The Spectacular Rise and Fall of Iomega

Chances are you‘ve never heard of Iomega or even used one of their Zip drives to back up important files. But if we step into our time machine and travel back to the mid-1990s, you‘d see Iomega Zip drives popping up on desks everywhere. Offering revolutionary portable storage when computers still measured hard drives in megabytes, Iomega‘s affordable and innovative Zip drives were totally game-changing.

So how did this promising tech superstar experience such a swift and spectacular downfall shortly after? Grab your 100MB disk and plug it into your parallel port because we‘re exploring the meteoric rise and crash-landing demise of Iomega.

Overview: Iomega‘s Journey from Obscurity to Stardom

Founded in 1980 by David Bailey and David Norton, Iomega faced years of struggle just to stay solvent before finally striking gold in 1994. Their breakthrough product was the Zip drive which could hold 100MB of data per removable disk. Compared to standard 1.44MB floppy disks of the era, this was a seismic jump in portable storage capacity.

Retailing for $199 plus inexpensive disks starting around $10 each, Zip drives were perfectly timed to ride the surging personal computing wave of the early internet age. And ride it they did – directly to a multi-billion dollar valuation on the back of over 2 million Zip drives sold in the first year alone!

But behind the scenes, serious flaws in Iomega‘s prized Zip drives were emerging. The infamous "click of death" scandal and subsequent class action lawsuit initiated the brand‘s downward spiral. A series of poorly executed attempts to pivot in response to emerging competition failed to revive interest amidst crumbling market confidence.

By 2008 when Iomega was finally acquired for parts by storage giant EMC, the sad denouement was complete. The one-time darling saw its name relegated to the footnotes of computer history. But understanding exactly how and why Iomega‘s fortunes were reversed so abruptly offers an instructive cautionary tale even today.

Selling Shovels in a Gold Rush: The Iomega Zip Drive

Prior to the Zip drive‘s 1994 debut, Iomega had focused on producing high-capacity disk and tape drives. While reliable, these products cost several thousand dollars each – far too expensive for the average consumer.

New Iomega CEO Kim Edwards decided to change direction in the early 90‘s based on the realization that while data storage tech was still nascent, demand for said storage was exploding thanks to the PC sales boom. But in order to harness this demand, the cost barrier would need to come way down while still offering a meaningful jump in capacity over 1.44MB floppies.

Edwards detailed the market opportunity Iomega was pursuing to the New York Times in 1996:

“It was obvious to me in the early 90’s that PC storage was about to become very important,” said Edwards. “As software becomes more graphical, as video and audio move into the computer, people need removable storage that they can move between their computer locations.”

Under Edwards‘ leadership, Iomega engineers got to work on what would become the Zip Drive. Shaped like a slightly thicker floppy disk but weighing half a pound, Zip disks utilized powerful new magnetic coils to deliver on Edwards’ vision for affordable multi-megabyte storage.

Following a successful debut at COMDEX 1994, a prominent computer trade exhibition, the floodgates opened as consumers clamored for Zip drives. Iomega simply couldn’t keep up with demand initially despite ramping up manufacturing capacity. The Zip drive had caught lightning in a bottle by providing people exactly what they needed precisely when they needed it most.

Over 20 million Zip Disks were churned out in just the first year of production. The consumer frenzy only amplified as software, game, and multimedia applications grew to require extra capacity floppies couldn‘t deliver. Iomega zoomed past $1 billion in annual sales by 1996 enroute to becoming the top-performing stock that year with over 2000% growth.

Foreshadowing the Fall: The "Click of Death"

However, behind the scenes in Iomega engineering labs and customer support centers, worrying signs were beginning to emerge. Consumers started reporting strange sounds emanating from their Zip drives followed soon after by complete failure.

According to Zip drive owners, the drives would make loud clicking noises and refuse to read discs. This problem was dubbed "click of death" and complaints started piling up in 1997. Customers felt misled and angry that their expensive drives touted as reliable workhorses were breaking well before the end of their useful lives.

One disgruntled customer told the Chicago Tribune:

"I went through three Zip drives in two years, two suffered the ‘click of death’ flaw."

While new technologies often experience some bugs at first, Iomega was shockingly slow to respond. Confidence in the Zip drive eroded rapidly on early internet forums and chatrooms dedicated to complaining about click of death issues.

This growing reputational crisis represented an existential threat Iomega failed to treat seriously until it was too late. Other removable storage competitors smelled blood in the water and rushed to steal Iomega‘s market share while the giant was staggered and struggling to mount an effective response.

Going from Bad to Worse: The Click of Death Class Action Lawsuit

Despite awareness of design flaws inside Iomega that caused click of death, public relations and customer service mismanagement allowed the situation to spiral out of control. So much so that in late 1998, a class action lawsuit was filed against Iomega for knowingly selling defective Zip drives.

This lawsuit represented the first nail in Iomega‘s financial coffin. Even if they wanted to issue a recall and replace drives, Iomega had neither the resources nor manufacturing bandwidth to swap out the over 20 million Zip drives it had sold in just the past 36 months.

Instead, Iomega chose to settle the lawsuit in 1999 by providing coupons to affected consumers worth up to $50 toward new Iomega products. But the fatal damage was already done to its once sterling brand image. This increasingly tarnished reputation made it near impossible for Iomega to succeed in storage space 2.0 as technology relentlessly marched forward.

Flailing Pivots Amidst Defeat

Iomega made multiple attempts to pivot into new product categories as the Zip drive business collapsed. This included refreshed versions of the Zip drive itself, CD-R drives, smaller portable Zip drives, and even an MP3 player in 2001. But none of these were able to capture anything close to Zip‘s initial mania.

For one, Iomega was now competing against giant established players in the optical media space like Sony and Verbatim. And their rushed CD-R device ended up suffering from many of the same reliability complaints as the original Zip drive.

Iomega tried to compete on price but competing on scale against true giants with fully outsourced global supply chains just wasn’t realistic. Not with their brand now synonymous in tech circles with failure.

Simultaneously, traditional hard disk drive capacities were growing exponentially, diminishing mainstream need for proprietary removable disks. And on the enterprise side, cloud computing and high speed ethernet networks reduced dependencies on physical external media for transferring data.

Facing assault on all fronts and hemorrhaging money, Iomega couldn‘t manage successful follow-up acts once the Zip well ran dry.

The company was eventually acquired for $213 million in 2008 by storage giant EMC Corporation – a fraction of the high flying valuation it commanded in the mid-90s. EMC kept the Iomega brand alive for a while on some network storage products inherited in the deal.

But by 2018 when current owner LenovoEMC discontinued the last vestiges of Iomega‘s solutions suite, the pioneering brand quietly faded into tech postmortem lore.

Key Takeaways from Iomega‘s Cautionary Tale

While misfortune undoubtedly played a role, Iomega was ultimately the agent of its own undoing after that serendipitous lightning strike with the Zip drive. Its failure to swiftly address product flaws and opting to paper over emerging cracks with broader unreliability complaints irreparably destroyed consumer trust.

Meanwhile, the storage innovation march Iomega had briefly led continued at a relentless pace. New technologies obsoleting proprietary removable disks became widely accessible and affordable. So by the time Iomega stabilized its reputation enough to compete again, the war for market share was already lost.

The meteoric rise and crashing failure of Iomega reinforces several important lessons for even today‘s most prominent tech brands:

• Innovating ahead of the curve guarantees nothing unless you rapidly build trust and loyalty.
• Major quality problems will sink a reputation without compassionate and comprehensive response plans.
• Competitive landscapes can shift overnight, demanding thoughtful flexibility not reactionary pivots.
• Once lost, regaining consumer confidence requires starting over from scratch.

While Iomega‘s name has faded, we owe an odd debt of gratitude still to its brief but stellar success. Launching the Zip drive reshaped user expectations of storage capacity and speed. This rising tide lifted an entire industry even if Iomega itself capsized before reaching shore.

So next time you save an epic 4k cinematic masterpiece to the cloud in seconds, take a moment to pour one out for data storage pioneers like Iomega. Its wild rollercoaster ride has lessons to share even decades later!