Blaming a severe decline in sales of its key Jaz and Zip product range, Iomega has announced plans to axe 38 per cent of its staff.

The company will dismiss 1,250 employees from its current workforce of 3,300. These include cuts announced in July. The sackings will cost Iomega in the range of $55-65 million in its third financial quarter.

New Iomega CEO Warner Heid said: "Our goal in the short term is to lower the break-even point of this business." The plans will save about $65 million per year, beginning in 2002.

Iomega announced a 40 per cent drop in revenues in its second quarter last month, as sales of its Zip and Jaz drives and media tanked.

It's also planning to move its headquarters to the West Coast from Utah. The company has not discussed how many employees are making the trip.

The San Diego Union-Tribune reports that Iomega is looking for 40,000 square feet of office space – enough for about 200 employees.