Quarterly Report on Form 10-Q for the period ended
March 29, 1998, the Company  initiated  litigation  against SyQuest  Technology,
Inc.  ("SyQuest")  on July 23,1997 in the United  States  District  Court in the
District of Delaware for  infringing the Company's  U.S.  Patent No.  5,644,444,
U.S. Design Patent No. D378,518 and the Company's  registered  trademark  "JET".
The complaint  requests monetary damages and injunctive relief enjoining SyQuest
from further  infringement.  The matter was scheduled for trial in January 1999,
but the trial date has been  rescheduled  to April  1999.  On  November 2, 1998,
SyQuest announced that it suspended  operations and is considering  alternatives
including  the filing of a case under  Chapter 11 of the U.S.  Bankruptcy  Code.
These  recent  events  could delay the trial date  further and could  impact the
Company's ability to recover any damages awarded to it against SyQuest.

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

On  September  10, 1998, a purported  class  action  lawsuit,  Rinaldi et al. v.
Iomega Corporation,  was filed against Iomega in the Superior Court of Delaware,
New Castle County.  The suit alleges that a defect in Iomega Zip drives causes a
clicking  noise  that may  damage a Zip drive or disk.  The  Company  intends to
vigorously defend against this lawsuit.

<PAGE>

Hi-Val,  Inc.  filed a  complaint  on October 9, 1998  against  Iomega and other
parties,  Hi-Val, Inc. v. Nomai, S.A., Nomus, Inc., Kevin Scheier and Iomega, in
the Superior Court of California,  County of Santa Clara. The complaint  alleges
tortious  interference  with contract,  tortious  interference  with prospective
economic advantage,  unfair business  practices,  and conspiracy against Iomega,
and other claims against the other parties. The claims are related to an alleged
arrangement  between Nomai, S.A. and Hi-Val for Hi-Val to distribute Nomai's XHD
cartridges.  Plaintiff seeks to recover $26 million in alleged  damages.  Iomega
intends to vigorously defend against these claims.

Item 2.           Change in Securities and Use of Proceeds

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

Item 6.           Exhibits and Reports on Form 8-K

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

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




<PAGE>



                                   SIGNATURES



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




                                                        IOMEGA CORPORATION
                                                           (Registrant)




                                                        /s/ Jodie K. Glore
                                                        ------------------
Dated:   November 10, 1998                              Jodie K. Glore
                                                        President and
                                                        Chief Executive Officer
                                             
                                                        /s/ Dan E. Strong
                                                        ------------------
Dated:   November 10, 1998                              Dan E. Strong
                                                        Vice President and
                                                        Corporate Controller
                                                        and Acting Chief 
                                                        Financial Officer










<PAGE>
<TABLE>



                                  EXHIBIT INDEX


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

Exhibit No.  Description

<S>          <C>   

  10.21(a)   Senior Subordinated Promissory Note Agreement, Idanta Partners Ltd.
                And Dunn Family Trust dated July 8, 1998
                              

  10.21(b)   $20 Million Senior  Subordinated  Promissory  Note, Idanta Partners
                Ltd., dated July 1, 1998

  10.21(c)   $7.5 Million Senior Subordinated Promissory Note, Idanta Partners
                Ltd., dated July 8, 1998

  10.21(d)   $12.5 Million Senior Subordinated Promissory Note, Dunn Family 
                Trust, dated July 8, 1998

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




</TABLE>