Roy, Utah-based Iomega, the leading high-density disk drive maker, reported a third-quarter operating loss of $0.03 a share, two cents better than consensus expectations, according to First Call.

Iomega scored a jump in shipments and made good on promises to cut inventory and internal costs, said president and chief executive James Sierk.

"We made a series of commitments last quarter and we've delivered on them," he said.In July, Iomega predicted its reorganisation, which included cuts in head count, advertising and internal expenses, would save it $50 million in the second half of the year. It set a third-quarter goal to reduce operating expenses by at least 25 per cent from second quarter 1998 levels.

"We actually overachieved that and came in with a $49-million reduction of expenses (in the thirdquarter), so I think its fair to say we are well on our way," he said.Still, Iomega's net loss of $0.06 a share, before a $0.03 a share charge related to its recent purchase of French drive maker Nomai S.A. was lower than the $0.11 cent profit it reported a year ago.

Thipd-quarter revenues also suffered, falling to $392million from $432 million.Those figures reflect Iomega's shift from selling individually its popular line of high density Zip and Jaz drives to shipping its products as built-in components of personal computers, which is a lower-margin business.Gross margins declined to 22.4 per cent of sales from 32.5 per cent. Sierk said that more than half of the Zip drives shipped are going to its PC makers, as part of its OEM, or original equipment manufacturer, strategy.

Price cuts on its Zip product, a necessity in a highly competitive retail personal computer sector, also hurt sales. Third quarter Zip revenues were $279 million, flat from a year ago, and down from $284 million in the secondquarter.But Sierk said that the company is encouraged by a jump in product shipments. Iomega shipped 2.4 million Zip drives in the third quarter, up 39 per cent over 1997.Shipments of Zip disks, whose sales reap substantially higher margins than that of Zip drives, rose 30 per cent over last year and 6 per cent from the second quarter.

"Disks are a big deal for us," he said. "And since all of those installed drives consume disks, that says positive things for the future too."Sierk reiterated his projection of fourth-quarter profits, driven in part by sales of Zip disks.

Looking further, Iomega will benefit from the integration of Nomai, a former rival, which adds some European manufacturing options and the potential for new products.