Back to GetFilings.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

OR

For the Transition Period from                to                

1-12333
(Commission file number)

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

(801) 332-1000
(Registrant's telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:
None

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/  No / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /

    The aggregate market value of Common Stock held by non-affiliates of the registrant at March 2, 2001, was $1,016,011,273 based upon the last reported sales price of the Common Stock as reported by the New York Stock Exchange. The number of shares of the registrant's Common Stock outstanding at March 2, 2001, was 270,215,764

    Documents incorporated by reference:

•

Specifically identified portions of the Company's Definitive Proxy Statement for its 2001 annual meeting of stockholders into Part III of Form 10-K.

This Annual Report on Form 10-K contains a number of forward-looking statements, including, without limitation, statements referring to: plans to introduce new products, including new CD-RW drives, LifeWorks software applications and the Peerless drive system; the impact of software solutions on the Company; expected increases in revenues from newly released products; expected increases in the volume of sales through the Company's Web site and availability of additional services on the Web site; expected growth in the CD-RW market; the expected sufficiency of cash, cash equivalents and temporary investment balances and available sources of financing; the impact on gross margins resulting from the sales volumes of disks, sales mix between disks and drives, the mix between OEM sales and sales through other channels and the sales mix between the Company's products; the impact of new accounting pronouncements; expected effective tax rates; the source of funding for the Company's stock repurchase program; the impact of the Euro conversion on the Company's business or financial condition; plans for expansion in Latin America; expected sales levels due to seasonal demand; anticipated hedging strategies; and the possible effects if an adverse outcome in legal proceedings described in Item 3 of Part I were to occur. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "intends" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words.

There are a number of important factors that could cause actual events or the Company's actual results to differ materially from those indicated by such forward-looking statements. These factors include, without limitation, those set forth under the captions "Liquidity and Capital Resources," "Factors Affecting Future Operating Results" and "Disclosures About Market Risk" included under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of Part II of this Annual Report on Form 10-K and those set forth in Items 1 and 3 of Part I of this Annual Report on Form 10-K. The factors discussed herein do not reflect the potential future impact of any mergers, acquisitions or dispositions. In addition, any forward-looking statements represent the Company's estimates only as of the day this annual report was first filed with the Securities and Exchange Commission and should not be relied upon as representing the Company's estimates as of any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so, even if its estimates change.

Iomega Corporation was incorporated in Delaware in 1980. The Company's principal executive offices are located at 1821 West Iomega Way, Roy, Utah, 84067 and its telephone number is (801) 332-1000. The terms "Iomega" and the "Company" refer to Iomega Corporation and its wholly owned subsidiaries, unless the context otherwise requires.

PART I

ITEM 1. BUSINESS:

Iomega designs, manufactures and markets innovative personal and professional data management solutions, based on removable-media technology, for users of personal computers and consumer digital electronics devices. The Company's principal data management solutions include: magnetic drives and

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

IBM and Microdrive are trademarks or registered trademarks of International Business Machines Corporation in the United States, other countries or both. Microdrive is used under license by Iomega Corporation. Quicken and TurboTax are registered trademarks of Intuit, Inc. and used with permission. Certain other product names, brand names and company names may be trademarks or designations of their respective owners.

1

disks marketed under the trademarks Zip®, Jaz®, and PocketZip™ (formerly Clik!™); CD-RW drives marketed under the Iomega® CD-RW (formerly ZipCD™) and Predator™ trademarks; digital audio players marketed under the trademark HipZip™ and digital image centers marketed under the trademark FotoShow™. The Company's products can be purchased as aftermarket products for computers and consumer electronic devices, or as a built-in feature incorporated in computers and other OEM products.

Since January 2000, the Company has expanded its core Zip product line with the following new products:

•

Zip 100MB USB drive

•

Zip 250MB USB powered drive

•

Zip FireWire® adapter for Zip 250MB USB drive

•

Internal "bay tray" Zip 250MB drives for Dell, IBM and Toshiba notebook computers

•

Zip U250MB disk

•

FotoShow digital image center

During 2000, the Company also increased its product offerings with the introduction of the HipZip™ digital audio player and several new CD-RW drives, including the Predator USB external 4X4X6 drive.

During 2000, the Company also introduced new lines of software products, including QuikSync™ 2 automatic backup software and LifeWorks™ software applications based on Active Disk technology which automatically configures and launches the software application from the Zip disk whenever the disk is inserted into a Zip drive and stores all data on the Zip disk with the application. LifeWorks applications now include Photo Album and an edition of the popular Intuit tax preparation application Quicken® TurboTax® for tax year 2000.

Iomega® Data Management Solutions

The Company believes its data management products address key information storage and management needs of users of personal computers and various digital electronic devices by providing affordable, easy-to-use data management solutions with the benefits of media removability. The Company's data management products are designed to offer expandable storage capacity, media removability, data backup and archival capabilities, all at an attractive price.

The Company's data management products allow users to share and protect their data and to expand their primary storage capacity (generally a hard drive in the case of computers and flash memory in the case of consumer electronic devices). The Zip, Jaz, Iomega CD-RW, and PocketZip drives install easily and offer versatile additional storage capacity. The Company's Zip and Jaz drives use high-capacity removable magnetic disks providing storage for desktop and laptop computer users in home and office settings. The Company's CD-RW products store data on industry standard CD formats including CD-Recordable (known as "CD-R"), which is recordable once, and CD-ReWritable (known as "CD-RW"), which is recordable multiple times. The Company's PocketZip products store data on durable, low-cost 40MB disks, providing a removable storage solution for various handheld consumer electronic devices and notebook computers.

The Company believes that its data management products provide a combination of price, performance, software and other features that make them attractive data management solutions for their target markets. Zip drives offer users a reliable disk medium with the data access times, transfer rates and storage capacity needed for today's larger files, along with the benefits of removable media, at an attractive price for mass-market customers. Jaz drives offer professional users removable storage with many performance features comparable to those of conventional hard drives at a competitive price. Iomega CD-RW drives allow users to create, distribute and archive customized data/audio CDs on an industry standard CD format. PocketZip drives offer compact storage solutions on durable 40MB disks at an attractive price for digital audio players, digital cameras, laptop computers and other electronic devices.

2

Products

The Company offers products targeted at the personal computer, consumer digital electronic, OEM, enterprise and business professional markets. The Company's products continued to be recognized by industry publications and trade groups during 2000, receiving a number of prestigious awards, including:

•

PC World's "2000 World Class Award—Best Removable Media Drive" (Zip 250MB USB)

•

PC Magazine's "Best Portable Storage Device" (Zip 250MB USB)

•

PC World's "Best Portable Storage" (Jaz disk)

•

AV Multimedia Producer Magazine's "Platinum award for storage and delivery" (Iomega CD-RW USB external)

Zip Products

Since their introduction in March 1995, more than 40 million Zip drives and 250 million Zip disks have been shipped, including licensee shipments. Designed as an affordable portable storage product for personal computer users, Zip drives address multiple needs: data storage, archiving, hard drive expansion, portable applications (with Active Disk technology), data transportability, file distribution (including multimedia presentations), data security, backup and image viewing. The Zip 250MB disks provide personal computer users (both PC and Mac®) with the performance and capacity needed for today's larger files, and are compatible with leading operating systems for personal computers and workstations, including Microsoft® Windows® 2000, Me, 98, 95, NT4.0, 3.1, DOS Apple® Macintosh® OS 8.1-9.x and Linux Kernel 2.2.14. Software included with the Zip drives helps users organize, copy, move and back up their data and offers software read/write protection.

External Zip 100MB Drive.  Zip 100MB external drives are available in two interface models: parallel port and USB. The parallel port and USB versions feature a maximum sustained transfer rate of 0.6MB per second and 0.7MB per second, respectively.

Internal Zip 100MB Drive.  The 3.5-inch form factor Zip 100MB drive is available with an ATAPI interface for OEMs, system integrators and retail channels. The ATAPI version features a maximum sustained transfer rate of 1.2MB per second.

Zip 250MB Drives.  The Zip 250MB drive was designed to meet demand for higher storage capacity fueled by the prevalence of graphics in most applications, the emergence of audio and video files and the proliferation of Internet downloads. In addition to two and one-half times the capacity of the original Zip 100MB drive, the Zip 250MB drive offers increased speed when used with 250MB disks, and reads and writes to Zip 100MB disks allowing sharing of files with users of Zip 100MB drives.

External Zip 250MB Drive.  Zip 250MB external drives are available in three interface models: parallel port, SCSI, and USB. A FireWire adapter for regular Zip 250MB USB drives was released in 2000, and in December 2000, a USB-powered version of the Zip 250MB USB drive began shipping. The Zip 250MB USB powered drive uses a single USB cable for both data and power; the USB drive bundled with a FireWire adapter gives customers a host-powered solution with up to twice the performance at an affordable price.

Internal Zip 250MB Drive.  The 3.5-inch form factor Zip 250MB drive is available with an ATAPI interface for OEMs, system integrators and retail channels. The ATAPI version features a maximum sustained transfer rate of 2.3MBs per second.

Notebook Zip 250MB Drive.  The Zip 250MB drive is a simple way for the mobile user to save, store, transport and share their critical information safely. It is 12.7mm high and comes as a bare drive configuration or can be customized with a bay tray for the OEM. As of December 31, 2000, Dell, IBM, and

3

Toshiba were selling the Notebook Zip 250MB drive, with Compaq expected to begin shipping the Notebook Zip 250MB drive in the first quarter of 2001.

Zip U250MB Disk.  The Zip U250MB disk provides a way to save, store and protect the users files. The U250MB disk comes with a 10-year warranty, an improved jewel case and it is completely compatible with all Zip 250MB drives.

FotoShow Digital Image Center.  Introduced during the third quarter of 2000, and developed with the digital photography enthusiast in mind, Iomega's FotoShow digital image center, with built-in PictureIQ™ software, makes it easy to organize, edit and share digital photos with family and friends without the need for a PC. FotoShow can also be used for business applications, such as PowerPoint® presentations. Digital camera owners can also use the FotoShow digital image center's built-in CompactFlash™ and SmartMedia™ slots for simple one-button transfer of camera images to the internal Zip 250MB drive, freeing up expensive solid state memory cards for taking more digital pictures. Iomega also offers an optional 12-volt car adaptor for use on the road.

The FotoShow digital image center connects to a TV through composite video (RCA) or S-Video ports, or to a USB-equipped computer. When connected to a computer, it operates as a normal Zip 250MB drive and lets people easily transfer photos for later viewing on a television.

Jaz Products

Jaz products address the high-performance needs of computer users in several areas including graphics and desktop publishing, software development, CAD/CAM, web authoring, audio and video development, corporate backup and personal use. With a maximum sustained transfer rate of 8MBs per second, the Jaz 2GB drive is fast enough to deliver full-screen, full-motion video. Jaz drives incorporate tri-pad thin-film recording heads, dynamic head loading and drag and drop motorized cartridge ejection. The disks also include a proprietary disk capture system that secures the dual disk platters when the cartridge is not installed in a drive, eliminating rattle and reducing the possibility of losing valuable information. The drives operate with leading operating systems for personal computers and workstations, including Microsoft® Windows® 2000, Me, 98, 95, NT4.0, 3.1, DOS Apple® Macintosh® OS 8.1-9.x and Linux Kernel 2.2.14. Software included with Jaz drives helps users organize, copy, move and back up their data and offers software read/write protection, which further enables users to secure and protect their data. Additional features include an auto-switching power supply to allow operation in different countries and auto-sensing SCSI termination. The Jaz 2GB drive is available in both external and internal SCSI versions. The removable Jaz 2GB drive utilizes an ultra-SCSI interface. Adapters are available to connect the external drive to a USB port, an IEEE 1394 "FireWire®" port, PC's parallel port connector, or a PCMCIA slot.

Since the Jaz drive uses hard drive components to achieve higher capacities and data transfer rates, the usable product life may be shortened if the product is used in an environment which has high levels of contaminants, in heavy duty cycles or in high temperature and humidity conditions. During 2000, Jaz drive return rates were approximately six percent.

Iomega CD-RW Products

CD-RW drives are a mass-market product that addresses the growing and varied removable storage demands of customers. CD-RW drives are used for creating customized music CDs, archiving and distributing information. The Company began shipping its first CD-RW drive in August 1999. The Company now sells both internal and external CD-RW drives. The three speeds of a CD-RW drive such as 12X10X32 represent the Record (record once on CD-R media), Write (rewritable speed using CD-RW media) and Read (CD-ROM) speeds, respectively. CD-RW drives use an optical phase change technology and are a dual-function drive, offering both CD-R and CD-RW recording, giving the user a choice of which recordable media to use. Iomega purchases the internal CD-RW drive from optical drive

4

manufacturers, configures it into an external drive or internal drive kit and packages the drive under the Iomega CD-RW brand name with added software and interfaces. By the end of 2000, the Iomega CD-RW drives were rated the number two seller in the U.S. retail aftermarket by PC Data, based on the number of units sold by certain retailers. The Company believes this demonstrates the opportunity for additional product line extensions based on the Iomega brand.

Drives.  During 2000, the Company shipped internal drives with the following speeds, 8X4X32, 6X4X24X4 (combination CD-RW/DVD reader), 12X4X32 and 12X10X32. The Company began shipping the external USB 4X4X6 drive in February 2000. The external drive is compatible with PC and Macintosh platforms.

Predator CD-RW drive.  The versatile new Predator™ 8X4X32 CD-RW external drive supports popular interfaces by using interchangeable adapters. It is currently shipping with a USB 1.1 adapter offering 4X4X6 performance. An IEEE 1394 "FireWire" adapter model is expected to be available in the first half of 2001 with USB 2.0 and PCMCIA adapters scheduled to follow later in 2001. The FireWire and USB 2.0 adapters will allow the drive to perform at its full 8X4X32 speed capability. The Predator is compatible with PC and Macintosh platforms.

PocketZip Products (Formerly Clik!)

PocketZip drives are a miniaturized removable-media storage solution for use in a variety of handheld consumer electronics devices such as digital audio players (sometimes referred to as MP3 players), digital cameras, personal digital assistant ("PDAs"), and palmtop and notebook computers. PocketZip drives are designed to connect to portable digital or desktop products and to allow consumers to easily share information between products and synchronize information back to a desktop computer.

PocketZip PC Card Drive.  The PocketZip PC Card drive is the Company's smallest removable storage solution. The drive fits into most industry standard Type II PC Card slots found on many laptops or notebook computers, is hot-swappable and does not require any extra cables or cords, making it an optimal solution for traveling. A USB enabled PocketZip PC Card drive dock began shipping late in the second quarter of 2000 and is sold as an accessory to the PocketZip PC Card drive. This dock allows the user to utilize the PocketZip PC Card drive both on laptop and desktop computers.

PocketZip OEM Drive.  The PocketZip OEM drive is designed to be integrated into a variety of handheld consumer electronic devices. The PocketZip drive's small size allows it to be incorporated into small handheld digital devices such as digital audio players, digital cameras, personal digital assistants ("PDA's"), electronic books, and handheld personal computers. The PocketZip OEM drive provides consumers with inexpensive storage expandability using 40MB disks that sell for as little as $10 each. The Company believes the PocketZip OEM drive is an ideal solution for any electronic device that would benefit from having a flexible, removable and interchangeable storage medium, such as digital audio players and digital cameras.

HipZip Digital Audio Player.  Introduced during the third quarter of 2000, the HipZip digital audio player plays music stored on Iomega's PocketZip 40MB disks, lowering the cost of creating portable personal music collections. Most MP3 players use memory cards and the cost of adding cards is significantly more than PocketZip disks. The HipZip player utilizes Microsoft's Windows Media Format ("WMA") as well as MP3 and other compression, decompression formats ("codecs"), and can use digital rights management technologies to secure commercial music content to PocketZip disks, offering artists and publishers protection from the unauthorized distribution of commercial content. The HipZip player is shipped with MusicMatch Jukebox Plus and Microsoft's Windows Media Player 7, two leading third party software ("jukebox") applications.

5

PocketZip Disks.  PocketZip 40MB disks are 2" by 2" and have 25 times more capacity than a standard floppy disk—making them ideal for storing information, photos, audio files, presentations, e-mails and more. A 40MB PocketZip disk will hold approximately 60-80 "1 megapixel" images depending on camera settings, or about 80 minutes of digital music using the WMA format.

Peerless Drive System

Planned for release by mid-2001, the Peerless drive system represents a new generation of high performance data management devices designed to deliver affordability, versatility and reliability. The Peerless disk, which incorporates hard drive technology in 5GB, 10GB and 20GB capacities, is roughly the size and shape of a PDA. The Peerless disk will slip into a base station only slightly larger than the disk itself—a slim, vertical enclosure about four inches across and five inches tall. The Peerless drive system is expected to offer up to ten times the performance and greater storage capacity than CD-RW, DVD-RAM, DVD-RW or DVD+RW alternatives. The Peerless drive system benefits from two key design innovations. The first is the integration of read/write heads into fully sealed 5GB, 10GB and 20GB removable disks, a feature that eliminates the risk of dust contamination and allows sustained transfer rates in the range of an expected 15 MBs per second (with a FireWire interface). The second is the relocation of the hard drive electronics to the Peerless disks from the base station. Peerless will use industry-standard interfaces for simple integration into new devices. A wide range of new products, from mobile multimedia devices to new computer designs, stand to benefit from the Peerless drive system. A broad range of applications from editing digital video sequences to running consumer software applications to backing up large hard drive partitions will be possible with the Peerless drive system.

In enterprise applications, the Peerless drive system will offer security and performance. Peerless disks can be used in 3D CAD/CAM, software development, database management, entertainment authoring and other applications where the portability of large data sets is important. The ability to back up critical content to Peerless disks for high-speed random access retrieval will also mean a new alternative to tape drives in some applications. As an enabling technology, the Peerless drive system can be the basis of hardware designs that give multiple users their own portable environment on a disk.

The Peerless drive system is expected to begin shipping mid-year 2001 to major U.S. retailers, with shipments to Europe and Asia/Pacific to follow in the third quarter.

Software

QuikSync 2 software.  QuikSync 2 software, which provides automatic on-the-fly file backups for PC and Macintosh users, became available to consumers in October 2000. As the first Iomega software product to be offered to consumers in the retail channel, QuikSync 2 software represented a major step towards establishing the Company's presence in the consumer software marketplace. QuikSync 2 software is designed to keep important files safe from viruses and system malfunctions without the need for additional backup. All users have to do is select the folders on their hard drives or network drives that they want QuikSync 2 software to monitor. Every time users save a file to one of these folders, the software automatically stores a copy of that file on an Iomega Zip, Jaz or PocketZip drive. QuikSync 2 software will also automatically save to Iomega CD-RW drives on IBM compatible PCs. Additionally, by setting QuikSync 2 software to store multiple file revisions, users gain the ability to recover earlier versions of their important files even if the current version has been changed or damaged.

QuikSync 3 software.  In February 2001, Iomega announced the release of QuikSync 3 software, which will automatically back up files to Iomega storage devices and to storage devices not manufactured by Iomega. QuikSync 3 software is expected to be available at retail outlets throughout the United States starting in March 2001. A Macintosh version is planned for later in 2001.

6

LifeWorks.  The LifeWorks group of software uses the Company's Active Disk technology to automatically configure and launch applications contained on Zip disks whenever the disk is inserted into a Zip drive. The application and data reside on the same disk for true portability. The application leaves no trace on the host PC when the disk is removed, ensuring that the system's original settings will not be affected. Active Disk applications are designed to automatically save and close when the user hits the eject button.

Photo Album.  The Company's Photo Album software is an easy-to-use photo viewing and printing package. With Photo Album, users can easily print photos, organize slideshows, and e-mail images to friends and family. With Photo Album, users can also conserve expensive photo paper by resizing and printing multiple images on a page. The software enables users to easily create new Photo Album Zip disks as needed. The software, used in conjunction with the Company's Active Disk technology allows true portability for consumers' files.

TurboTax®.  During the fourth quarter of 2000, the Company announced that the U.S. federal tax version of Quicken® TurboTax for tax year 2000 would be on Zip disks using Iomega Active Disk technology. The Company began shipping this product in January 2001. Iomega's Active Disk technology automatically configures and launches the TurboTax program, from the Zip disk whenever the disk is inserted into a Zip drive and allows the tax data to stay with its corresponding TurboTax program, simplifying retrieval of information in future years.

Club Iomega.  During 2000, the Company introduced Club Iomega, an Internet site providing users of Zip disks with a source of online content and promotions. Beginning January 2001, all Iomega branded Zip disks will include a "Click Here.exe" file that will direct users to the Club Iomega Web site when clicked. Since Iomega is currently shipping over four million Zip disks every month, and with more than 40 million Zip drives shipped worldwide, content partners have the capability to reach a large and desirable customer base with key product messages and special discounts. The Club Iomega Web site, although built for Iomega product users is available to anyone with access to the World Wide Web. Club Iomega also promotes Iomega products and services.

Other Products

Microdrive.  Beginning in January 2001, Iomega became the first company to brand IBM's 340MB Microdrive. Iomega will bundle the drive with a Type II+ PC card adapter and QuikSync 2 software to provide customers with a new solution for removable storage in laptop computers, consumer handheld devices and digital cameras. The 340MB Microdrive with Type II+ PC card adapter is currently compatible with 62 laptop computer models from 15 manufacturers, including Dell, Compaq, Toshiba, IBM and Apple. The drive is also compatible with any digital camera or PDA equipped to use Type II+ Compact Flash Modules.

CompactFlash and SmartMedia.  Beginning in March 2001, Iomega began offering CompactFlash™ cards with capacities of 16MB, 32MB, 64MB and 128MB and SmartMedia™ cards with capacities of 16MB, 32MB and 64MB. The addition of the CompactFlash and SmartMedia lines to the low-cost PocketZip platform and high-capacity Iomega Microdrive™ now gives Iomega customers four portable storage solutions for a variety of handheld electronic devices. Iomega's new flash memory cards will be supported by Iomega's customer satisfaction team and extended warranty options and the new products will be available through Iomega's current distribution channels.

Marketing

The Company's worldwide marketing group is responsible for positioning and promoting the Company's brands, products and storage solutions. The Company's overall marketing objective is to generate awareness and demand for its products and its products' applications and uses among computer users, consumer electronic users, OEMs and corporate enterprise IT managers. Iomega's marketing programs

7

employ activities in public relations, advertising, trade shows and a corporate Web site to build awareness among consumers and trade groups, to educate on product uses and stimulate demand for both new and existing products and solutions. Marketing programs are also conducted with retail channel partners to support these awareness-building efforts and to help promote demand for products at the point-of-sale through product promotions and in-store displays. The Company also participates in various co-marketing programs with other companies. Marketing support is also provided to the Company's distribution and reseller channels for the marketing of the Company's products.

The Company actively markets the sale of Zip drives built into leading personal computers. The Company's OEM partners are actively supported by specific OEM marketing programs. (See the OEMs, Licensee and Private Label section below for information about our OEM partners.)

The Company's product development and marketing efforts are focused on several high-growth potential areas. Specifically, the Company's "Beyond PC", "Software Solutions" and "Secure Document Initiative" programs are seeking to expand use of the Company's technologies into non-Iomega and non-PC platforms.

"Beyond PC" promotes use of the Company's storage technologies on digital products outside the traditional personal computer market. Zip and PocketZip drives are being designed into or to work with game consoles, Internet appliances, set-top boxes, digital cameras, photo viewers, photo printers, audio devices and digital music players. These new platforms and technologies all seek to leverage the removable storage benefits of Iomega's Zip and PocketZip drives and disks and help promote convergence between technology platforms.

The Company expects software solutions to take on an increasing role in 2001 and beyond. The Company's Software Solutions Group is focusing on creating software in-house as well as partnering with industry leading software providers to leverage the large amount of digital content that is being created for digital music, digital imaging, secure distribution of digital documents, file protection and backup and non-PC devices. Currently available software programs that have integrated support for Iomega devices include Adobe ActiveShare, Adobe Acrobat, Quicken TurboTax, MusicMatch Jukebox and QuikSync 2 software. In addition to continuing to provide basic software tools free of charge, the Company plans to continue expanding its stand-alone software offerings that are sold for a fee, such as the LifeWorks line of software.

The distribution of digital copyrighted material offers the Company an opportunity to leverage its unique serialization feature on Zip, Jaz and PocketZip disks to allow authors, artists, musicians and eventually, video and film producers to protect their copyrighted digital content while distributing it through digital kiosks and the Internet when used with an appropriate security software application. The Company is a member of the Secure Digital Music Initiative (SDMI), a forum of more than 120 companies designed to develop the voluntary framework for playing, storing and distributing digital music. The serialization feature on Iomega's media, when used with appropriate digital rights management software, provides protection against unauthorized copying of artist's content.

Iomega's Enterprise Marketing works closely with Enterprise Sales to develop programs focused on sales to Fortune 1000 businesses, the top 200 educational institutions and major federal and state government agencies. Activities during 2000 included participation in more than 200 industry events targeted at information technology management, direct marketing programs and telemarketing. Iomega's Enterprise program also included the formulation of the ESP/EPP (Employee Subsidized Program/Employee Purchase Program) aimed at the employees within major corporations.

Sales

The Company sells its products primarily through computer product and consumer electronic distributors, retailers and OEMs. The Company's Zip products are targeted primarily to the retail consumer and enterprise markets and personal computer OEMs. The Company's Jaz products are targeted primarily to

8

the business professional market. The Company's Iomega CD-RW products are targeted to the retail consumer and enterprise markets. The Company's PocketZip products are targeted to the enterprise market, various consumer electronics device OEMs and retail consumer markets. During 2000, with the introduction of the HipZip and FotoShow products, the Company began targeting the consumer electronic markets.

During the years ended December 31, 2000, 1999 and 1998, sales to Ingram Micro, Inc., a distributor, accounted for 16%, 15% and 16%, respectively, of total sales. No other single customer accounted for more than 10% of the Company's sales in 2000, 1999 or 1998.

A substantial portion of outstanding trade receivables are due from computer product distributors, certain large retailers and OEMs. At December 31, 2000, the customers with the ten highest outstanding trade receivable balances totaled $122.0 million, or 62% of gross trade receivables, with one customer accounting for $26.9 million, or 14% of gross trade receivables. If any one or a group of these customers' receivable balances should be deemed uncollectable, it may have a material adverse effect on the Company's results of operations and financial condition.

The Company has agreements with certain of its customers which, in the event of a price decrease, allow those customers (subject to limitations) credit equal to the difference between the price originally paid and the new decreased price on units either in the customers' inventories on the date of the price decrease, or on the number of units shipped to the customer for a specified time period prior to the price decrease. When a price decrease is anticipated, the Company establishes reserves against gross trade receivables for estimated amounts to be reimbursed to qualifying customers.

Management believes the markets for the Company's products are generally seasonal, with a higher proportional share of total sales typically occurring in the fourth quarter and sales slowdowns commonly occurring during the first quarter and summer months. Accordingly, revenues and growth rates for any prior quarter are not necessarily indicative of revenues or growth rates to be expected in any future quarter.

Retail Distribution

Retail outlets for the Company's products include computer superstores, consumer electronic superstores, mail order catalogs, office supply superstores, specialty computer stores and other retail outlets. The Company sells its products to retail channels directly as well as indirectly through distributors. The Company continues its efforts to increase the number of retail outlets carrying the Company's products. The Company's products are sold at a retail level by most of the leading retailers of computer products in the United States and Europe. Retailers carrying the Company's products as of December 31, 2000 included Best Buy, Circuit City, CompUSA, Costco Warehouse, Fry's Electronics, Datavision, Fred Meyer, J&R Music World, MicroCenter, OfficeDepot, Office Max, PC Warehouse, Quill Corporation, Radio Shack, Sam's Club, Sears, Staples, VB Management Group (Broadway), Viking Office Products and WalMart in the U.S.; and Dixons, FINAC, Media Market, PC World and Vobis in Europe. Distributors as of December 31, 2000 included Ingram Micro, Merisel, Tech Data and United Stationers, in the U.S.; Actebis, Computer 2000 and Ingram Micro Europe in Europe; Gennett Technologies, Q*Soft Australia Pty. Ltd. and Sunkyong Distribution Ltd. in Asia; and Ingram Micro Mexico, Azerty de Mexico, Unisel de Chile, Dinastia and Exel del Norte in Latin America. Catalog partners as of December 31, 2000 included CDW Computer centers, Clubmac, Creative Computers, Global Computer supplies, Micro Warehouse, Inc., Midwest Micro Corporation, Multiple Zones International and PC Connection Inc.

iomegadirect™

In June 1999, the Company launched its iomegadirect.com Web site. The Company generally offers all of its products through the Web site, including various promotional product bundles. In addition to the Company's products, iomegadirect.com offers additional third-party products that use the Company's

9

technology. The Company intends to continue to increase the product offerings on the Web site. The Company anticipates increased volume sales through its Web site and plans to offer additional services on the Web site. Some of these additional services are expected to include the ability to download encrypted content such as video, music, data set and text data onto the Company's serialized products, the creation of various content clubs which would allow users to exchange data such as recipes, text, music and data through the site and enhanced customer service through e-mail and interactive chat sessions between Company personnel and customers.

International

The Company sells its products outside North America primarily through international distributors and retailers. The Company has several sales offices in Europe, Asia and Latin America. During 2000, the Company opened two new offices in Asia and established a presence in Latin America with two sales offices. The majority of sales to European and Latin American customers are denominated in U.S. dollars. Sales to Asian customers are typically denominated in U.S. dollars with the exception of Japan, where sales are primarily invoiced in the Japanese Yen. In total, sales outside of the United States represented 34%, 36% and 34% for the years ended December 31, 2000, 1999 and 1998, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of Part II and Note (15) to the Company's audited financial statements for more information on international sales.

OEMs, Licensees and Private Label

In addition to sales through retail and distribution channels, the Company has entered into a number of strategic OEM arrangements with a variety of companies within the computer and consumer electronic industries. These alliances include OEM arrangements providing for certain of the Company's products to be incorporated in new computer systems and portable electronic devices at the time of purchase. The Company also has licensing or co-development arrangements that grant rights to third parties to manufacture and/or market to OEMs and other third parties. The Company also has private-branding and co-branding arrangements with major vendors of computer products covering the resale of the Company's products.

Zip Drives and Disks.  The Company has arrangements with many of the major PC manufacturers to incorporate Zip drives into their computer systems as standard or optional features. The Company's sales of Zip drives to OEM customers (excluding licensee shipments) accounted for 43% of total Zip drive units sold in 2000, compared to approximately 51% in 1999 and 52% in 1998.

The Company has non-exclusive license agreements with MCI and NEC under which they manufacture and market Zip 100MB drives to OEMs and other parties.

The Company has private-branding and co-branding arrangements with Fuji and Maxell covering the sale of Zip 100MB and Zip 250MB disks globally in packages that include the Zip brand name in addition to the partner's name.

PocketZip Drives and Disks.  The Company has licensing agreements with MCI and NEC that grant non-exclusive rights to manufacture and market PocketZip mobile storage drives to OEMs and other consumers worldwide and for use in their own portable electronic products.

QuikSync 2 software.  The Company has licensed Iomega QuikSync 2 software to IBM, for bundling with their Microdrive products.

Manufacturing

The Company's products are manufactured by the Company at its facilities in Penang, Malaysia and Roy, Utah and by independent parties who manufacture products for the Company on a contract basis.

10

Manufacturing activity generally consists of assembling various components, subcomponents and prefabricated parts manufactured by outside vendors.

Although the Company believes it is positioned to produce or otherwise obtain the majority of its products in the future, there can be no assurance that the Company will not from time to time encounter difficulties in achieving desired levels of manufacturing capacity; that it will be successful in managing relationships with third-party manufacturers; that third-party manufacturers will be able to meet the Company's quality, quantity, pricing and other requirements for manufactured products; or that vendors of components, subcomponents and prefabricated parts will be able to meet quantity, quality, pricing and other requirements of the Company.

Penang Manufacturing Facility

The Company owns a 376,000 square-foot, manufacturing facility in Penang, Malaysia where the Company's Zip, Jaz and PocketZip OEM drives are manufactured. Jaz disks, FotoShow digital image centers, Predator CD-RW drives and HipZip digital audio players are also manufactured in Penang.

Utah Manufacturing Facility

The Company leases a 100,000 square-foot facility in Roy, Utah that is utilized as a regional manufacturing facility to produce products to be sold mainly in North America. This facility produces Zip drives, PocketZip OEM drives, Zip disks, PocketZip disks, Iomega CD-RW drives, Predator CD-RW drives and HipZip digital audio players.

In addition, the Utah facility assists in new product introduction and produces limited quantities of products for quick-turn response and other special needs.

The Company both assembles CD-RW drives and sources internal CD-RW drives from a number of optical drive manufacturers.

Third-Party Product Manufacturing

The Company currently has third-party manufacturing relationships with MegaMedia Corporation, located in Taiwan, and Sentinel N.V., located in Belgium, who produce a majority of the Company's Zip disks.

Components

Certain components incorporated in, or used in, the manufacture of the Company's products are currently available only from single or sole source suppliers. In particular, media used in Zip 250MB disks and PocketZip disks is obtained exclusively from Fuji Photo Film, certain integrated circuits used in Zip drives are obtained exclusively from Texas Instruments, media used in Jaz disks is obtained exclusively from HMT Technology, motors used in Jaz and PocketZip drives are obtained exclusively from Nidec Corporation, head stack assemblies ("HSAs") used in Jaz drives are obtained exclusively from Read Rite International, HSAs used in Zip notebook and PocketZip drives are obtained exclusively from SAE Magnetics and disk enclosures used in PocketZip disks are obtained exclusively from J.E.B. Engineering Design, Ltd.

The Company purchases a portion of its single, sole and limited source components pursuant to purchase orders without guaranteed supply arrangements. The Company has experienced difficulty in the past, and may experience difficulty in the future, in obtaining a sufficient supply of key components on a timely basis. The Company continues to seek to develop relationships with qualified manufacturers with the goal of securing high-volume manufacturing capabilities and controlling the cost of current and future models of the Company's products; however, there can be no assurance that the Company will be able to obtain a sufficient supply of components on a timely or cost effective basis.

11

The inability to obtain sufficient components and equipment, to obtain or develop alternative sources of supply at competitive prices and quality, or to avoid manufacturing delays could prevent the Company from producing sufficient quantities of its products to satisfy market demand (or, in the case of a component purchased exclusively from one supplier, the Company could be prevented from producing any quantity of the affected product(s) until the component becomes available from an alternative source), delay product shipments, increase the Company's material or manufacturing costs or cause an imbalance in the inventory levels of certain components. Moreover, difficulties in obtaining sufficient components may cause the Company to modify the design of its products to use a more readily available component; and such design modifications may result in product performance problems. Any or all of these problems could in turn result in the loss of customers, provide an opportunity for competing products to achieve market acceptance and otherwise adversely affect the Company's business and financial results.

Backlog

The Company had an order backlog at the end of December 2000 of approximately $29.9 million, compared to a backlog at the end of December 1999 of approximately $45.9 million. The purchase agreements or purchase orders pursuant to which orders are made generally allow the customer to cancel orders without penalty, and the Company has experienced some cancellations or rescheduling of orders in backlog. Moreover, it is common in the industry during periods of product shortages or perceived product shortages for customers to engage in practices such as double ordering in order to increase a customer's allowance of available product. Accordingly, the Company's backlog as of any particular date should not be relied upon as an indication of the Company's actual sales for any future period.

Product Development

An important element of the Company's business strategy is the ongoing enhancement of existing products and the development of new products and software. During 2000, the Company's efforts were primarily focused on the development of the Company's HipZip digital audio player, FotoShow digital image center, QuikSync 2 and QuikSync 3 software, Iomega CD-RW and Peerless products, and enhancing its existing Zip and Jaz and products including developing different system interfaces, developing higher capacity and performance versions, enhancing and expanding compatibility with various computers and operating systems and reducing production costs. During 2000, the Company introduced the USB powered interfaces for its Zip drive products, a Zip internal drive for notebook computers and the Predator CD-RW external drive, along with several internal CD-RW drives at various speeds. The Company is continuing to work on new product innovations, outside the traditional computer market, built around the Company's products as evidenced by the introduction in 2000 of products such as FotoShow, a digital image center; HipZip, a digital audio music player; and QuikSync 2, a back-up/archive software solution. The Company is also continuing its efforts on expanding software applications to be used with the Company's current product offerings to provide additional value to the customer.

During 2000, 1999 and 1998, the Company's research and development expenses were $58.6 million, $76.5 million and $101.5 million, respectively (or 4.5%, 5.0% and 6.0%, respectively of net sales). Decreased research and development spending in 2000 was primarily the result of decreased spending on Zip, Jaz and PocketZip projects.

The Company operates in an industry that is subject to both rapid technological change and rapid change in consumer demands. The Company's future success will depend in significant part on its ability to continually develop and introduce, in a timely manner, new removable-media disk drive products with improved features and to develop and manufacture those new products within a cost structure that enables the Company to sell such products through effective channels at lower prices than those of competing products. There can be no assurance that the Company will be successful in developing, manufacturing and marketing new and enhanced products that meet both the performance and price demands of the data storage market.

12

Competition

The Company believes that its Zip and Jaz products compete with other data storage devices, such as fixed hard drives (for upgrade), magnetic cartridge disk drives (that use either floppy or rigid media), magnetic tape drives, magneto optical drives, optical disk drives and "floptical" disk drives. The Company believes that its PocketZip products compete with other data storage devices including various formats of flash memory, certain fixed hard drives and magnetic cartridge disk drives (that use either floppy or rigid media). Current competing solutions of removable-media data storage devices include Orb (product developed by Castlewood Systems, Inc.), Memory Stick (product developed by Sony Corporation), Microdrive (product developed by IBM), CompactFlash (product developed by Sandisk), SmartMedia (product developed by Toshiba), and CD-R, CD-RW and DVD drives and media. Although the Company believes that its Zip, Jaz and PocketZip products offer advantages over the other removable-media storage devices and other storage solutions available today, the Company believes that the price, performance and usability levels of existing removable-media products have improved and will continue to improve and that other companies will introduce new removable-media storage devices and new non-removable storage solutions. Accordingly, the Company believes that its Zip, Jaz and PocketZip products will face increasingly intense competition.

To the extent that Zip and Jaz drives are used for incremental primary storage capacity, they compete with non-removable media storage devices such as conventional hard disk drives, which are offered by companies such as Seagate Technology, Western Digital Corporation, Quantum Corporation and Maxtor Corporation, as well as integrated computer manufacturers such as NEC, IBM, Fujitsu, Hitachi, Ltd. and Toshiba. In addition, the leading suppliers of conventional hard disk drives could at any time determine to enter the removable-media storage market.

The Company believes that it is currently the only source of technology for the disks used in its Zip, Jaz and PocketZip drives. It is possible that other sources of supply for disks used in Zip, Jaz and PocketZip drives will emerge as a result of another party succeeding in producing disks that are compatible with Zip, Jaz and PocketZip drives without infringing the Company's proprietary rights.

Iomega CD-RW products compete with other CD-RW products as well as most of the magnetic products listed above as competitors for Zip and Jaz drives. CD-RW drives are distributed through traditional channels, which include retail, catalog, distribution, direct and also OEM. The CD-RW drive market has different segments in which drive suppliers compete. Numerous companies manufacture CD-RW drives. These manufacturers include Sony, Philips, Ricoh, Mitsumi, Yamaha, TEAC, Plextor, LG Electronics, Panasonic, Samsung, Lite-On and Sanyo. Sony, Philips and LG Electronics lead the market in manufacturing capacity for these drives. It is expected that additional companies will enter into the manufacturing market for CD-RW drives. Some of these manufacturers such as Sony, Philips and LG electronics sell directly to personal computer OEMs as well as into the aftermarket channels under their own brand names. Drive manufacturers also sell their drive components or finished drives to resellers which use their own engineering expertise to add value to the drive such as interface, external design, software as well as brand name to sell CD-RW drives. Some of these companies which purchase CD-RW drives from manufacturers include Iomega, ACS Innovations International, Acer Peripherals, Actima Technology Corporation, Behavior Tech Computer Corporation, Cendyne Creative Technology Ltd., Hewlett-Packard Corporation, Hi-Val, LG Electronics, Inc., Memtek Products, Inc., Pacific Digital, Traxdata and Waitec. The Company competes with these manufacturers and resellers on several factors such as price, performance, brand recognition, quality, customer support and software/accessories included with the drives. Adoption of CD-RW drives by personal computer OEMs is expected to continue to grow as drive reliability improves, drive prices decline and performance increases.

The Company believes that in order to compete successfully against current and future sources of competition, it will be necessary to further reduce the manufacturing costs of its products, thus enabling the Company to sell its products at lower prices. During the past several years, the Company has

13

implemented a number of programs, including Six Sigma quality initiatives, which have resulted in substantial product and process quality improvements and reduced costs. Through these and other programs, the Company is continuing to focus on reducing the manufacturing costs of its products by: reducing the cost of parts and components used in the Company's products through improved inventory management and product design modifications and by taking advantage of industry-wide reductions in costs; increasing manufacturing efficiencies; and decreasing defect rates. As new and competing removable-media storage solutions are introduced, it is possible that any such solution that achieves a significant market presence or establishes a number of significant OEM relationships will emerge as an industry standard or achieve a leading market position. If such is the case, there can be no assurance that the Company's products would achieve significant market acceptance.

The Company believes that in order to compete successfully against current and future sources of competition, it will need to differentiate its products from the competition through effective marketing and advertising portraying the benefits of the Company's products, such as the software embedded in the products that lends to ease of use.

In the OEM market, the Company competes with the vendors mentioned above, as well as with the manufacturers of personal computers, who may elect to manufacture data storage devices themselves.

The Company faces competition from its licensees and expects to compete in the future with any other licensees of the Company's products. In addition, the Company has granted certain companies the right to purchase disks from the Company (generally at a discount to the price paid by retail channels) and resell such products under private brand names; the Company's products may become subject to increased price competition from such private branded resellers. Price competition from other resellers of the Company's products, whether or not the Company has a manufacturing relationship with any such party, may result in increased pressure on the Company to reduce the prices at which its products are sold to such resellers or others or to offer rebates. The Company continually evaluates its prices and may elect to reduce prices or offer rebates in the future. Reductions in the prices at which the Company sells its products or any rebates offered by the Company would adversely affect gross margins to the extent such reductions or rebates are not offset by reductions in the cost of manufacturing such products.

The Company believes that most consumers distinguish among competitive data storage products on the basis of some or all of the following criteria: price (cost per unit and cost per megabyte of storage capacity), performance (speed and capacity), functionality (reliability, product size, removability, transportability and size of installed base of users), ease of installation and use and security of data. Additional competitive considerations, particularly in the OEM market, are the size (form factor) of the drive and the interface type with which the drive is compatible. The most common form factor for floppy drives is 3.5-inches. The Company currently offers 3.5-inch Zip and Jaz drives. The most common system interface for the OEM market is ATAPI. The Company currently offers internal Zip drives in ATAPI, SCSI, USB and FireWire interface models and internal Jaz drives in SCSI interface models.

The data storage industry is highly competitive, and the Company expects that competition will substantially increase in the future. In addition, the data storage industry is characterized by rapid technological development. The Company competes with a number of companies that have greater financial, manufacturing and marketing resources than the Company. The availability of competitive products with superior performance, functionality, ease of use, security or substantially lower prices could adversely affect the Company's business.

Proprietary Rights

The Company relies on a combination of patent, copyright, trademark, trade secret laws and contractual provisions to protect its technology. While the Company currently intends to carefully manage and, where appropriate, vigorously enforce its intellectual property rights, there can be no assurance that the steps taken by the Company to protect its technology and enforce its rights will be successful. The Company has

14

pending approximately 675 U.S. and foreign patent applications relating to its Zip, Jaz, PocketZip and Peerless drives and disks, and Iomega CD-RW drives although there can be no assurance that such patents will be issued. The Company holds more than 430 individually or jointly owned U.S. and foreign patents relating to its Zip, Jaz, PocketZip and other technologies. Some of these patents and patent applications are subject to license agreements with third parties. The Company is also developing new technologies that are not currently embodied in commercial products. The Company intends to similarly protect, where possible and deemed appropriate, these new technologies. There can be no assurance that any patents or other intellectual property rights obtained or held by the Company will provide substantial value or protection to the Company, that their validity will not be challenged or that affirmative defenses to infringement will not be asserted.

The validity of certain of the Company's patents has been challenged by parties against whom the Company has asserted infringement claims. If another party were to succeed in producing and selling Zip, Jaz or PocketZip compatible disks in volume, without infringing or violating the Company's intellectual property rights, the Company's sales would be adversely affected and such adverse effects could be material. It is also possible that the price at which the Company sells its proprietary disks could be adversely affected by the availability of such disks from other parties. Moreover, because the Company's Zip, Jaz and PocketZip disks have higher gross margins than the Zip, Jaz and PocketZip drives, the Company's net income would be disproportionately affected by any such sales shortfall.

The Company has 35 different registered trademarks in the United States, several of which are also registered trademarks in other countries. The registered trademarks include: Iomega, Zip and Jaz. Trademarks include: the stylized "i" logo, PocketZip, HipZip, FotoShow, QuikSync, LifeWorks, Peerless, Club Iomega, iomegadirect, Predator, ZipCD and Clik!.

Due to the rapid technological change that characterizes the Company's industry, the Company believes that the success of its products will also depend on the technical competence and creative skill of its personnel in addition to legal protections afforded its existing drive and disk technology.

As is typical in the data storage industry, from time to time, the Company has been, and may in the future be, notified of claims that it may be infringing certain patents, trademarks and other intellectual property rights of third parties. It is not possible to predict the outcome of such claims and there can be no assurance that such claims will be resolved in the Company's favor. If one or more of such claims is resolved unfavorably, there can be no assurance that such outcomes will not have a material adverse effect on the Company's business or financial results. The data storage industry has been characterized by significant litigation relating to infringement of patents and other intellectual property rights. The Company has in the past been engaged in infringement litigation, both as plaintiff and defendant. There can be no assurance that future intellectual property claims will not result in litigation. If infringement were established, the Company could be required to pay substantial damages or be enjoined from manufacturing and selling the infringing product(s) in one or more countries, or both. In addition, the costs of engaging in intellectual property litigation may be substantial regardless of outcome, and there can be no assurance that the Company will be able to obtain any necessary licenses on satisfactory terms.

Certain technology used in the Company's products is licensed on a royalty-bearing basis from third parties, including certain patent rights relating to Zip products. The termination of a license arrangement could have a material adverse effect on the Company's business and financial results.

Employees

As of December 31, 2000, the Company employed 3,429 individuals worldwide, consisting of 2,204 in manufacturing, 478 in general management and administration, 236 in research and development, 249 in sales, marketing and service, 180 in customer satisfaction and 82 in product management. None of the Company's employees are subject to a collective bargaining agreement. The Company believes that its relations with its employees are good.

15

Government Contracts

No material portion of the Company's business is subject to renegotiations of profits or termination of contracts at the election of the United States government.

Environmental Matters

Compliance with federal, state and local environmental protection laws had no material effect on the Company in 2000 and is not expected to have a material effect in 2001.

ITEM 2. PROPERTIES:

The Company's executive offices and a portion of its distribution, manufacturing and research and development facilities are located in leased offices and warehouses in the Roy, Utah area. These facilities include a 100,000 square-foot manufacturing facility to produce products to be sold mainly in North America. The Company leases warehouse facilities in North Carolina to serve as its principal distribution center for North America. In addition, the Company leases office space in various locations throughout North America for local sales, marketing and technical support personnel as well as other locations used for warehouses and for research and development activities.

Outside the United States, the Company leases office space in Geneva, Switzerland for use as its European headquarters and in Tiel, the Netherlands for use by its European logistics and distribution personnel. The Company also leases office space throughout Europe, Asia and South America for local sales, marketing and technical support personnel. The Company owns a 376,000 square-foot, manufacturing facility in Penang, Malaysia where the Company's Zip, Jaz and PocketZip OEM drives are manufactured. Jaz disks, FotoShow digital image centers, Predator CD-RW drives and HipZip digital audio players are also manufactured in Penang. The Company considers its manufacturing facilities, warehouses and other properties to be in good operating condition and suitable for their intended purposes. The Company's facilities are considered adequate with sufficient capacity to meet the operating requirements of the business.

The Company owns substantially all equipment used in its facilities through either outright purchases or capital leases.

ITEM 3. LEGAL PROCEEDINGS:

Except as set forth below, in management's opinion, there are no significant legal proceedings to which the Company or any of its subsidiaries is a party or to which any of their property is subject. The Company is involved in other lawsuits and claims generally incidental to its business. It is the opinion of management, after discussions with legal counsel, that the ultimate dispositions of these lawsuits and claims discussed below will not have a material adverse effect on the Company's financial position or results of operations, except that, an adverse judgment or settlement of certain claims could have a material adverse effect on the operating results reported by the Company for the period in which any such adverse judgment occurs or settlement occurs (or is implemented).

On September 10, 1998, a purported class action lawsuit, Rinaldi, et al. v. Iomega Corporation, was filed against the Company in the Superior Court of Delaware, New Castle County. The suit alleges that a defect in the Company's Zip drives causes an abnormal clicking noise that may indicate damage to the Zip drive or disks. The plaintiffs sought relief pursuant to claims of breach of warranty, violation of the Delaware Consumer Fraud Act, negligent design and manufacture, and failure to warn. On September 3, 1999, the Court dismissed the claims of breach of warranty and violation of the Consumer Fraud Act, granting the plaintiffs the opportunity to amend the latter claim. On January 31, 2000, the plaintiffs filed an amended complaint, reasserting their claim under the Delaware Consumer Fraud Act and, on February 28, 2000, the Company moved to dismiss this amended claim. With respect to this motion, on April 10, 2000, the

16

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

On June 15, 1999, a patent infringement lawsuit, Valitek, Inc. v. Iomega Corporation, was filed against the Company in the United States District Court for the Eastern District of Pennsylvania. The complaint requests injunctive relief against the Company, as well as monetary damages. On October 26, 1999, the court granted the plaintiff's motion to consolidate the action against Iomega, for discovery purposes only, with a second, similar lawsuit filed by Valitek against Hewlett-Packard and Imation. The Company intends to vigorously defend against this suit.

On July 6, 1999, the Company initiated litigation against Castlewood Systems, Inc. ("Castlewood"), Iomega Corporation v. Castlewood Systems, Inc., in the United States District Court for the District of Utah, for infringing the Company's U.S. Patent No. 4,458,273 and U.S. Patent No. 5,854,719, and for infringing and diluting the Company's registered trademarks "Iomega," "Zip" and "Jaz." The complaint further alleges that Castlewood has engaged in federal unfair competition, common law unfair competition and common law unjust enrichment. Through the complaint, the Company requests monetary damages and injunctive relief enjoining Castlewood from further infringement. On August 18, 1999, Castlewood filed an answer and counterclaims, denying the Company's claims and requesting a declaratory judgment that the Company's patents are invalid. On September 9, 1999, the Company filed a reply to the counterclaims, denying that the patents are invalid. On November 15, 1999, Castlewood filed an amended answer and counterclaims, adding several affirmative defenses. The Company filed a reply to this amended answer and counterclaims on January 5, 2000. On February 23, 2000, Castlewood filed another amended answer and counterclaims. Because this amended answer contained no new counterclaims, the Company did not file a reply. On April 11, 2000, the Company also initiated litigation against Castlewood in the United States

17

District Court for the District of Utah for infringement of the Company's U.S. Patent No. 6,049,444. The Company's complaint requests monetary damages and injunctive relief enjoining Castlewood from further infringement. Castlewood responded to the complaint on September 15, 2000. The two complaints filed by Iomega in the United States District Court for the District of Utah have been consolidated. In addition, on September 17, 1999, the Company initiated litigation against Castlewood in the Paris District Court based on claims of copyright and patent infringement. The Company sought a preliminary injunction preventing the sale of Castlewood's infringing products. Additionally, on September 20, 1999, the Company initiated litigation on this same basis against Motek, a French retailer of Castlewood's products, in the Paris District Court. The court has since denied the Company's request for a preliminary injunction with respect to the Company's patent claims, and granted the Company's motion for a preliminary injunction with respect to the Company's trademark claims. The action on the merits was withdrawn from the records of the court with the consent of both parties. It may be revived within two years by either party. On November 29, 1999, the Company filed suit against Castlewood and Motek for infringement of a patent covering a magneto resistive head. The court has since denied the Company's motion for preliminary injunction. At this time, the action on the merits is pending.

On December 8, 2000, IPDN Corporation filed a patent infringement complaint against Iomega, IPDN Corporation v. Iomega Corporation, in the U.S. District Court for the Eastern District of Missouri. IPDN contends that Iomega's sale of the HipZip product constitutes patent infringement as the HipZip incorporates features or functions that infringe one or more claims of the IPDN patents. The Company intends to vigorously defend against this lawsuit.

On March 23, 2001, the Company initiated litigation against Albi Media Manufacturing, SARL ("AMM") in the Tribunal de Grande Instance de Paris for infringing certain Iomega patents in connection with AMM's production and sale of the Swap 100MB disk, a cartridge that AMM claims can be used with certain of the Company's Zip drives. The complaint requests monetary damages and other relief against further infringement by AMM. The Company intends to vigorously pursue these claims and to continue its protection of Iomega intellectual property.

Nomai/AMM Litigation:

Nomai S.A. ("Nomai") is a subsidiary of the Company that was acquired during the third quarter of 1998. As described below, Nomai is currently engaged in several litigation matters that revolve around (1) Nomai's acquisition of the assets of RPS Media S.A, acquired in 1997, and (2) Nomai's subsequent sale of AMM in September 1999.

On February 18, 2000, Maître Jean Jacques Savenier, the Commissaire à l'execution du Plan (bankruptcy trustee), filed a complaint against Nomai. Savenier claimed that Nomai has not complied with the alleged investment and employment related commitments made by Nomai's former management before the Commercial Court of Albi, France in 1997 in connection with Nomai's acquisition during 1997 of the assets of RPS Media S.A. in bankruptcy. The action sought a daily penalty against Nomai of FF 100,000 (approximately $14,000) until Nomai invests FF 48,000,000 (approximately $6.7 million) and hires 100 people. An initial hearing before the Commercial Court was held on April 4, 2000. On April 18, 2000, the Commercial Court declined, on jurisdictional grounds, to issue a summary judgment ruling in favor of Savenier. On February 16, 2001, Savenier refiled the complaint with the Commercial Court, again asking that the Court order Nomai to comply with the alleged employment and investment commitments set forth in the bankruptcy plan or to fine Nomai FF 100,000 for each day of noncompliance. Nomai intends to vigorously defend against these allegations.

On May 18, 2000, Conseil & Technique, Soterem and IDCC (subcontractors under a research and development contract) filed a lawsuit before the Commercial Court of Toulouse, France against Nomai's former subsidiary, Albi Media Manufacturing, SARL ("AMM"). Nomai is obligated to indemnify for and defend against the lawsuit pursuant to the agreement whereby Nomai divested its ownership of AMM to a

18

new owner. Neither Iomega nor Nomai are named parties to the lawsuit. The lawsuit alleges breach of contract and other claims relating to a research and development project between AMM and the plaintiffs. The lawsuit claims total damages of approximately 75 million French francs (approximately $10.0 million). The Court held hearings in the case on June 26, 2000, November 13, 2000 and February 5, 2001. The next hearing is scheduled for May 14, 2001. Based on the indemnification obligations described above, Nomai intends to vigorously defend against these allegations.

On January 3, 2001, Nomai was served with a notice of arbitration from Alain Bouttier, the acquirer of Nomai's former subsidiary, AMM. Mr. Bouttier's action is based on alleged breaches by Nomai of the agreement whereby Nomai divested its ownership of AMM to Mr. Bouttier. In particular, Mr. Bouttier claims that AMM suffered damages as a result of Nomai's treatment of AMM assets prior to its sale and the alleged bad faith of Nomai. Mr. Bouttier seeks the nullification of the non-competition agreement between AMM and Nomai and claims damages of FF 142,061,617 (approximately $20 million). Although the nature of Mr. Bouttier's claims are difficult to assess at this early stage, they appear to include claims that overlap with those asserted in the Savenier and Conseil & Technique, Soterem and IDCC matters described above. The arbitration claim will be heard before a three-member arbitration panel in Paris. The arbitration panel has been appointed and is commencing the proceeding. Nomai intends to vigorously defend against these allegations.

On January 19, 2001, the Commercial Court of Coutances, France, which has jurisdiction over Nomai's commercial registration, ordered Nomai to appear at a hearing before the Court on February 6, 2001. The purpose of the hearing was to evaluate Nomai's solvency, and, if Nomai were found insolvent, to start a judicial reorganization proceeding. The Court ordered Nomai to provide various documentation at a hearing scheduled for April 24, 2001. Nomai intends to respond to the Court's order and to demonstrate its solvency.

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

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

No matters were submitted to a vote of the Company's security holders during the quarter ended December 31, 2000.

EXECUTIVE OFFICERS OF THE COMPANY

The executive officers of the Company as of February 28, 2001 were as follows:

19

Bruce R. Albertson joined the Company as President and Chief Operating Officer in November 1999 and assumed the position of Chief Executive Officer in January 2000. Prior to joining the Company, Mr. Albertson served General Electric Company in various senior global and marketing capacities for more than 25 years, most recently as Vice President—Worldwide Marketing and Product Management, GE Appliances. From 1993 until his retirement in mid-1998, Mr. Albertson was also an officer of GE.

David W. Campbell joined Iomega in March 2000 as Director, Promotions and Creative Services. During 2000, he was promoted to Vice President, Marketing Communications, and in February of 2001, his title was changed, without a change in responsibility, to Senior Vice President, Marketing Communications. Prior to joining Iomega, he was Vice President, Sales at Power Creative, a full service marketing communications agency, where he worked for 10 years. Before that, he worked in a variety of positions in Sales and Marketing for GE Appliances.

J. Douglas Collier joined the Company as Vice President, Product Management and Business Development in September 2000 and in February 2001, his title was changed, without a change of responsibility, to Senior Vice President, Marketing and Product Management. Prior to joining the Company, Mr. Collier served in senior management roles with NIBCO Inc., an international provider of valves, fittings and piping products, from 1996 to 2000, including General Manager, Fittings and Director, e-Business & Marketing. Mr. Collier served as Product Director for Whirlpool Europe BV and Director of Business Development for Whirlpool North America from 1993 to 1996. Mr. Collier served in Product Planner and Product Manager roles for GE Canada from 1989 to 1992.

John L. Conely, Sr. joined the Company in October 1997 as Vice President, Operations Personal Storage Division. During 1998, Mr. Conely took over manufacturing responsibility for all of the Company's product divisions. He served as Executive Vice President, Operations from June 1999 to February 2001, when his title was changed, without a change in responsibility, to Senior Vice President, Operations. Prior to joining the Company, Mr. Conely spent 12 years at SAFT America Incorporated, a subsidiary of Alcatel, a communications company, most recently as Vice President of Sales and Marketing and Vice President and General Manager, Portable Battery Division, in Valdosta, Georgia. Prior to this, Mr. Conely spent 18 years at GE in various mid and senior level positions.

Philip G. Husby joined the Company as Senior Vice President, Finance and Chief Financial Officer in August 1999. From 1990 to 1998, Mr. Husby served as Senior Vice President and Chief Financial Officer of Ogden Corporation, a NYSE traded multinational services company. From 1987 to 1990, Mr. Husby served as Senior Vice President and Chief Administrative Officer of Ogden Financial Services, Inc., a subsidiary of Ogden Corporation. From 1979 to 1987, Mr. Husby was a partner with KPMG, serving a variety of technology and financial services clients in various domestic and international offices.

Charlotte L. Miller joined the Company in July 1998 as Director, Litigation Management. In September 1999, Ms. Miller was appointed Vice President, and was appointed as Acting General Counsel in November 1999. In January 2000, she was appointed Vice President, Human Resources. In February 2001, her title was changed, without a change in responsibility, to Senior Vice President, Human Resources. Prior to joining the Company, Ms. Miller was employed at Summit Family Restaurants Inc., a restaurant operating company, from 1992 to 1998 and served in various management positions, including General Counsel, Chief Administrative Officer and Senior Vice President.

Herbert K. Scales, III joined the Company as Executive Vice President, Sales in February 2000. In February 2001, his title was changed, without a change in responsibility, to Senior Vice President, Sales. Prior to joining the Company, Mr. Scales served as Vice President, Sales Worldwide for Gardenway, Inc., a privately held outdoor power equipment manufacturer, from 1997 to 1999. Mr. Scales served as Senior Vice President, Retail Sales for Philips Consumer Electronics from 1995 to 1997. From 1992 to 1995, Mr. Scales served as General Manager of Brand Marketing for Whirlpool Corporation.

20

PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS:

Securities

Iomega Common Stock is traded on the New York Stock Exchange under the symbol IOM. As of December 31, 2000, there were 6,589 holders of record of Common Stock. The Company has not paid cash dividends on its Common Stock in the past and has no present intention to do so in the future. The following table reflects the high and low sales prices as reported by the New York Stock Exchange for 2000 and 1999.

Price Range of Common Stock

ITEM 6. SELECTED FINANCIAL DATA:

The following tables indicate the trends in certain components of the consolidated statements of operations and balance sheets for each of the last five years.