Imation Betting It All on Nexsan

Imation, faced with a forth-quarter operating loss that exceeded revenues, will essentially double down on its Nexsan acquisition.

Imation’s sea of red ink—it reported an operating loss (without charges) of $5.2 million off revenue of $291.1 million—stems from special charges, including writing off the value of its consumer businesses. When those charges are taken into account, the company lost $310.4 million. Optical and magnetic tape media revenues dropped by 15 percent, but secure and scalable storage revenues grew by 17 percent—the strongest growth the company said it had seen in two years.

Those numbers undoubtedly fueled Imation’s decision to begin a “strategic transformation” to, in the words of chief executive Mark Lucas, begin “leveraging Imation’s roots in data storage to become a major player in data security and data storage.” In January, Imation bought Nexsan, which is looking like the centerpiece of the business.

Imation said it will divest itself of its Memorex and XtremeMac consumer electronics businesses, and keep its TDK business on a “focused basis”—basically in Europe, Australia, and Japan, where high-margin TDK consumer products are succeeding. Imation plans to slash 25 percent of its operating expenses—laying off 20 percent of its employees, followed by office consolidations in Europe and Latin America, and product “rationalization” or elimination—and will realign its business into two divisions, Tiered Storage and Security Solutions (TSS) and Consumer Storage and Accessories.

The goal, Lucas said, was to establish a minimum threshold of a 20 percent profit margin across the company, which would focus on developing products that met that threshold. That almost certainly means that the company is going to orient itself around Nexsan, which “now becomes the center of our tiered storage business,” he told analysts.

“The Imation strategy includes addressing the under-served SMB market with storage systems and appliances,” he added. “This is a sector that Nexsan knows well. And we expect this acquisition to contribute considerably to growth in both the small and medium sized business market and the distributed enterprise storage or SME markets.”

Lucas told analysts that the Nexsan is well positioned to serve the channel, where the “big six” storage companies, which includes Compellent and Equal Logic, don’t do nearly as well.

TheInfoStor, a data storage research group and part of The 451 Group, recently listed automated tiered storage as the hottest technology of 2012. Indeed, more IT managers are investing in it, drawn by its reported efficiencies; virtually all of the leading names in the storage industry, including EMC’s Symmetrix products and Hitachi’s Virtual Storage Platform, have embraced it. It better be: Imation’s basically betting the future of the company on its technology, and any disruption in the space could send it straight to the bottom.

 

Image: FotoYakov/Shutterstock.com

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