DEFA14A 1 ddefa14a.htm DEFA14A DEFA14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A INFORMATION

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the Securities Exchange Act of 1934

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IOMEGA CORPORATION


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Filed by Iomega Corporation

Pursuant to Rule 14a-12

Under the Securities Exchange Act of 1934

Subject Company: Iomega Corporation

Commission File No. 001-12333

This filing relates to the proposed acquisition of ExcelStor Great Wall Technology Limited, a Cayman Islands company (“EGWTL”), and Shenzhen ExcelStor Technology Limited, a People’s Republic of China (“PRC”) company (“SETL”) by Iomega Corporation (“Iomega”) from Great Wall Technology Company Limited, a PRC company (“GWT”), ExcelStor Group Limited, a Cayman Islands company (“EGL”), ExcelStor Holdings Limited, a British Virgin Islands company (“EHL” and, together with GWT and EGL, the “Selling Shareholders”), pursuant to the terms of a Share Purchase Agreement, dated as of December 12, 2007 among Iomega, the Selling Shareholders, EGWTL, and SETL. The following PowerPoint slides were presented by Iomega’s management to investors beginning on December 12, 2007:


IOMEGA Enters Definitive
IOMEGA Enters Definitive
Agreement to Acquire
Agreement to Acquire
ExcelStor Group
ExcelStor Group
December 12, 2007


2
Statements in this presentation regarding the highlights of the ExcelStor Acquisition
(“Transaction”), accretion; potential incremental sales; access to and launch of new products;
cross-selling opportunities; potential new markets and market sizes; access to China markets;
partnering with CEC; Transaction synergies; all pro forma financial and performance estimates
after closing the Transaction including 2008, 2009 and 2010 incremental revenue, income and
synergy estimates; cost savings; operating leverage; tax benefits and rates; and all other
statements that are not purely historical are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995.  All such forward-looking statements are
based upon information available to Iomega as of the date hereof, and Iomega disclaims any
intention or obligation to update any such forward looking statements. Actual results could
differ materially from the current expectations.
Factors that could cause or contribute to such differences include the failure to close the
Transaction; post closing integration challenges; difficulties in realizing cost savings and
synergies; difficulties in accessing and launching new product lines; downturn or loss of any
major customer; a downturn or sale of any ExcelStor OEM customer; a lack of success of new
products due to market and competitive pressures; restructuring or other charges necessary
as part of the integration; legal, compliance, accounting or Sarbanes Oxley issues arising from
a complex global operation; unforeseen technical or manufacturing challenges; reactions or
changes to business relationships resulting from the Transaction; unexpected cost or burden
increases resulting from the Transaction; ability to maintain stringent quality assurance
standards; availability of critical product components; the failure or delay of any sole source
supplier; products and technology obsolescence; manufacturing and inventory issues;
management turnover; cultural or communication issues adversely impacting the integration;
intellectual property rights; competition; litigation; difficulties realizing the tax strategy,
Government inquiries or directives; general economic and/or industry-specific conditions; and
the other risks and uncertainties identified in the reports filed from time to time by Iomega
with the SEC, including Iomega's most recent Forms 10-Q and 10-K.
Cautionary Note About Forward-
Cautionary Note About Forward-
Looking Statements
Looking Statements


3
Will remain a public company (NYSE: IOM) headquartered in San Diego, CA
9 Board Members: 5 from GWT / CEC and 4 from Iomega
Management
Acquisition of ExcelStor Technology, a subsidiary of Great Wall
Technology (GWT) and China Electronics Corporation (CEC), by Iomega
Transaction Summary
Transaction Summary
Transaction
Consideration
All stock consideration
~140 mm post-transaction fully diluted shares outstanding
Post-transaction ownership:
Pro Forma
Company
Closing
Approval by Great Wall and Iomega shareholders
HSR and PRC regulatory approvals
Anticipated to close in approximately 6 months from announcement
Value
Transaction value of $310 mm, based on Iomega’s
Market Cap of $207 mm
Implied ExcelStor multiples of 0.32x ‘08 Rev; 6.6x ‘08 EBITDA; 13.6x ‘08 PE
Financial Impact
Accretive w/o synergies (excl. one-time transaction-related costs)
Substantially more accretive assuming synergies
GWT / CEC (43%)
Iomega (40%)
Other ExcelStor Investors (17%)
Dr. Z.X. Chen (Pres. of CEC)
Lu Ming (VP of CEC and Pres. of GWT)
Stephen David (Current Chair of Iomega)
Jon Huberman (Current CEO of Iomega)
Eddie Lui (Current CEO of ExcelStor)
CEO: Jonathan Huberman
Pres. / COO: Thomas Kampfer
Exec Chairman: Eddie Lui
CFO: Preston Romm


4
Highlights of Transaction
Highlights of Transaction
Creates a global Consumer Storage and
Creates a global Consumer Storage and
Electronics Company
Electronics Company
Combine Iomega’s global brand and
Combine Iomega’s global brand and
channels with ExcelStor’s China presence
channels with ExcelStor’s China presence
and manufacturing capabilities
and manufacturing capabilities
Drive significant incremental sales in
Drive significant incremental sales in
adjacent Consumer Electronics markets in
adjacent Consumer Electronics markets in
partnership with CEC sister companies
partnership with CEC sister companies
Combine best talents from both
Combine best talents from both
companies to create an experienced
companies to create an experienced
global management team
global management team
Cash EPS accretive
Cash EPS accretive


5
ExcelStor at a Glance
ExcelStor at a Glance
Privately held; founded in 2001 by former Seagate and Connor
Peripheral Executives
Headquartered in Shenzhen, China, with 2,700 total employees
Manufacturer of internal / external hard drives and storage
systems with a strong OEM relationship with major HDD company
This strategic OEM relationship represents approximately 84% of
revenue
ExcelStor
produces
over
20
million
single-platter
drives
per
year
2007 Revenue forecasted at $818.2 mm and net income of 
$18.3 mm
Manufactures and sells other HDD & storage products, including
Iomega’s REV products
ExcelStor branded products represent 12% of revenue
World-class manufacturing expertise
Design services


6
Primary product line is single-platter hard drives
Other products include:
External HDD
Autoloaders
Partners include:
Hitachi
Bell Microproducts
Freecom
Tandberg
Experienced management team with over 20 years of disk
drive manufacturing experience in the U.S., China,
Singapore and Malaysia
Facilities include a clean room, testing and production
facility in Shenzhen
ExcelStor Overview
ExcelStor Overview
Digital recordable jukebox
Xander International
Hasee Technology
Fujitsu Korea
Iomega


7
Single-Platter 3.5”
Single-Platter 3.5”
HDD Market Share
HDD Market Share
Single-platter drives
account for ~65% of 3.5”
market
ExcelStor produces over
20 mm units per year of
single-platter 3.5”
HDDs
Worldwide HDD Sales (units) of 3.5”
Other
35%
Single-
Platter
65%
Market Size:
285 mm
185 mm
185 mm
100 mm
100 mm
20 mm
20 mm
165 mm
165 mm
Single-Platter 3.5”
HDD Vendor Shares (units)
Source:  Industry estimates. 
ExcelStor:
11%


8
Overview of CEC Organization
Overview of CEC Organization
CEC
Over 60
holding
companies
CGC
10 companies similar
to Great Wall and
some are
publicly traded
Great Wall
Technology
(0074.HK)
12 other
similar companies
and some are
publicly
traded
ExcelStor
100%
62%
62%
Monitors
LCD TVs
Software
Semiconductor
MP3 Players
Consumer
Electronics
China Electronics Corporation
CEC is a PRC Government-owned
conglomerate
and
CEC’s
affiliates
generate over ~$16 bn in revenues 
Approximately 50% ODM / OEM
Approximately 50% branded
products
CEC controls over 1,000 companies
and 10,000 products
CEC will indirectly control 43% of
Iomega
Very limited distribution in the
Americas and EMEA
Portfolio company sectors include
PCs
Notebooks
Servers
HDD
Cell Phones
PDAs


9
CEC Sister Companies
CEC Sister Companies
Great Wall Technology Co., Ltd.
China National Electronic Corp.
Shanghai Hua Hong (Group) Co., Ltd.
Amoi Electronics Co., Ltd.
CEC Holding Co., Ltd.
SED Electronics Industry Corp.
China National Software & Service Co., Ltd.
CEC Corecast Co., Ltd
Wuhan Zhongyuan Electronics Co., Ltd
China Electronics Financial Co., Ltd
China Integrated Circuit Design Co., Ltd
Panda Electronics Co., Ltd
Shanghai Pudong Software Park Co., Ltd.


10
($ in millions, except per share data)
Comparative Valuation Summary
Comparative Valuation Summary
(1)
2007 ExcelStor net income excludes pre-tax transaction related expenses of $4.0 mm ($3.7 mm net income).
(2)
2007 Iomega net income excludes:
i.
Non-cash pre-tax goodwill impairment charge of $3.0 mm ($1.8 mm net income) incurred in Q1 and Q2;
ii.
Pre-tax
transaction
related
expenses
of
$2.0
mm
($2.0
mm
net
income)
incurred
in
Q2,
Q3
and
Q4;
and
iii.
Pre-tax restructuring benefit of $0.2 mm ($0.1 mm net income) incurred Q1, Q2 and Q3.
Iomega
Offer Price
At Market
for ExcelStor
As of 12/10/07
Stock Price
$3.70
% of 52-Week High
64.3%
Equity Value
$310.3
$206.9
Debt
56.8
0.0
Cash
55.7
69.4
Enterprise Value
$311.4
$137.5
Pro Forma Ownership (100% Stock)
60.0%
40.0%
EV / Revenue
(1)
Metric
(2)
CY 2007E
$818.2
0.38x
0.45x
$308.4
CY 2008E
981.8
0.32x
0.36x
383.6
EV / EBITDA
CY 2007E
$38.5
8.1x
13.7x
$10.1
CY 2008E
47.1
6.6x
9.7x
14.2
Equity Value / Net Income
CY 2007E
$18.3
16.9x
29.1x
$7.1
CY 2008E
22.8
13.6x
20.5x
10.1
Multiples
ExcelStor
Iomega
Value
Metric


11
Review of Iomega’s
Review of Iomega’s
Stand Alone Business
Stand Alone Business
Leverage brand and channels with
new products
Scale to leverage existing
infrastructure
Extend business beyond external
HDD business
Penetrate Asian market where
currently under-represented
Key Initiatives
Key Initiatives
Strengths
Strengths
Global brand recognition
Strong worldwide distribution
channel
Recent growth and momentum
Profitable with $69.4 mm in cash
Ability to scale revenues without
adding significant infrastructure
Broad portfolio of hundreds of
patents


12
Creating a Global Consumer Storage
Creating a Global Consumer Storage
& Electronics Provider
& Electronics Provider
Sell Iomega products into Chinese Markets
Sell
ExcelStor
products
outside
China
increase
size
of
current branded business
Utilize in-house manufacturing where appropriate to
lower COGS
Plan to partner with CEC’s 1,000+ subsidiaries to
sell globally through Iomega channel
Extendable brand
Strong channel
relationships
Global presence
World-class
manufacturing expertise
Size / profitability
Growing OEM and
branded storage business
New Iomega
Vast breadth of products
Manufacturing and design
capabilities
Deep access into Chinese
end markets


13
Cross-Selling Opportunities
Cross-Selling Opportunities
Expansion of product lines creates a unique portfolio
Expansion of product lines creates a unique portfolio


14
Immediate Market Expansion
Immediate Market Expansion
Significant opportunity to sell CEC products globally
New Iomega will gain immediate access to large markets
such as PCs and LCD panels
Note:  Estimates from IDC and Industry Research.  HDD forecast includes internal and external drives.
(1)
Computer peripherals market includes (i) mice and keyboards, (ii) video web cameras and (iii) audio and gaming peripherals. 
Source: IDC, Morgan Keegan research report dated 2/28/07 and Logitech.
Market Size ($ billions)
Market Size ($ billions)
Units Produced (millions)
Units Produced (millions)
2011
2007
+7.5%
CAGR
+14.0%
CAGR
(6.0%)
CAGR
+5.6%
CAGR
482
147
113
71
177
194
163
676
Mobile PC
LCD TV
LCD Monitor
HDD
+14.5%
CAGR
+23.2%
CAGR
+4.7%
CAGR
+8.8%
CAGR
2011
2007
+12.5%
CAGR
(1)
$6
$30
$36
$144
$71
$10
$28
$193
$120
$37
Mobile PC
LCD TV
LCD
Monitor
HDD
Computer
Peripherals


15
Significant Synergies
Significant Synergies
Revenue
Gross Margin
Sell additional CEC products through Iomega’s
global channel
Revenue potential:
LCD Monitors
LCD & HD TVs
PCs / Laptops / Servers
Other peripherals
Consumer Electronics
Sell additional Iomega products in China
Sell ExcelStor products in North America and
Europe
Cost savings on Iomega products due to
ExcelStor manufacturing efficiencies
Tax
Significant reduction in pro forma tax rate
achieved through step-up of ExcelStor assets
Effective tax rate going-forward ~ 12%
Operating Leverage
Scale revenue with small incremental op ex
investment


16
Pro Forma Operations –
Pro Forma Operations –
2008 is a Year of Transition
2008 is a Year of Transition
Revenue
Revenue
Net Income
Net Income
$308
$230
$384
$982
$818
$720
$70
2006A
2007E
2008E
Iomega
ExcelStor
Synergies
$950
$1,127
$1,435
$10
$3
$7
$18
$18
$23
$8
2006A
2007E
2008E
$20
$25
$41
(1)
2007 Iomega net income excludes:
i.
Non-cash pre-tax goodwill impairment charge of $3.0 mm ($1.8 mm net income) incurred in Q1 and Q2;
ii.
Pre-tax
transaction
related
expenses
of
$2.0
mm
($2.0
mm
net
income)
incurred
in
Q2,
Q3
and
Q4;
and
iii.
Pre-tax restructuring benefit of $0.2 mm ($0.1 mm net income) incurred Q1, Q2 and Q3.
(2)
2006
Iomega
net
income
reconciliation
see
previously
filed
10K
and
10Qs.
(3)
2007 ExcelStor net income excludes pre-tax transaction related expenses of $4.0 mm ($3.7 mm net income).
(1)
(2)
(3)
($ in millions)


17
Significant Revenue and
Significant Revenue and
Cost Synergies Expected
Cost Synergies Expected
$243
$70
$500
2008E
2009E
2010E
$19.4
$8.5
$34.3
2008E
2009E
2010E
($ in millions)
Incremental Revenue
Incremental Revenue
Pre-Tax Synergies
Pre-Tax Synergies
-Tax Synergies
Tax Synergies


18
Pro Forma Tax Benefits
Pro Forma Tax Benefits
U.S. ~ 0%
Cayman Islands ~ 0%
Europe ~ 18%
China btwn 7.5% –
25.0% over next 7 years
Blended Tax Rate ~ 12%
Geographic Tax Rates


19
Pro Forma 2008E Cash
Pro Forma 2008E Cash
Earnings Per Share
Earnings Per Share
Iomega Stand Alone 2008E Earnings  
$10.1
$10.1
Plus: ExcelStor Stand Alone Earnings
$22.8
$22.8
Plus: Net Income Impact
$1.0
$8.4
Pro Forma 2008E Cash Net Income
$33.9
$41.3
Per Share Basis
Iomega Stand Alone 2008E EPS
$0.18
$0.18
2008E Cash EPS Accretion
$0.06
$0.12
Pro Forma 2008E Cash EPS
$0.24
$0.30
($ in millions, except per share data)
(1)
Assumes adjustments from interest income lost due to cash transaction expenses and an adjusted tax rate of 12% for the
combined company. 
(2)
Pro forma cash net income and EPS is non-GAAP and excludes transaction-related restructuring costs and amortization of
intangibles.
Without
Without
Synergies
Synergies
With
With
Synergies
Synergies
(2)
(1)
(2)
(2)


20
Pro Forma Balance Sheet
Pro Forma Balance Sheet
($ in millions)
Cash, Equivalents and
Short-Term Investments
Total Assets
Total Debt
Total Liabilities
Shareholders’
Equity
Iomega
Iomega
$ 69.4
205.5
0.0
111.0
94.4
ExcelStor
ExcelStor
Pro Forma
Pro Forma
$ 55.7
283.5
56.8
229.4
54.1
$ 125.1
489.0
56.8
340.4
148.5
(1)
(1)
Iomega and ExcelStor balance sheet as of Q307 and Q207, respectively.
(2)
Pro forma balance sheet excludes transaction expenses.
(1)
(2)


21
Pro Forma Ownership
Pro Forma Ownership
4.7%
ExcelStor / Iomega
Management
6.1%
ExcelStor
Foxteq Holdings
6.1%
ExcelStor
H&Q Asia Pacific
18.8%
Iomega
Top 10 Institutions
21.2%
Iomega
Other Institutional &
Retail Investors
100.0%
43.1%
Ownership
Ownership
ExcelStor
Affiliation
Affiliation
Pro Forma Total
CEC Subsidiaries
Investors
Investors
Source: Iomega Management and FactSet.


22
Stand Alone Iomega
Stand Alone Iomega
Globally Recognized Brand Name
External HDD, network storage drives and managed services offerings
Large, loyal installed base with 60 million drives sold
Worldwide Channel Presence
Broad channel coverage focused on Consumer / SOHO / SMB markets
Strong platform for potential future products
Global Infrastructure
Able to handle significantly more revenue than we currently generate
Headquartered in San Diego, CA with 253 employees
Sales offices worldwide
Strong Financial Performance
Profitable revenue growth
$69.4 million in cash, no debt
Broad Patent Portfolio of Hundreds of Patents
Currently Lacks Presence in China
Europe –
70%
U.S. –
28%
Asia-Pacific –
2%


23
Iomega Has a Strong Brand and
Iomega Has a Strong Brand and
Product Portfolio
Product Portfolio
Product
Product
Description
Description
Portable storage products with 2.5”
to 3.5”
drives
Targets the Consumer and SOHO markets
NAS and NHDD storage for backup and disaster
recovery
Targets the Consumer, SOHO and SMB markets
Enterprise quality managed services for SMBs
Key relationships with leading security vendors
Backup storage products, removability and transport
Targets the SMB market


24
Iomega Has A World-Class
Iomega Has A World-Class
Distribution Channel
Distribution Channel
Sold at over 11,500 stores in
the Americas, Europe and Asia
Integrated into Iomega’s
online strategy
Direct marketers are a cost
effective channel to reach
small businesses, medium /
large enterprises, government
and education
Indirect selling channel for N-
HDD, NAS and REV disks
Iomega reaches over 65,000
VARs worldwide through its
distributor network
Comprehensive channel
program with 15,000
registered resellers in the U.S.
and Europe
Approximately 2.5 million
unique visitors, and 250,000
software and driver downloads
per month 
2006 sales through the
website were approximately
$10 million
Distributors
Iomega.com
Retail /
E-tail
Direct
Marketers


25
Conditions to Closing
Conditions to Closing
Approvals by both shareholders
Approvals of relevant antitrust and regulatory
agencies
All government approvals
Applicable Hong Kong and PRC Government
requirements
HSR and other principals
No material adverse effect of Iomega / ExcelStor
stand alone business
Anticipated to close in approximately 6 months
from announcement


26
Highlights of Transaction
Highlights of Transaction
Creates a global Consumer Storage and
Creates a global Consumer Storage and
Electronics Company
Electronics Company
Combine Iomega’s global brand and
Combine Iomega’s global brand and
channels with ExcelStor’s China presence
channels with ExcelStor’s China presence
and manufacturing capabilities
and manufacturing capabilities
Drive significant incremental sales in
Drive significant incremental sales in
adjacent Consumer Electronics markets in
adjacent Consumer Electronics markets in
partnership with CEC sister companies
partnership with CEC sister companies
Combine best talents from both
Combine best talents from both
companies to create an experienced
companies to create an experienced
global management team
global management team
Cash EPS accretive
Cash EPS accretive


Important Additional Information for Investors and Stockholders

In connection with the transaction, the Company intends to file a proxy statement with the SEC. INVESTORS AND STOCKHOLDERS ARE STRONGLY ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors and stockholders may obtain a free copy of the proxy statement (when it becomes available) and other documents filed by the Company at the SEC’s website at http://www.sec.gov. A free copy of the proxy statement when it becomes available may also be obtained from the Company, by calling Investor Relations at (801) 332-3585 or by writing to Iomega Corporation, Attn: Investor Relations, 10955 Vista Sorrento Parkway, San Diego, CA 91230.

The Company, EGWTL, SETL, the Selling Shareholders and each of their respective executive officers and directors may be deemed to be participants in the solicitation of proxies from the stockholders of the Company in favor of the transaction. Information about the executive officers and directors of the Company and their ownership of the Company’s common stock is set forth in the proxy statement for the Company’s 2007 Annual Meeting of Stockholders filed with the SEC on April 13, 2007 and the Company’s Current Reports on Form 8-K filed with the SEC on September 27, 2007 and November 8, 2007. Certain directors and executive officers of the Company may have direct or indirect interests in the transaction due to securities holdings, pre-existing or future indemnification arrangements, vesting of options or rights to severance payments if their employment is terminated following the transaction. Additional information regarding the Company, EGWTL, SETL, the Selling Shareholders and the interests of each of their respective executive officers and directors in the transaction will be contained in the proxy statement regarding the transaction that will be filed by the Company with the SEC.