Feeds

Shareholders rage over Imation's incredible 88% plunge

How the leading disc and flash maker came a cropper

Internet Security Threat Report 2014

How do you build a $226m company? Start with a $2bn one. This joke could apply to Imation, which could go the way of Kodak and turn shareholder value into dross, because its management, facing declining sales of old technology, is late to respond and now buying bum companies with crappy prospects.

That's the view implied by transcribed comments from the 2011 third quarter earnings call. Imation's shares, at $5.93, are just 11.5 per cent of their $48.81 peak value in 2006. The company has a current market capitalisation of $226.02m. On June 20, 2006, it was $1.96bn. Imation's management has lost 88.5 per cent of the company's share value, a humungous $1.734bn of market capitalisation since then. A harsh view is that it has been a prolonged and spectacular executive management failure.

Imation share prices 2003-2011

Imation share price and dividend payments chart, 2003 - 2011

How has it come to this?

In 2006 Imation was riding high, selling millions of optical disks, floppy disks and tape cartridges that it made in its own factories. Now it is basically a brand operation shell, selling secure USB memory sticks and a few Wi-Fi and removable disk drive products as a result of recent acquisitions. That year it bought Memorex and the TDK media recording businesses and so became the largest supplier of CD-R and DVD media in the world and was also, at the time, the leader in flash media sales.

But from then on the company lost ground as the products it sold started becoming less and less relevant. Imation's share price plunged throughout 2007, from its peak of $48.50 down to $21.99 by the end of the year.

In 2008 it bought XtremeMac which provided accessories for the Mac, but this was a pretty futile attempt to escape the jaws of the long-term vice it was in. The tape market was contracting rapidly as backup targets changed from tape drives to disk arrays, leaving tape the smaller archive business. Simultaneously the optical disk business declined as well with the post-DVD format wars which eventually saw Blu-ray rule over a much, much smaller optical media roost as consumers increasingly downloaded music and video content from the internet.

Shareholder to execs: 'We're not seeing anything, we're just seeing cash leave the balance sheet.'

For Imation, the escape routes from the declining tape and optical media markets turned out to be illusory or cul-de-sacs.

In a way the company was like that old Remington shaver company, but only if you can imagine it selling blades and shaving cream and not the razors. As wet shaving gave way to dry shaving, Remington switched to electric shavers - but Imation, stuck in the razor blades mindset, looked for new razor-blade type products and seized on USB memory sticks, external disk drives and Wi-Fi gear, thinking it could stay a massive company selling these bought-in commodity items through its channel under its umbrella brands.

In the external disk drive market it found itself competing with Hitachi GST, Seagate, Toshiba and Western Digital who, collectively, outsold it. Wi-Fi is a desktop and notebook computer preserve with an admixture of external hard drive Wi-Fi media servings from Seagate and WD. There is little scope for outside suppliers to make any great impact here.

Beginner's guide to SSL certificates

Next page: Exit Russomanno

More from The Register

next story
Docker's app containers are coming to Windows Server, says Microsoft
MS chases app deployment speeds already enjoyed by Linux devs
'Hmm, why CAN'T I run a water pipe through that rack of media servers?'
Leaving Las Vegas for Armenia kludging and Dubai dune bashing
'Urika': Cray unveils new 1,500-core big data crunching monster
6TB of DRAM, 38TB of SSD flash and 120TB of disk storage
Facebook slurps 'paste sites' for STOLEN passwords, sprinkles on hash and salt
Zuck's ad empire DOESN'T see details in plain text. Phew!
SDI wars: WTF is software defined infrastructure?
This time we play for ALL the marbles
Windows 10: Forget Cloudobile, put Security and Privacy First
But - dammit - It would be insane to say 'don't collect, because NSA'
Oracle hires former SAP exec for cloudy push
'We know Larry said cloud was gibberish, and insane, and idiotic, but...'
Symantec backs out of Backup Exec: Plans to can appliance in Jan
Will still provide support to existing customers
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
Win a year’s supply of chocolate
There is no techie angle to this competition so we're not going to pretend there is, but everyone loves chocolate so who cares.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.