After an 11-year holdout, Iomega agrees to a buyout

It's the end of another great technology brand that came to light, shot like a comet, and then started blinking out all during the 1990s. Iomega held out as long as it could, and in the end, a nearly quarter-billion-dollar buyout may not be all that bad.

When my ten-year-old daughter asked me the other day why there was no "A" or "B" drive on any PC she had ever used, I gave her the short and sweet answer that the older drives that used to have those letters are now too small to be significant. The real answer, of course, was Iomega.

The company that struck the first -- and many believe, the fatal -- blow to the floppy diskette as a technology critical to the operation of the PC, succumbed this morning to a very long battle for independence, this time against an offer from storage manufacturer EMC that Iomega's shareholders finally could not resist: a $213 million tender offer, worth $3.85 per share. Iomega stock was trading early this afternoon on the New York Stock Exchange at $3.80, though it had reached $5.64 as recently as last September.


But there was a day long ago when the decimal point was kicked pretty far to the right. In the latter half of the 1990s, Iomega was one of the premiere brands in new consumer technology, offering the first stand-alone, portable data storage devices with sizes that were proportionate to the work people were doing at the time: 100 MB and above. Some believe the Iomega Zip drive, from the perspective of a marketing campaign, was the precursor to the Apple iPod -- an example of how to package and price something right.

It didn't just kick the floppy disk out of existence, it obliterated it. When Zip was first introduced, so-called "superdisks" were being tested that stored as many as 100 MB in a traditional 3.5" floppy form factor. But they required expensive built-in drives that weren't always compatible, it turned out, with all standard 1.44 MB disks, especially the ones that used copy protection -- and before CD-ROMs took off, those disks were the principal means of installing software.

The fact that a consumer could reliably carry 100 MB of storage with him with an investment of $200 or less, meant the floppy disk became unnecessary outside of software installation. In just the first year of its introduction, businesses that had yet to discover the joys of going online, let alone launching their own Web sites, actually shuttled important documents between offices by shipping Zip disks overnight by FedEx or courier, leading to major changes in the way shipping services used X-rays to scan packages.

Major corporations -- especially publishers -- were purchasing Zip drives for their employees not only to expedite the way they shipped files around, but also to postpone the inevitable time when they would have to purchase entire laptop computers for them.

A company that new doing something that successful as well as it did, could only mean one least to analysts: It's a startup that's ripe for a takeover. The year was 1997, and the original bidder was Hewlett-Packard, in a proxy war that lasted for years thereafter, and which drove Iomega's share price as high as $140 per share, according to MarketWatch's Herb Greenberg.

But along with the increased scrutiny came magnified skepticism whenever the company made missteps. First, a new series of Zip drives came with a massive amount of bloatware that consumers didn't want. Next, there were innumerable driver problems, especially as Microsoft moved to Windows 98.

And then came the problem whose moniker came to be irrevocably associated with the company brand: the dreaded "Click of Death." Beginning in 1998, Zip drive users noted a mysterious sound emerging from their units, not unlike a hamster hiccupping in a plastic box. That sound would inevitably be accompanied (as I myself witnessed on countless occasions) by drives that were inoperable, and disks that were used in those inoperable drives that were unreadable by any other Zip drive.

How Iomega handled that major bug would eventually sign its death warrant: For a time, it denied the problem's very existence. Then when it started addressing the problem in the manufacturing process, it was already way too late. The CD-R era was upon us, and the DVD-R era was just around the corner. Iomega found itself shipping portable hard disks, but it was no longer in a league of its own, competing with giants Seagate and Western Digital.

The Iomega brand will apparently live on, however, as the consumer division of EMC. Iomega CEO Jonathan Huberman will be in charge of EMC's new division, though one of its main jobs, the acquiring company stated this morning, will be to market its existing line of consumer-focused storage software products. Iomega is treating the buyout today as the turn of a chapter of its corporate history, though it's difficult now -- especially in light of where Iomega has been -- not to perceive that chapter as merely an appendix.

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