Iomega's president and CEO, Werner Heid, has resigned. I fear it is the beginning of the end and wonder if Iomega is headed for acquisition, break-up or irrelevance. Heid resigned 'following discussions with the board'. My understanding is that he was pushed out because the transition of Iomega from a high-flying Zip drive company to something else has failed.
Iomega chairman Stephen David has been appointed (appointed himself?) interim CEO. He said: "The transition of Iomega from its Zip product line, as Zip reaches the end of its technology lifecycle, to new market segments and innovative products has been a very difficult management challenge." Right.
The trouble is that the follow-on products, specifically NAS, Rev removable drives, and DCT, haven't succeeded. Rev sales are half-hearted and Iomega has found it really heavy going in the NAS market.
A month ago I threw away the last of my Zip drives. Their contents are now on CDs or my external backup drive. USB thumb drives are used for the old Zip transfer waltz and there's no place for Iomega to go. It didn't get bought. It didn't invent compelling enough technology. General disk-to-disk backup availability and ever-cheaper tape autoloaders reducing the prospects for its Rev autoloader. It's a sad, sad story.
Like any other chairman pressed into service as interim CEO after effectively firing his predecessor, David said: "Iomega must refocus on its future strategy, with the key need for a strengthened business plan that can better enable Iomega to deliver higher margin product solutions and consistent profitability."
Yeah, right. The firm needs to make more money. Not least because it might pay up to $950,000 to Heid in severance payments. That is some financial inducement to leave.
Iomega knew it needed to make more money in July last year when it announced a restructuring. It knew that in October last year when its CFO, Thomas Ligouri, went 'for personal reasons'. He was only appointed in February, 2005, a scant seven months in place and, whoosh, he's gone, he's history. His predecessor, Thomas Kampfer, appointed in June, 2004, after Barry Zwarenstein resigned in May, 2004, was an interim CFO. The CFO seat at Iomega must be based on aircraft ejection technology.
More income is needed. You don't need to be a genius to work that out. But what from Mr David, what from? Your inherited product line based around small scale, convenient and transportable data storage has been killed off, demolished, blown to smithereens. The NAS market is not for you. NAS is a commodity. NAS is a killer market for storage companies like yours. Is the provision of NAS for the home going to save you? I hope so but I fear it won't.
Here is a potted history of Iomega's chairman: 'Mr. David is currently an independent consultant focused on providing strategic planning services to a variety of clients in the consumer products industry. He retired from Procter & Gamble, a multi-national manufacturer of family, personal and household care products, in January 2005, following a career that spanned more than thirty-four years."
It says this in the Heid resignation press release. Why does it say that he is an independent consultant? Isn't being chairman and interim CEO of Iomega a full-time job? Why on earth is there copy in this release that is a quasi-marketing pitch for David's independent consultancy business? It strikes me as curious.
What is Stephen David doing in place? Is he there just to issue soft-soap press releases thanking Werner Heid for his 'leadership'? David joined the board in 2002 and became chairman in 2004. My reckoning is that Iomega's investors desperately want him to get some, any, shareholder value delivered to them. To get the shares up he needs an Iomega buyer or a really great product line. Can this guy, this non-technical leader of a once great storage company, find and back a new product direction? At this point in time? With no CEO and no track record of doing so? I fear not. Will the investors stand idly by as he shrinks the company so that its costs are lower than its earnings and profit appears? Of course not. Yes, he'll do that kind of thing and carry on the current product development direction - he has to. But my bet is he'll look to sell the company if he can.
And the investors will say a heartfelt: "Thank you very much" and other investors in sad, tired and fading companies will think to themselves: "Perhaps we too could use this David to slay the falling shareholder value Goliath that's destroying our investment." They could be right.
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