Iomega Corp, which in December announced that initial shipments of its 2-gigabyte Jaz drive would be delayed (CI No 3,315) until the end of the first quarter, is now facing legal heat over the matter. Within 24 hours of the Roy, Utah company’s announcement that it is finally shipping the new drives (CI No 3,344), two class action suits have been filed against the company and its senior executives alleging that it knowingly misled shareholders about the release of its new product and the negative sales impact of its delay. Iomega had previously announced that the delay in Jaz 2 shipments hit the fourth-quarter top line by roughly $70m. The suits, which seek unspecified damages, contend that based on the misinformation Iomega’s shares soared and executives took advantage of the situation by dumping $11.5m worth. On January 22, Iomega announced its fourth-quarter results and disclosed the $70m shortfall, while at the same time announcing that it was embarking on a $100m advertising campaign that would negatively impact future results unless sales volume increased significantly. The company’s shares reacted to the triple-hit by losing 32% of their value. Overall, in the class period from September 22 through January 22, Iomega shares have lost roughly 45% of their total value. The 2Gb Jaz drives were announced in September (CI No 3,253) and were expected to ship during the fourth-quarter. The company said the delay was due to the need for further product testing.
