Feeds

Imation's new buying spree strategy

Changes direction, looks for growth

5 things you didn’t know about cloud backup

Okay, we've stopped draining cash and stabilised the business – now let's buy into growth storage markets. That is Imation's new strategy in a nutshell.

CEO and president Mark Lucas fronts a statement issued by Imation, which says it will work its existing but declining businesses to wring more cash out of them while looking to acquisitions to grow revenues.

This is against a background of a solid fourth 2010 quarter and full year 2010 revenues of $1.461bn (2009: $1.65bn) and a net loss of $158.5m (2009: -$42.2m).

Lucas wants double-digit growth in 2012 and overall top-line growth from then on. It won't get it by getting more profit from its declining businesses and so it has to go into new areas. The trouble is that the optical market is a bust, floppies have flopped, USB sticks are commodity gizmos and tape is set for a long-term decline. The only growth business Imation has at first glance is in removable hard drives – where, our guess is, it plays second fiddle to Tandberg Data in the ProStor RDX space.

The dying business strategy, which include optical and tape media products, is phrased like this: "The company's strategy is to use a disciplined, end-to-end product life cycle management process designed to deliver products with higher gross margins while phasing out low-margin businesses. In 2011, this process is expected to drive new product launches with at least 20 per cent gross margin as an entry target." Good stuff – but the real good news is on the acquisition front.

Imation says it plans to invest in four core product technology areas: secure storage, scalable storage, Wireless/connectivity, and magnetic tape. But this doesn't mean these are are the growth areas. For example, Imation has just got out of tape media manufacture by signing a deal with TDK, with the company now saying: "The recent strategic alliance with TDK to develop and manufacture next-generation tape is an example of an optimisation action expected to maximize ROIC (return on invested capital) in the magnetic category."

In what it calls Emerging Storage which includes including flash and removable hard disk drives, where it sees growth potential, Imation plans to invest in higher growth and margin opportunities. These include its Defender line of secure removable storage products and portable and external hard drives for small-medium businesses (SMBs).

In its Electronics and Accessories area, the strategy is to launch differentiated, higher margin products such as the XtremeMac and TDK Life on Record premium audio lines, while rationalising (meaning killing the crap) low-margin businesses, such as TVs and assorted video products.

Other investments inside Imation and its channel will include expanded sales and marketing coverage for VAR (value added reseller) and OEM channels, improved decision-support tools in IT, and international expansion, focused on China.

Acquisitions

Now, to the acquisitions, with Imation saying these will be "focused on data protection, storage hardware, removable hard drive systems, and related software, with the potential for several acquisitions each ranging from a few million dollars to $50 million."

The leading removable hard drive company is ProStor, a venture capital-backed startup. It tapped VCs for $12.2m in 2006, which made total funding $18.4m, and hasn't raised any more funds since then. El Reg's storage financial whizz kids think Imation has just erected an I Wanna Buy You Sign in front of ProStor's head office.

A "storage hardware" buy is so open-ended as to be impossible to interpret and "data protection" is also pretty vague. Is Imation going to buy a backup company? If it is then buying one with a good run rate business, OEM deals and a cloud strategy would be a good idea. That should narrow the field a bit. A $50m budget for a buy puts CommVault out of reach though; it has a $1.42bn market capitalisation.

With Imation and Dell both being on the acquisition prowl they will get lots of calls from board directors of companies, especially VC-backed companies looking to cash in their investments, hoping to tap Imation's signalled willingness to spend.

Imation stock rose $1.52 – or 15 percent on Monday's closing price – to close at $11.62 on Tuesday after news of the restructuring hit the markets.®

Build a business case: developing custom apps

More from The Register

next story
Microsoft: Azure isn't ready for biz-critical apps … yet
Microsoft will move its own IT to the cloud to avoid $200m server bill
Shoot-em-up: Sony Online Entertainment hit by 'large scale DDoS attack'
Games disrupted as firm struggles to control network
Silicon Valley jolted by magnitude 6.1 quake – its biggest in 25 years
Did the earth move for you at VMworld – oh, OK. It just did. A lot
VMware's high-wire balancing act: EVO might drag us ALL down
Get it right, EMC, or there'll be STORAGE CIVIL WAR. Mark my words
Forrester says it's time to give up on physical storage arrays
The physical/virtual storage tipping point may just have arrived
Better be Nimble, tech giants, or mutant upstarts will make off with your sales
Usual suspects struggling to create competing products
VMware vaporises vCHS hybrid cloud service
AnD yEt mOre cRazy cAps to dEal wIth
prev story

Whitepapers

A new approach to endpoint data protection
What is the best way to ensure comprehensive visibility, management, and control of information on both company-owned and employee-owned devices?
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Maximize storage efficiency across the enterprise
The HP StoreOnce backup solution offers highly flexible, centrally managed, and highly efficient data protection for any enterprise.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.