Feeds

Brit disk biz Nexsan out of the frying pan and into the firing line

Why it needs to bring home the bacon for Imation

Designing a Defense for Mobile Applications

Blocks and Files Imation's purchase of Nexsan for $120m will be seen as a failed exit for Nexsan's venture capital backers in the eyes of the most ferocious investors.

Nexsan is in the second tier of disk drive array storage vendors, and has found it hard to progress into the top tier. It has failed twice at launching a successful IPO since it was founded in 1999 in Derby, UK. We calculate it's wolfed down…

  • 2003: $11m in seed capital
  • Dec 2003: $17m in an A-round
  • April 2007: $7.5m in a B-round

That's a total of $35.5m, meaning the venture capital backers got a 3.4 multiplier of a return on the $120m Imation purchase price. As $15m of that was in Imation shares, the cash return represents a multiplier of 2.95 for the VCs. In the good times 5 multipliers were possible, so a 3.0 return is relatively piss-poor.

The alternative wasn't particularly brilliant either: the storage startup buzz is in all-flash arrays and cloud storage. Nexsan is not in those areas. It is a traditional disk array vendor that's added flash to its boxes and has object storage technology in its Assureon product line. There are no good IPO prospects here. It's too late.

Imation isn't buying a hot and wild startup. It's got its hands on a mature 13-year-old company with more than 11,000 customers worldwide and in excess of 33,000 systems installed. It has bought its way into the small and medium business (SMB) storage array market and knows nothing about that business in general.

Nexsan's people are staying with the business and, we expect, the main execs have have golden handcuff contracts to stay on. Nexsan's fiscal 2011 revenues were $82m whereas Imation took $1.3bn but made a loss of $43m. We have no word on Nexsan's profitability.

Here is what we understand is Nexsan's revenue history:

  • 2006: $5m loss on $42.8m in sales
  • 2007: $3m net loss on $49.8m in sales
  • 2009: $63m in sales
  • 2011: $82m in sales

In its acquisition announcement, Imation said Nexsan has strong gross margins and that its sales are growing. Lord only knows Imation needs a growth business. Its recent financial history is wobbly and its attempts to buy in technology to boost its gutted tape media and optical disk businesses have been small-scale and not delivered any substantial boost to its revenues or prospects.

The chart below shows it last made a profit in the last fiscal 2009 quarter.

Imation revenues to Q3 fy2012

Imation's quarterly revenue and profit and loss history. Spot the last profit.

Buying Nexsan is a gamble for Imation: screw this up and it's possible Imation's management won't just walk - they'll be booted out by frustrated investors. Loss-making Imation isn't Nexsan's sugar-daddy. The El Reg storage desk thinks Nexsan has convinced Imation it will be profitable in 2013 and has a product roadmap that will increase sales further. Some of Imation's own distribution channel can take the Nexsan kit and Nexsan's sales partners may be able to take Imation's removable RDX disk storage products and also its security stuff.

Happy new year, Nexsan execs; you've got the VCs off your backs, but now you report to Imation CEO Mark Lucas and he really needs profits. ®

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.