SaaS data loss: The problem you didn’t know you had

Struggling tape, disk, and optical media maker Imation has found its salvation: it's Nexsan, the maker of block-and-file storage systems based on flash storage that Imation is shelling out $120m to acquire.

The acquisition of Nexsan – one of myriad storage startups competing in this hot part of the IT market – comes hot on the heels of Imation's restructuring in October 2012. Back then, when Imation was reporting its third-quarter financial results, sales were off 19.6 per cent to $248.2m and net losses shrank by more than half to $6.3m.

That was not a new strategy, but rather one that Lucas was espousing almost two years ago when he said Imation would invest in four key areas – secure storage, scalable storage, wireless/connectivity, and magnetic tape – and move away from optical and USB storage, which are as moribund as the floppy disks that gave Imation its brand-recognition so many years ago.

Seven years ago, when these older products were still hot commodities, Imation was flying high in the wake of its spinout from 3M, and had a market capitalization of $2bn. As El Reg goes to press, Imation has a market capitalization of a mere $162.8m.

Last October, Imation also announced that it would lay off about 20 percent of its 1,080-strong workforce and incur restructuring charges on the order of $50m to $60m, taking a big bite out of the $183.6m in cash and equivalents that Imation had in the bank as the September quarter came to a close. And, as it turns out, most of the remaining cash that Imation has is going towards the acquisition of Nexsan. Under the terms of the deal, Imation is paying $105m in cash plus another 3.32 million shares valued at approximately $15m prior to when the deal was announced.

Nexsan has around 200 employees who work from facilities in the US, UK, and Canada, and they will join Imation. Privately held Nexsan brought in around $82m in 2011, gross margins in the range of 40 per cent, and will immediately add to profits once the deal closes. Perhaps more importantly, Nexsan has over 11,000 customers worldwide and a relatively strong partner program peddling its storage products. (It did not have a direct sales force.)

Nexsan, which was founded in 1999 and which raised $7.5m in venture funding in April 2009, has pushed over 33,000 storage arrays of various kinds over the past decade and a half. The company sells the E-Series disk arrays, the Assureon line of secure archiving systems, and the NST line of unified storage systems that sport both flash and disk storage. It has tried to get up the steam to go public twice, but has been thwarted by the Great Recession.

Imation will outline its integration plans for its InfiniVault arrays and DataGuard secure data appliances with the Nexsan alternatives sometime in the first quarter, very likely when it reports its fourth quarter financial results on February 13. ®

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