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Imation posts FOURTEENTH loss-making quarter

On a good note, losses this time are a bit smaller

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Scalable-storage biz Imation's revenue slump continues while management continues to talk the talk about recovery, which – worryingly, for Imation – depends mainly upon storage array product developments in a brutally competitive market.

The firm's revenues – and profitability – crashed as tape and optical disk media sales plummeted over the past few years, necessitating strategic changes. One of these was buying second-tier storage array maker Nexsan in January OF this year.

For its latest quarter, which finished on June 30, Imation's revenues were $211.7m, down from the prior quarter's $224.4m and significantly down – 15 per cent – on the year-ago quarter's $249.2 million. The days of half-billion dollar quarters for Imation are a distant memory.

This fourteenth loss-making quarter showed a net loss of $5.1m, noticeably better than the previous quarter's losses of $21.1m and also less than half the year-ago quarter's $12m loss. That is an improvement, of sorts: it's Imation's smallest loss in 11 straight quarters.

"Imation's second quarter performance was in line with our expectations, Prez and CEO Mark Lucas's said in a canned statement. "Our transformation continues and we are seeing signs of progress. We are focused on high-growth market segments in data storage and security, and have dedicated teams launching differentiated products to meet customer needs globally."

Translation: "We know what we're doing. Have faith."

Imation's official results statement said: "The Consumer Storage and Accessories (CSA) business performed better than expected in the second quarter given industry dynamics. Revenues were down 27.2 percent; however, gross margins and cash generation continued to be strong for this unit."

Reading between the lines, was Imation expecting a worse decline this quarter thanks to sharp-elbowed competitors?

The firm posted revenue growth of 7 per cent for Q2 fiscal 2013, which it attributed to the acquisition of data-storage minnow Nexsan. Margins ran at 21.7 per cent, an increase of 2.1 per cent year-on-year.

"The Company expects continued margin gains as revenue of higher-margin products increases in the Nexsan and Imation Mobile Security product portfolios," the statement continued. We do hope that means some increased profits are on the way.

Nexsan, with its line of hybrid flash/disk SAN arrays, unified NAS and iSCSI NST arrays, and recently updated Assureon archive arrays, along with its other mobile security products, represent Imation's revenue-growth areas.

"The TSS segment is the growth engine of Imation, and we are making investments to advance those product portfolios," said Lucas, adding that Imation is introducing new products in both Nexsan and Imation Mobile Security.

The company is "moving forward with plans to divest the Memorex and XtremeMac consumer electronics brands. ... Imation continues to aggressively right-size the organisation and implement cost-savings initiatives."

El Reg observes that it's really difficult to trim the fat and keep muscle in the body corporate.

In these days of all-flash arrays, flash-enhanced servers, and file sync 'n' share, what is Nexsan doing to develop its storage arrays? It is a fiercely competitive market with little room for middle-of-the-road players.

Are we expecting to see all-flash Nexsan arrays and array software enhanced to manage flash effectively? Will Assureon get Big Data analytics features? Perhaps Nexsan will resell, or OEM, an existing all-flash array? It might also add array clustering software or some other form of scale-out capacity and performance facility to its SAN and file array products.

There are lots of storage array suppliers for SMEs and the low end of larger businesses. Nexsan's product strategists and engineers will need a sure touch as they set a course for product development through today's thorny and brutally competitive storage product landscape. ®

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