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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

1-12333

(Commission file number)

Iomega Corporation

(Exact name of registrant as specified in its charter)

10955 Vista Sorrento Parkway, San Diego, CA 92130

(Address of principal executive offices)

(858) 314-7000

(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.  x

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

The aggregate market value of Common Stock held by non-affiliates of the registrant at June 29, 2003 was $505,156,546 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 1, 2004 was 51,528,745

Documents incorporated by reference:

IOMEGA CORPORATION AND SUBSIDIARIES

This Annual Report on Form 10-K contains a number of forward-looking statements, including, without limitation, statements referring to: plans to introduce new and enhanced products and software, including DCT, a small-form factor removable flexible magnetic storage device expected to have a capacity of about 1.2 to 1.5 gigabytes (“GB”) and the REV drive, a removable hard disk storage system expected to have a native capacity of approximately 35GB and a compressed capacity of up to 90GB; the goal to ship REV products in April 2004; the expected REV products features and benefits over tape drives; the plan to launch Firewire, SCSI and S-ATA based REV drives later in 2004; the goal to ship DCT sometime during the summer of 2004; goals to recruit OEM customers for new products, particularly for REV products and DCT; the need for additional restructuring or other charges in the future; the goals and timing to achieve profitability on REV and DCT new products after their launch; the expectation that the REV products should be profitable by fourth quarter 2004; the expected profitability or lack of profitability on certain product lines; the expected sales volume or lack of sales volume on certain product lines, particularly Zip products; expected levels of future research and development investments by the Company; the goal to achieve an annual cost and expense reduction of $35 million to $40 million as compared to first half 2003 run rates as a result of the 2003 restructuring initiatives; plans concerning the availability of PocketZip and Jaz disks and other plans concerning product lines; the goal to grow the Company’s sales; the expectation of continuing to lower product procurement costs; the goal to improve the procurement and commodity business processes to maximize profitability on sourced products; the impacts of expensing stock option grants; the expected sufficiency of unrestricted cash, cash equivalents and temporary investment balances and cash flows from future operations; the factors affecting future gross margins; expected sales levels due to seasonal demand; the expectation that the Company can obtain sufficient product and components thereof to meet business requirements; anticipated hedging strategies; the possible effects of an adverse outcome in the review of the Company’s SEC filings described under the caption “Other Matters” in Management’s Discussion and Analysis of Financial Condition and Results of Operations; the expected impact of the adoption of recent accounting pronouncements; the belief that the Magic Project litigation can be resolved and the possible effects of an adverse outcome in legal proceedings, as described in Note 6 of the notes to consolidated financial statements in Part IV. Any other statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “intends” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words.

There are a number of important factors that could cause actual events or the Company’s actual results to differ materially from those indicated by such forward-looking statements. These factors include, without limitation, those set forth under the captions “Critical Accounting Estimates and Assumptions,” “Liquidity and Capital Resources,” “Factors Affecting Future Operating Results” and “Quantitative and Qualitative Disclosures About Market Risk” included in Items 7 and 7A 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.

Copyright ^© 2004 Iomega Corporation. All rights reserved. Iomega, the stylized “i” logo, Zip, REV, Boot and Run, HotBurn, Active Disk, Iomega Automatic Backup, Iomega Sync, ioLink, ioClub, Jaz, PocketZip and HipZip, are either registered trademarks or trademarks of Iomega Corporation in the United States and/or other countries. All other trademarks referenced herein are the property of their respective owners.

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IOMEGA CORPORATION AND SUBSIDIARIES

PART I

Iomega designs and markets products that help customers protect, secure, capture and share their valuable digital information. The Company has organized its products into three broad business categories to align with its customers for marketing purposes: a) Mobile and Desktop Storage Systems, b) Network Storage Systems and c) New Technologies.

Iomega Corporation was incorporated in Delaware in 1980. The Company’s executive offices are located at 10955 Vista Sorrento Parkway, San Diego, CA 92130 and its telephone number is (858) 314-7000. The terms “Iomega” and the “Company” refer to Iomega Corporation and its wholly owned subsidiaries, unless the context otherwise specifies. The Company provides its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, free of charge, in the Investor Relations section of the Company’s website at www.iomega.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission.

Product Categories

The Company’s Mobile and Desktop Storage Systems products include the following:

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IOMEGA CORPORATION AND SUBSIDIARIES

The Company’s Network Storage Systems products include:

The Company’s New Technologies products include:

Regarding all capacity references contained in this filing, one megabyte (or “MB”) equals 1 million bytes, one gigabyte (or “GB”) equals 1 billion bytes and one terabyte (or “TB”) equals 1 trillion bytes.

Availability

Iomega’s Mobile and Desktop Storage Systems products are generally available worldwide from retailers, catalog, distribution, original equipment manufacturers (“OEMs”) and online vendors. Iomega Network Storage Systems products are available worldwide from catalog, distribution, online vendors, value-added resellers (“VARs”) and system integrators. When shipped, the Company expects REV products to be available worldwide from catalog, distribution, online vendors, VARs and system integrators. The Company also sells its products through its www.iomega.com website.

Company Products

Mobile and Desktop Storage Systems Products

Zip Products

Zip Drives. The Company introduced the Zip drive in March 1995. Designed as an affordable portable storage product for personal computer users, Zip drives address multiple needs: data storage, archiving, portable applications (with Active Disk technology, which automatically configures and launches applications contained on a Zip disk whenever the disk is inserted into a Zip drive), data transportability, file distribution (including multimedia presentations), data security and backup. Zip drives are available in 100MB, 250MB and 750MB capacities. Zip drives are compatible with leading operating systems for personal computers and workstations (both PC and Mac^®). Software included with the Zip drives helps users organize, copy, move and back up their data and offers software read/write protection. Zip drives use Iomega proprietary Zip disks and are available as both an internal and external drive.

Zip Disks. Zip disks are available in 100MB, 250MB and 750MB capacities.

Optical Products

Optical products include Iomega CD-RW drives and Iomega DVD rewritable drives. Iomega CD-RW drives are used for creating customized music CDs, archiving and distributing other digital information such as photos and graphics. DVD rewritable drives are used for these purposes and for transferring and storing video content on DVD discs.

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IOMEGA CORPORATION AND SUBSIDIARIES

Iomega CD-RW Drives

At December 31, 2003, the Company shipped external drives with capacities up to 52x24x52 speed. The Company also shipped a CD-RW/DVD combination drive with a CD-RW speed of 48x24x48 and a DVD-ROM read speed of 16x. The three speeds of a CD-RW drive, such as 52x24x52, represent the write (record once on CD-R media), Re-Write (rewritable speed using CD-RW media) and Read (CD-ROM) speeds, respectively. These drives are compatible with both USB 1.1 and USB 2.0 interfaces. These drives currently come with Iomega’s HotBurn^® Pro CD/DVD writer software, Iomega Automatic Backup software and also include certain third-party software packages. These drives are compatible with both PC and Mac^® platforms.

Iomega DVD Rewritable Drives

During 2003, the Company began selling DVD products and at December 31, 2003, sold both internal and external DVD drives. Iomega’s Super DVD rewritable drives support all DVD formats including DVD+R, DVD+RW, DVD-R, DVD-RW, DVD-ROM and DVD-RAM. These drives also support CD-R, CD-RW and CD-ROM. DVDs can store up to 4.7GB of data files per disc. All Iomega DVD rewritable drives currently ship with HotBurn Pro DVD burning software, Iomega Automatic Backup software and also include certain third-party software packages.

The Company anticipates that DVD technology, like CD-RW technology, will be characterized by rapid advances in available write, re-write and read speeds. The Company may offer DVD rewritable drives with upgraded speeds as they become available, provided that market demand and other factors make it prudent for the Company to do so.

Other Mobile and Desktop Storage Systems Products

Iomega HDD Drives

Iomega Desktop HDD Drives. Iomega desktop HDD drives add storage easily and quickly to personal computers. Complete with Iomega Automatic Backup software and Norton Ghost^™ disaster recovery software, they are preformatted for ease of use. USB 1.1, USB 2.0 and FireWire^® compatibility make switching between PC and Mac^® easy. The Iomega desktop HDD drives are available in capacities ranging from 80GB to 250GB and come in a 3.5-inch form factor.

Iomega Portable HDD Drives. Iomega portable HDD drives make security, recovery and data storage easy. These drives for PC or Mac^® are available in 20GB to 60GB capacities. USB 1.1, USB 2.0 and FireWire^® compatibility make switching between PC and Mac^® easy. They feature patented Shock Resistance Technology for a compact device (2.5-inch form factor) that is small enough to fit in a shirt pocket. The portable HDD drives ship with Iomega Automatic Backup software and Norton Ghost^™ disaster recovery software and are preformatted for ease of use. The drives are host powered, so they can be used without needing a separate power supply.

Iomega Mini and Micro Mini USB Drives

Introduced during the fourth quarter of 2002, the Iomega Mini and Micro Mini USB drives are portable, easy-to-use secure devices for transporting and sharing data. They are as small as a car key and plug into any computer’s USB port. Active Disk applications can launch and run directly from the drives. The drives

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IOMEGA CORPORATION AND SUBSIDIARIES

have capacities ranging from 64MB to 512MB and offer Mini Lock software (PC only) to password protect the data on the drive. Iomega Mini USB drives come in both USB 1.1 and USB 2.0 interfaces. During the first quarter of 2004, the Company began shipping the Iomega Micro Mini^™ USB drives with USB 1.1 and USB 2.0 interfaces. Micro Mini USB drives are smaller than Iomega Mini USB drives and have capacities ranging from 64MB to 128MB.

Iomega Floppy USB Drive

Iomega Floppy USB drive is a host-powered external drive, so it can be used without needing a separate power supply. The Floppy USB drive reads and writes to all formatted floppy disks.

Software

HotBurn^® CD/DVD Writer Software. HotBurn and HotBurn Pro software are designed to simplify the process of creating CDs and DVDs. HotBurn Pro software is an advanced version of HotBurn software that gives the user greater control over CD/DVD burning options. HotBurn and HotBurn Pro software include CD and DVD mastering, packet writing and cover editing. HotBurn Pro software is included with the Company’s CD-RW and DVD rewritable drives. Both HotBurn and HotBurn Pro software can be downloaded from the Iomega website. HotBurn software has been licensed to ValuSoft, Inc., under the Burn & Go Gold CD/DVD label, while HotBurn Pro software has been licensed to ValuSoft, Inc., under the Burn & Go Professional label.

Iomega Active Disk^™ Software. Iomega Active Disk software, which incorporates patented technology developed by Iomega, allows users to automatically launch and run software applications directly from their removable storage devices. Users simply connect their device or insert their disk in the drive and the Active Disk enabled application launches and runs automatically. When finished, users simply close their application, disconnect their device and the software along with all of the related work is saved to the secure, removable storage device. Active Disk software allows the user to stay mobile and organized.

Iomega Automatic Backup^™ Software. Iomega Automatic Backup software (“Automatic Backup”) is designed to maintain copies of important files safely and automatically. Users select the folders on any storage device (e.g., hard drives, network drives or other storage devices) that they want to protect. Then, every time users save a file to one of these folders, Automatic Backup automatically makes a backup copy to the storage device selected by the user. Automatic Backup can also store multiple file revisions, so users can recover earlier versions of important files if the current version is damaged. Automatic Backup is bundled with many of the Company’s products and can be downloaded from the Iomega website.

Iomega Sync^™ Software. Iomega Sync software keeps files on multiple computers synchronized. Active Disk powered Iomega Sync software launches and runs from a storage device, such as a Zip disk, USB Flash drive or external hard disk drive. As files are changed and saved, Iomega Sync software automatically synchronizes the selected data on the computer system’s hard drive with the data on the targeted storage device, so that the latest file revisions are always on the targeted storage device.

Peerless Products

The Peerless drive and disk systems began shipping during the second quarter of 2001 in 10GB and 20GB configurations. During 2002, with the launch of Iomega HDD drives, the Company began to discontinue the Peerless drives and related Peerless disks. The Company continues to sell Peerless products from existing inventory.

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IOMEGA CORPORATION AND SUBSIDIARIES

Jaz® Products

During the first quarter of 2002, the Company discontinued its Jaz drive products. However, the Company currently sells Jaz disks to support the installed base of Jaz drives.

Jaz products, which were first introduced in December 1995, addressed 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. Jaz drives use proprietary Iomega Jaz disks.

PocketZip™ Products

During the first quarter of 2002, the Company discontinued its PocketZip drive and HipZip^™ digital audio player (“HipZip”) products. However, the Company currently sells PocketZip disks to support the installed base of PocketZip drives and HipZip players, which play music stored on Iomega’s PocketZip 40MB disks.

PocketZip drives, which were first introduced in December 1998, were miniaturized removable-media storage devices designed for use in a variety of handheld consumer electronics devices and notebook computers. PocketZip 40MB disks are flexible magnetic disks in a 2” by 2” metal jacket. PocketZip drives and HipZip players use proprietary Iomega PocketZip disks.

Network Storage Systems Products

Iomega Network Attached Storage

During 2003, the Company focused on the NAS target market under $25,000, which may be further divided into three categories, entry level (prices less than $2,000), mid-range (prices from $2,000 to $5,000) and high-end (prices $5,000 and greater). The Company shipped NAS servers with capacities of up to 2TB, with most servers featuring hot swappable drives (drives that can be changed without rebooting the server) and RAID (redundant array of independent disks) technology for increased security. Iomega NAS servers use Microsoft^® Windows^® as the operating system.

During the fourth quarter of 2003, the Company decided to focus its NAS strategy on the low end and certain models of the mid-range of the target market and is in the process of exiting the high-end (products costing $5,000 to $25,000 per unit) of the target market. During 2004, the Company plans to focus on the sales of servers with capacities ranging from 160GB to 1TB. By focusing on the low end of the target market, the Company expects to better leverage its small- to medium-sized business customer base and channel customers, including existing VARs already addressing these customers. Despite significant efforts and spending on marketing and product introductions during 2002 and 2003, the Company was not successful in penetrating the high-end of the target market and first tier corporate reseller channels and thus made the decision to exit this part of the NAS market. The Company will continue to support all products that have been sold.

Aftermarket service plans for Iomega NAS servers are available either separately or bundled with NAS servers depending upon the NAS server model and may include, among other options, on-site repair, extended warranties and 24-hour phone support.

New Technologies and Products

During 2003, the Company’s research and development efforts were focused primarily on two new high-capacity removable storage devices, a removable hard disk storage system, REV^TM, that is expected to have a

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IOMEGA CORPORATION AND SUBSIDIARIES

native capacity of approximately 35GB and a compressed capacity of up to 90GB and a small-form factor removable flexible magnetic storage device, DCT, that is expected to have a capacity of about 1.2 to 1.5GB. REV product sales are expected to begin in April 2004. The initial versions of the REV drive will be in USB and Atapi interfaces, with Firewire, SCSI and S-ATA interfaces planned for later in 2004. DCT sales are expected to begin during the summer of 2004. Like any new development, these two technologies, DCT in particular, are subject to significant technical, manufacturing and market adoption risks. The Company anticipates that it will continue to incur significant research and development expenses in 2004 on these two projects.

REV products are designed for backup and high-capacity portable storage for small- and medium-sized businesses and enterprise workgroups. Compared to traditional tape systems, REV drives and disks are expected to be faster, more durable, easier to maintain and provide random access to data. They are anticipated to cost significantly less than most tape alternatives, including DDS, DAT-72, VXA^®, AIT-1, DLT^® and DLT VS80.

DCT is designed as a low-cost, high-capacity portable storage platform for consumer electronics devices. With the 1.2 to 1.5GB capacity of DCT disks, consumers will be able to transfer video clips, audio tracks and photos between supported devices; store data permanently on secure low-cost media; erase and reuse disks as needed and carry workplace files wherever they are needed. Camcorders, motion video digital still cameras, audio and video players, PC Card enabled flat panel televisions and personal video recorders are among the target applications of this new platform. The Company believes that the success of DCT is dependent upon significant adoption by consumer electronics OEMs of this product during the later part of 2004 and early 2005.

Product Development

In addition to its research and development expenses for new technologies, such as REV and DCT new products and software enhancements for existing and anticipated products, the Company incurs development expenses in the sourcing, qualification and testing of its sourced products, including CD-RW and DVD rewritable drives, NAS servers and other products. During 2003, 2002 and 2001, the Company’s research and development expenses were $31.6 million, $36.2 million and $49.5 million, respectively (or 8.1%, 5.9% and 6.0%, respectively, of net sales).

The Company is continuing its efforts to expand software applications to be used with the Company’s current product offerings to provide additional value to the customer, such as enhancing the HotBurn CD/DVD burning software and data protection/data mobility applications like Automatic Backup. The Company is also developing Boot and Run^™ technology (a technology that will allow immediate recovery and use of a computer system directly from REV products in the event of a computer system failure).

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 storage products with improved features and to develop and source those new products within a cost structure that enables the Company to sell such products through effective channels at competitive prices. There can be no assurance that the Company will be successful in developing, procuring and marketing new and enhanced products that meet both the performance and price demands of the data storage market.

Marketing

The Company’s worldwide marketing objective is to build awareness and generate demand for the Company’s products. The Company’s worldwide marketing efforts are focused on the positioning and messaging of the Company’s products and software to enhance the value of the Iomega brand. The

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IOMEGA CORPORATION AND SUBSIDIARIES

Company delivers brand and product-specific messages to a variety of target segments including computer users, Information Technology (“IT”) managers and OEMs via a broad assortment of communication vehicles including advertising, public relations, tradeshows and events, direct marketing and the www.iomega.com website. These awareness-generating activities are enhanced with demand stimulus programs and promotions, such as direct mail or e-mail offers to target market segments, for distribution, reseller and retail channel partners.

The Company markets internal Zip 250MB and Zip 750MB drives to personal computer manufacturers, which in turn incorporate these drives into personal computers for sale to end users. The Company supports specific OEM marketing programs directed at these OEM partners (see the “OEMs and Private Label Customers” section below for information about OEMs which support Iomega products).

In addition, the Company actively focuses on marketing to and developing the small- and medium-sized business segments. The Company’s brand marketing resources develop programs focused on small- and medium-sized businesses, large educational institutions and major federal and state government agencies. Activities during 2003 included advertising, direct marketing programs and e-marketing activities, as well as participation in Storage Industry events targeted at IT management and small businesses. To enhance the Company’s ability to serve this important market segment, the Company has actively recruited qualified VAR partners to sell the Company’s products. These VAR partners are supported through the Company’s ioLink initiative with marketing programs, training and sales materials.

The Company organizes its marketing and product development initiatives around Mobile and Desktop Storage Systems, Network Storage Systems and New Technologies.

Marketing initiatives for Mobile and Desktop Storage Systems products are designed to promote usage and generate incremental disk consumption. To enhance or differentiate its products, the Company has focused on software development and promotes software titles such as Iomega Automatic Backup, Iomega Sync, HotBurn and the Active Disk technology. The Company’s marketing efforts for its NAS products are primarily directed toward small- and medium-sized businesses. The Company’s New Technologies marketing efforts are directed toward generating interest among computer OEMs, VARs and systems integrators for REV products and consumer electronics OEMs and retailers for DCT products.

Sales

The Company sells its products primarily through computer product and consumer electronic distributors, retailers, VARs, OEMs and private label customers. The Company’s Zip products are targeted primarily to the small- to medium-sized business, home office, retail consumer, personal computer OEM and key segments including government, education, health care, business services and manufacturing. The Company’s sourced branded products (Optical, HDD, Mini and Micro Mini USB drives and Floppy USB drives) are targeted primarily to the retail consumer market. The Company’s Network Storage Systems products are targeted primarily to the small- to medium-sized business market and sold through VARs, catalogs and distributors. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II and Note 15 to the notes to consolidated financial statements for financial information about the Company’s business segments.

The Company’s sourced branded business is typically strongest during the fourth quarter. The Company’s European sales are typically weakest during the third quarter due to summer holidays. Zip sales to OEM customers are typically strongest during the third quarter. There can be no assurance that this historic pattern will continue. Given the continued expected decline of the Zip business, the Company is unable to estimate or forecast any Zip product seasonality in future quarters. As a result of the foregoing, sales for any prior quarter are not necessarily indicative of the sales to be expected in any future quarter.

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IOMEGA CORPORATION AND SUBSIDIARIES

Retail Sales

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. In Europe, Asia and Latin America, the Company sells its products to the retail channel indirectly through distributors. The Company’s products are sold at a retail level by most of the leading retailers of computer products in the United States. Retailers with whom the Company sold directly to as of December 31, 2003 in the United States included Best Buy, Circuit City, CompUSA, Datavision, Fry’s Electronics, J&R Music World, MicroCenter, Office Depot, Office Max, Quill Corporation, Sam’s Club, Staples, Viking Office Products and WalMart Stores.

Distributors

Distributors as of December 31, 2003 included Bell Microproducts, D&H Distributors, Inc., Horizon USA, Ingram Micro, Inc., Tech Data, SP Richards, Synnex and United Stationers in the U.S.; Actebis, Banque Magnetique, CMS Peripherals, Datamatic S.P.A., Dexxon Data Media S.A., E&K Data, Esprinet S.P.A., Tech Data International S.A.R.L. and Ingram Micro Europe in Europe; Ingram Micro, Neoteric Informatique Pvt. Ltd. and Tech Pacific in Asia and Azerty de Mexico, Darck Technologies, Exel del Norte, Golden Distribuidora, Officer Distribuidora, Pentaxis Chile and Intcomex in Latin America.

Direct catalog partners as of December 31, 2003 included CDW Computer Centers, Corporate Express, PC Connection and PC Mall.

Company Website

The Company offers its products, including various promotional items, through its www.iomega.com website.

International Sales

The Company sells its products outside North America primarily through international distributors. The Company has several sales offices in Europe, Asia and Latin America. The majority of sales to European customers are denominated in Euro. All sales to Latin American and Asian customers are denominated in U.S. dollars. In total, sales outside of the United States represented 42%, 37% and 33% for the years ended December 31, 2003, 2002 and 2001, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II and Note 15 of the notes to consolidated financial statements for more information on international sales.

OEMs and Private Label Customers

In addition to sales through retail and distribution channels, the Company has entered into a number of agreements with a variety of OEMs within the computer industry. The Company has arrangements with many of the major PC manufacturers to incorporate Zip drives into their computer systems as optional features. Despite decreasing total Zip sales, the Company’s percentage of Zip drive sales to OEM customers has remained fairly steady with OEM customers accounting for approximately 51%, 53% and 51% of total Zip drive units sold in 2003, 2002 and 2001, respectively.

The Company has a private-branding arrangement with Fuji covering the sale of Zip 100MB, 250MB and 750MB disks globally in packages that include the Zip brand name in addition to Fuji’s name.

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IOMEGA CORPORATION AND SUBSIDIARIES

Manufacturing

During the fourth quarter of 2002, the Company completed the sale of its Penang, Malaysia Manufacturing Subsidiary to Venture Corporation Limited (“Venture”), where the Company’s Zip drives and disks and certain other products are manufactured (See the caption entitled “Penang Manufacturing Subsidiary Impairment Charges” 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 or Note 2 of the notes to the consolidated financial statements in Part IV of this Annual Report on Form 10-K for more details concerning the sale of this subsidiary). The Company entered into a five-year manufacturing services agreement with Venture and the Company’s former Penang Manufacturing Subsidiary for the manufacture and supply of Zip drives and certain other storage related products.

With the sale of the Penang Manufacturing Subsidiary, the Company no longer has any manufacturing facilities. The Company has outsourced the manufacturing of its products to other vendors.

Although the Company believes it is positioned to obtain an adequate supply of its products in the future, there can be no assurance that the Company will not from time to time encounter difficulties, particularly on the Zip product line, in achieving desired levels of product; that it will be successful in managing relationships with its suppliers; that suppliers 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.

Distribution

During 2002, the Company completed the outsourcing of all of its distribution and logistics centers. During the first half of 2002, the Company outsourced its European product distribution center and logistics. With the sale of the Penang Manufacturing Subsidiary during the fourth quarter of 2002, the Company outsourced its Asian product distribution center. During 2001, the Company outsourced its product distribution center from the Company’s North Carolina facility and closed this facility as part of the Company’s third quarter 2001 restructuring actions. During first quarter 2004, the Company entered into an agreement with a global provider of logistics services with the goal to consolidate its worldwide distribution and logistics requirements with one prime contractor.

Components and Sourced Products

Although the Company has sold its Penang Manufacturing Subsidiary and has outsourced its manufacturing capabilities, the Company has retained responsibility for the supply of certain key components for its Zip products. The Company has experienced difficulty in the past and may experience difficulty in the future, in obtaining a sufficient supply of various key components on a timely and cost effective basis. Some components incorporated or used in the Company’s products are currently available only from single source suppliers or from a limited number of suppliers and are purchased by the Company without guaranteed supply arrangements. In addition, the Company has only one supplier of certain key products. More and more frequently, as the Zip product line reaches the end of its lifecycle, suppliers of critical components for Zip products continue to announce their intention to discontinue manufacturing. In such cases, the Company attempts to make an end-of-life (“EOL”) purchase on the required component(s) based on its estimates of all future requirements. There is no assurance that an EOL purchase option will be available from a supplier who has chosen to discontinue a component. Moreover, there can be no assurance that the Company’s estimates of future requirements will be accurate or that the components purchased would not be subsequently lost, become defective or be otherwise damaged. In summary, there can be no assurance that the Company will be able to obtain a sufficient supply of components for its Zip products on a timely and cost effective basis.

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IOMEGA CORPORATION AND SUBSIDIARIES

The Company has experienced difficulty in the past and may experience difficulty in the future, in obtaining a sufficient supply of sourced products on a timely and cost effective basis. Most sourced products are currently available only from single source suppliers or from a limited number of suppliers and are purchased by the Company without guaranteed supply arrangements.

The purchase orders under which the Company buys many of its components and sourced products generally extend one to three quarters in the future based on the lead times associated with the specific component or sourced product. The quantities on the purchase order are based on estimated sales requirements. In the case of new products or products with declining sales, it is difficult to estimate future product demand, which could result in excess purchase commitments, where the Company has made commitments for purchases that the Company does not anticipate utilizing and therefore are considered excess.

Backlog

The Company had an order backlog at the end of December 2003 of approximately $14 million, which was the same as at the end of December 2002. The entire December 31, 2003 order backlog is expected to be filled during 2004. The purchase agreements or purchase orders pursuant to which orders are made generally allow the customer to cancel orders without penalty. 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.

Competition

The Company’s Zip products compete with other data storage devices, such as internal and external hard drives, magnetic cartridge disk drives (that use either floppy or rigid media), magnetic tape drives, magneto optical drives, flash memory devices and internal and external optical disc drives. Current competing systems of removable-media data storage devices include: Memory Stick (product produced by Sony Corporation), Microdrive (product owned by Hitachi Ltd.), CompactFlash (product produced by many companies), SmartMedia and Secure Digital Cards (products produced by many companies), miniature USB flash drives (products produced by many companies), CD-R, CD-RW and DVD rewritable drives and discs and removable hard drives and disks (products produced by several companies). Although the Company believes that its Zip 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 continue to introduce new removable-media storage and non-removable storage devices. Further, the Company believes that broad adoption of CD-RW drives has had a significant adverse impact on the Company’s Zip product line and the Company’s CD-RW sales have not and are not expected to offset the sales decline of the Zip product line. As a result of the foregoing, the Company believes that Zip sales will continue to decline and will be significantly less in 2004 as compared to 2003.

To the extent that Zip 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, Western Digital Corporation and Maxtor Corporation, as well as integrated computer manufacturers such as NEC, 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. In addition, one of the key features offered by Zip technology, the ability to transport electronic data, is increasingly fulfilled by various internet applications and by USB flash drives. Thus, Zip technology

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competes with a variety of internet applications with respect to moving and sharing files. Internet applications that are developing increased levels of security and performance is a continuing factor in the decline of the Zip product line.

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

Iomega Optical drives (which include recordable/rewritable CD and DVD rewritable drives) compete with other CD-RW and DVD rewritable products, as well as most of the magnetic products listed above as competitors for Zip drives. The CD-RW and DVD rewritable drive markets have different segments in which drive suppliers compete. Numerous companies manufacture CD-RW and DVD rewritable drives. CD-RW drive manufacturers include: Acer, Aopen, BTC, Cyberdrive, Delta, LG Electronics, Lite-On, Mitsumi, NEC, Panasonic, Philips, Plextor, Ricoh, Samsung, Teac, Toshiba, Ultima and Yamaha. DVD rewritable drive manufacturers include: Asus, BenQ, BTC, LG Electronics, Lite-On, NEC, Panasonic, Pioneer, Philips, Plextor, Ricoh, Samsung, Teac and Toshiba. LG Electronics, Lite-On and Philips lead the market in manufacturing capacity for these drives. Many of these manufacturers sell directly to personal computer OEMs as well as into the aftermarket channels under their own brand names. Adoption of internal CD-RW and DVD rewritable drives by personal computer OEMs is expected to continue to grow as drive prices decline. Drive manufacturers also sell their drive components or finished drives to resellers which use their own engineering expertise prior to resale to add value to the drive such as interface, external design, software as well as brand name. Some of these companies which purchase CD-RW drives from manufacturers include: Iomega, ACS Innovations International, Actima Technology Corporation, Cendyne Creative Technology Ltd., Freecom, Hewlett-Packard (“HP”), Hi-Val, I-O Magic, LaCie, Memtek Products, Inc., Pacific Digital, Sony, TDK, Traxdata and Waitec. Companies which purchase DVD rewritable drives from manufacturers include: Iomega, HP, I-O Magic, LaCie, Mitsumi, Pacific Digital, Sony, TDK, 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. Given that the Company is sourcing substantially complete drives from manufacturers while also competing with them, it is subject to significant supply risk and situations where the manufacturer under prices the Company in the market.

As is the case with CD-RW and DVD rewritable drives, there are numerous manufacturers and resellers of HDD drives and Mini and Micro Mini USB drives. 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. Given that the Company is sourcing substantially complete drives from manufacturers while also competing with them, it is subject to significant supply risk and situations where the manufacturer under prices the Company in the market.

The Company’s Network Storage Systems products compete with other NAS products as well as traditional methods for increasing storage on network servers. These traditional methods of expanding storage capacity include: additional hard drives, tape drives/tapes, general purpose servers (“GPS”) and direct attached storage (“DAS”) that are connected to the system. In addition, some companies are choosing to deploy a higher end solution like Storage Area Networks. The Company believes that NAS offers a more compelling product solution than DAS or the purchase of an incremental server by being less costly per gigabyte, more efficiently enabling workgroup file sharing, being fast and easy to deploy and having a lower total cost of ownership because there are no applications running on the device.

During 2003, the Company focused on the NAS target market under $25,000, which may be further divided into three categories, entry level (prices less than $2,000), mid-range (prices from $2,000 to $5,000) and high-end (prices $5,000 and greater). During 2004, the Company plans to compete primarily in the entry level category and to offer certain products in the mid-range market. The key competitors in these two

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categories include: Dell, Snap Appliance, Linksys and HP. The Company intends to compete by providing small- to medium-sized businesses relevant features, competitive pricing, brand recognition, strong relationships in the VAR and catalog channels, quality, customer support and strong sourcing relationships. Given that the Company is sourcing substantially complete products from a limited number of sources, it is subject to significant supply risks.

The Company anticipates that REV product sales will begin in April 2004. The Company expects that REV products will face significant competition from a variety of technologies, including the following: entry-level and low-end magnetic tape drives from manufacturers such as HP, Certance, Quantum, Sony and their respective OEMs; optical-based products incorporating either recordable or rewritable CD or DVD technology, including new products based on Blu-Ray and similar high-capacity optical storage technologies from Sony, LG Electronics, Hitachi Ltd., Phillips and others; magneto-optical technologies from manufacturers such as Sony and Fujitsu and external hard disk drives from manufacturers such as Certance and Maxtor.

The Company anticipates that DCT product sales will begin in the summer of 2004. The Company expects that DCT technology will face significant competition from a variety of technologies, including the following: solid-state, compact flash- (or similar) based products such as XD, Memory Stick/Pro, SD/MMC, Compact Flash and miniature USB drives; miniature hard drives such as the Hitachi/IBM MicroDrive and similar products from manufacturers such as Toshiba and Panasonic, including removable hard drives in PCMCIA format; optical based products incorporating either recordable or rewritable CD or DVD technology and the Cornice Storage Element product. In addition, potential DCT competitors could include any of the potential competitors identified above as competitive with Iomega’s Zip products.

The Company believes that in order to compete successfully against current and future sources of competition, it will be necessary to further reduce the costs of its products, thus enabling the Company to profitably sell its products at lower prices in response to competition. During 2003, the Company incurred $16.5 million in restructuring charges with the intent of reducing ongoing operational costs. The Company also incurred $39.0 million in restructuring charges during 2001 to reduce ongoing operational costs. (See the caption entitled “Restructuring Charges/Reversals” 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 or Note 5 of the notes to the consolidated financial statements in Part IV of this Annual Report on Form 10-K for more details concerning the 2003 and 2001 restructuring charges. During 2002, the Company sold its Penang Manufacturing Subsidiary to Venture, where the Company’s Zip drives and certain other products are manufactured (See the caption entitled “Penang Manufacturing Subsidiary Impairment Charges” 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 or Note 2 of the notes to the consolidated financial statements in Part IV of this Annual Report on Form 10-K for more details concerning the sale of this subsidiary). Through these and other actions, the Company is continuing to focus on reducing the 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 and decreasing defect rates. 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 such products.

As new and competing removable-media storage devices are introduced, it is possible that any such competing 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 or maintain significant market acceptance.

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The Company believes that in order to compete successfully against current and future sources of competition, it will also 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 of the Company’s products.

The Company’s only product currently being sold in the OEM market is Zip. 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 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 and transportability), broad adoption and standardization of the technology across many devices, ease of installation and use, brand, perceived functionality and utility 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-inch. The Company currently offers 3.5-inch Zip drives. The Company currently offers internal Zip drives in ATAPI, USB and FireWire^® interface models.

The data storage industry is highly competitive and the Company expects that the industry will remain highly competitive in the future. In addition, the data storage industry is characterized by rapid technological development. The Company competes with many 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 patents, copyrights, trademarks, trade secrets 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 pending approximately 310 U.S. and foreign patent applications relating to its Zip, Jaz, REV and PocketZip drives and disks, CD-RW drives, DCT technology and various software applications, although there can be no assurance that such patents will be issued. The Company holds approximately 540 individually or jointly owned U.S. and foreign patents relating to its Zip, Jaz, PocketZip, REV drives and disks, DCT technology, software applications and other technologies. Some of these patents and patent applications are subject to license agreements with third parties. 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, in the past, been challenged by parties against whom the Company has asserted infringement claims. If another party were to succeed in producing and selling Zip 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 disks have higher gross margins than the Zip drives, the Company’s net income would be disproportionately affected by any such sales shortfall.

The Company has various registered trademarks in the United States, several of which are also registered trademarks in other countries.

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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, the Company is regularly notified of alleged 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. An unfavorable resolution of one or more of such claims could 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 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, 2003, the Company employed 591 individuals worldwide. None of the Company’s employees are subject to a collective bargaining agreement.

Government Contracts

No material portion of the Company’s business is subject to renegotiation 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 2003 and is not expected to have a material effect in 2004.

The Company’s executive offices and corporate headquarters are located in leased offices in San Diego, California. A portion of the Company’s research and development, operations, facilities and other administrative functions are located in leased offices in Roy, Utah. 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 research and development activities.

Outside North America, the Company leases office space in Geneva, Switzerland for use as its European headquarters. The Company leases office space in Singapore for its Asia Pacific headquarters. The Company also leases office space throughout Europe, Asia and South America for local sales, marketing and technical support personnel. The Company considers its properties to be in good operating condition and suitable for their intended purposes. The Company owns substantially all equipment used in its facilities.

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A discussion of the Company’s legal proceedings appears in Note 6 of the notes to consolidated financial statements and is incorporated herein by reference.

No matters were submitted to a vote of the Company’s security holders during the quarter ended December 31, 2003.

EXECUTIVE OFFICERS OF THE COMPANY

The executive officers of the Company as of March 12, 2004 were as follows:

Werner T. Heid has been a Director of the Company since May 2000 and was elected President and Chief Executive Officer in June 2001. From June 2000 to June 2001, Mr. Heid served as Executive Vice President, Worldwide Sales, Marketing, Product Strategy and Service of InFocus Corporation, a designer and manufacturer of digital multimedia projectors and services. In May 1998, Mr. Heid became President of Proxima Corporation (“Proxima”) a developer, manufacturer and marketer of multimedia projection products that was acquired by InFocus Corporation in June 2000. Prior to joining Proxima, Mr. Heid held a variety of management positions over twelve years at HP, a global provider of computer and imaging solutions and services. His roles included Worldwide Marketing Manager of HP All-in-One and HP Color Copier products, as well as European Marketing Manager for HP’s LaserJet printer and printer supplies business.

Anna L. Aguirre joined the Company in July 2001 as Vice President, Human Resources and Facilities. Prior to joining the Company, Ms. Aguirre spent nine years at Proxima, where she served as Director of Human Resources. As a member of the executive team, she provided strategic guidance and set policy in the areas of change management, organizational development, human resources planning and facilities management.

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Sean P. Burke joined the Company in January 2003 as Vice President and General Manager, Mobile and Desktop Solutions. Prior to joining the Company, Mr. Burke spent twelve years at Compaq Computer Corporation (including six months with HP, after Compaq Computer Corporation was acquired by HP), a global manufacturer of computer products and services, where he held a variety of management positions. Mr. Burke’s roles included Vice President and General Manager, iPAQ Products Business Unit as well as Vice President of Asia Consumer Business located in Singapore.

Thomas D. Kampfer joined the Company in July 2001 as Vice President, General Counsel and Secretary. From February 2001 to July 2001, he served as General Counsel and Secretary and Vice President, Corporate Development of Entropia, Inc., a developer of distributed computing technology. From January 1995 to January 2001, Mr. Kampfer was with Proxima. While at Proxima, he served in several capacities including General Counsel and Secretary and Vice President, Business Development. Prior to Proxima, Mr. Kampfer spent eleven years at IBM Corporation, a global manufacturer of computer products and services, where he held a variety of engineering and legal positions.

Gregory S. Rhine joined the Company in August 2002 as Vice President and General Manager, Americas. Prior to joining the Company, Mr. Rhine served from November 2001 to August 2002 as Vice President of Worldwide Sales for Danger, Inc., a venture-backed startup that developed a client server wireless application platform that delivers applications to wireless devices. Prior to Danger, Inc., Mr. Rhine served from July 1999 to October 2001 as Vice President of Worldwide Sales and Service for Palm, Inc., a handheld computer company. Prior to Palm, Inc., Mr. Rhine served from October 1997 to June 1999 as Vice President and General Manager for VeriFone, an electronic payment systems and software company, which was acquired by and became a division of HP. Prior to VeriFone, Mr. Rhine spent nine years at Apple Computer, a designer and manufacturer of computers and other consumer electronic equipment, in a variety of senior sales and channel management positions, including Vice President of Americas Channel Development and Distribution Sales.

Barry Zwarenstein joined the Company in November 2001 as Vice President, Finance and Chief Financial Officer. Prior to joining the Company, Mr. Zwarenstein served from January 2001 to June 2001 as Chief Financial Officer for Mellanox Technologies, Ltd., a leading supplier of InfiniBand semiconductors. From November 1998 to January 2001, Mr. Zwarenstein served as Vice President Finance and Chief Financial Officer of Acuson Corporation, a producer of advanced diagnostic medical ultrasound systems, until its acquisition by Siemens A.G. Mr. Zwarenstein served as Chief Financial Officer of Logitech S.A., a leading supplier of interface devices that connect people and computers, from July 1996 through October 1998. Prior to being with Logitech S.A., Mr. Zwarenstein was with FMC Corporation, a diversified global manufacturer of a machinery, chemicals and ordnance, from 1975 through June 1996, most recently as Chief Financial Officer for FMC Europe, based in Brussels, Belgium.

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PART II

Securities

Iomega Common Stock is traded on the New York Stock Exchange under the symbol IOM. As of December 31, 2003, there were 5,865 holders of record of Common Stock. The Company has not historically paid regular recurring cash dividends on its Common Stock. However, during the third quarter of 2003, the Company’s Board of Directors declared a one-time cash dividend of $5.00 per share, which was paid on October 1, 2003 to stockholders of record on September 15, 2003. The Company currently has no plan to pay cash dividends in the future. The following table reflects the high and low sales prices as reported by the New York Stock Exchange for 2003 and 2002.

Price Range of Common Stock