Faced with soaring inventories of unsold drives, in particular the obsolescent 8 units, Iomega Corp is initiating a ruthless programme of lay-offs to bring the company back to a size consistent with the current reduced level of business. It is reducing overheads by making a cut of over 25% in professional, management and indirect labour, with 183 positions permanently eliminated in all areas of the Roy, Utah company’s business. Iomega is also laying off about 182 manufacturing employees, 46% of manufacturing staff, covering those building the company’s Alpha 10 8 disk drives and Bernoulli Boxes. Iomega says that the action is required to bring finished goods inventory and inventory in the distribution channel down to acceptable levels. The lay-offs do not affect production of the new 5.25 Beta 20 drives, which is currently being built to fill a back-log of orders. Iomega also said that it will receive a qualified opinion from the auditors of its 1986 financial statements, subject to the outcome of litigation brought by disaffected shareholders seeking damages over alleged inaccurate statements in a class action. Iomega specialises in 8 and 5.25 hard shell floppy disk drives, and scored major commercial success in the IBM Personal market a couple of years ago as demand for a simple back-up system grew. But Winchester capacity on Personals has outrun the capacity of Iomega’s drives, and cartridge tape systems now dominate the back-up market.
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