ROY, Utah--(by ARIK HESSELDAHL, ELECTRONIC NEWS)--March 29, 1999--Iomega Corp. last week said it has sold certain assets of its Ditto and Ditto Max tape backup products line to Tecmar Technologies Inc. for $3 million.
The deal includes rights to all of Iomega's Ditto products. It also encompasses related intellectual property, tooling, jigs and dies, and the brand name, packaging, and logos. Iomega received an exclusive license to the Ditto trademark for use with non-tape products. No Iomega facilities or employees are transferring to Tecmar.
Iomega chief executive officer Jodie K. Glore, attributed the deal to recent changes in the removable storage market.
"We've seen our Zip and Jaz drives rapidly replace personal tape storage," Glore said. "This sale benefits both companies and all of our customers. It is a strategic asset sale for Iomega, which will allow us to focus on our core Zip, Jaz and Clik branded portable storage solutions. Plus, Tecmar's roadmap for the Ditto line is in the network storage market, which is their area of expertise. We will work closely with Tecmar to make this transition seamless for Ditto 2GB and Ditto Max users."
Jim Porter, president of Disk/Trend, a research firm that covers the hard drive market, said the Ditto product line had recently been an albatross for Iomega. Units sales plummeted to 68,000 in the third quarter of 1998, down from 243,000 in the first quarter of 1997. Sales recovered to 103,000 in the fourth quarter of 1998. Iomega reported $81 million in revenues generated from Ditto sales in 1998.
"The downward trend was pretty severe. This product line did not make up a very big part of Iomega, so I think they saw it as something they couldn't develop into any big deal for them," Porter said.
For Tecmar, the Ditto brand name was an attractive purchase, Porter said.
"Iomega has done a marvelous job of building its brand names, and Ditto is a good name, and there is still an attractive market for low-end tape drives sold into desktop market," Porter said. "The problem there is that buying backup storage is like buying life insurance. You don't need either until you're dead. Buying something to protect against the loss of data is easy to put off."
Tecmar president Ernest Wassmann noted the strength of the brand in a company statement announcing the deal.
"With over three million units installed, Iomega has obviously been very successful with this product line," Wassmann said. "The acquisition of the Ditto Max brand gives us a strong entry into the price/capacity segment of the network storage The new Ditto line will form the basis for capture of the price/capacity segment as well."
The asset sale is Iomega's latest move as it struggles with falling earnings, despite a virtual lock on the removable storage market space, following the demise of its chief rival Syquest in late 1998. The company in January paid $9.5 million for most of Syquest's assets. Two weeks later, it announced earnings for the fourth quarter of 1998 that beat Wall Street expectations slightly, but were almost half the reported earnings for the same quarter in 1997. The same day the company announced a reshuffling of its top management, which included the departures of Ted Briscoe, president of its personal storage division, and Fred Forsyth, president of the professional products division.
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