Iomega has posted a net loss for its second quarter, and revealed it has halted production on a new product line.

The company posted a net loss of $19.8 million compared with a year-earlier profit of $4.4 million. Sales fell 23 per cent to $78 million from $101 million.

Iomega president and CEO Werner Heid said: "The second quarter was a difficult quarter with very mixed results. Our financial results were disappointing, however, on the positive side, we successfully launched our exciting new REV products and our Network Storage Systems sales grew and achieved a positive product profit margin. Initial sales of REV products have exceeded our expectations and we continue to receive favourable reviews."

Iomega has decided not to introduce its digital capture technology (DCT) products that were to offer storage for digital audio and video files. It will wind down development activities for these entertainment media products in the current quarter.

Heid said: "Based on our analysis and our objective evaluation of the market environment in which DCT would compete, we concluded that we do not have sufficient resources to simultaneously pursue the opportunities of DCT and our REV products within our cost structure. We have therefore elected to focus our resources on REV products.

"Consequently, we have decided not to launch an Iomega branded PC peripheral DCT device and intend to wind down DCT development activities during third quarter 2004. We continue to believe that DCT could be a compelling technology for the consumer in the hands of a company that has the resources to fully capitalize on the technology. Accordingly, we intend to continue to pursue licensing and other strategic alternatives for the DCT technology.

REV upped

B. Riley & Co. analyst Wes Cummins told Reuters: "Iomega's reports is just the latest in a string of poor quarterly results that reflect Iomega's struggle to repeat the breakout success of its Zip drive nearly a decade ago.

"However, with the introduction of REV, the company now has a shot at producing another multi-hundred-million-dollar product. They have the brand name, they have the assets in place, now with this product, they finally have the pieces in hand."

Cummins had estimated $2 million in REV sales for the quarter – the company actually made $7.5 million. "It was a really extraordinary start," he said.