Feeds

Shareholders rage over Imation's incredible 88% plunge

How the leading disc and flash maker came a cropper

Designing a Defense for Mobile Applications

Revenue and profits

Imation revenues

Imation annual revenues from 2003 to 2010.

The annual revenue (above) and profit/loss numbers (below) show the scale of the problem, with plunging revenues and deepening losses.

Imation annual profit/loss numbers

Imation annual net income numbers 2003 - 2010.

Imation's growth strategy

In February this year Imation CEO Mark Lucas outlined a 5-pronged strategy, with the intention of returning Imation to revenue growth by the end of 2011. Firstly, the dying tape and optical businesses will "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". Prongs two, three, four and five were new core product technology areas: secure storage, scalable storage, wireless connectivity, and magnetic tape.

  • Secure storage meaning protected thumb drives and hard disk drives? That's surely not a significant business, not at Imation scale, especially not when hard disk drive vendors sell self-encrypting drives.
  • Scalable storage means RDX and InfiniVault, disk-based data protection when general small/medium business protection is set to move to the cloud, limiting RDX's prospects, although RDX revenues are growing at 24 per cent annually.
  • Wireless connectivity meaning Link Wireless Audio/Video Extender products to project audio and high-definition video content - internet TV, movies, photos, online games, web video conferencing and even business presentations - to a television or projector. Really? With Seagate and WD making Wi-Fi and router-connected hard drives serving media to output devices? There is also wireless link which creates a secure, wireless connection from a laptop to a digital projector.
  • Magnetic tape meaning LTO-5 since all other formats are dying businesses. Here Imation appears to be competing with HP, IBM and Quantum, the LTO threesome.

Most of this can be judged unrealistic. Playing about with Wi-Fi, muddling about with securing USB sticks and external disk drives; calling RDX scalable storage when everyone else understands scalable storage to be cloud storage or big data arrays like the EMC Isilon jobs, and then calling tape both a dying business and yet a core business? Is it surprising that the share price has continued resolutely downwards?

Imation describes itself as undergoing a "strategic transformation to a global technology company focused on growth opportunities in data storage, protection, and connectivity". For disappointed investors this doesn't ring true.

They think Imation needs a real growth strategy, this view was reflected in the earnings call comments.

Earnings call

Lucas said in the call: "Our goal is to return to revenue growth by the end of 2012. We continued to deliver growth in our secure and scalable products during the quarter, but we have not yet hit the inflection point where these revenues will offset declines in our traditional storage area … We saw some positive signs in terms of new product growth. We need more."

Five years after the XtremeMac purchase he had this to say: "In our audio and video information products, formerly called consumer electronics products, we saw a 12 per cent growth in accessories with several new retail placements for our XtremeMac line. Excluding rationalised video products, other audio and video information products grew almost 8 per cent."

That is not impressive. If the rest of the business was producing good profits then the reasonable growth seen in RDX and secured storage products would be readily acceptable but, on their own and against the ongoing decline in tape and optical media these investments could look like too little too late and too limited in growth prospects.

The Power of One eBook: Top reasons to choose HP BladeSystem

More from The Register

next story
Apple fanbois SCREAM as update BRICKS their Macbook Airs
Ragegasm spills over as firmware upgrade kills machines
Attack of the clones: Oracle's latest Red Hat Linux lookalike arrives
Oracle's Linux boss says Larry's Linux isn't just for Oracle apps anymore
THUD! WD plonks down SIX TERABYTE 'consumer NAS' fatboy
Now that's a LOT of porn or pirated movies. Or, you know, other consumer stuff
EU's top data cops to meet Google, Microsoft et al over 'right to be forgotten'
Plan to hammer out 'coherent' guidelines. Good luck chaps!
US judge: YES, cops or feds so can slurp an ENTIRE Gmail account
Crooks don't have folders labelled 'drug records', opines NY beak
Manic malware Mayhem spreads through Linux, FreeBSD web servers
And how Google could cripple infection rate in a second
FLAPE – the next BIG THING in storage
Find cold data with flash, transmit it from tape
prev story

Whitepapers

Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
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.
Reducing security risks from open source software
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.