Memorex 2010 Annual Report Download - page 20

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(1) These operational measures, which we regularly use, are provided to assist in the investor’s further understanding of
our operations. Days sales outstanding is calculated using the count-back method, which calculates the number of
days of most recent revenue that are reflected in the net accounts receivable balance. Days of inventory supply is cal-
culated using the current period inventory balance divided by an estimate of the inventoriable portion of cost of goods
sold expressed in days.
(2) Return percentages are calculated using (loss) income from continuing operations.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion is intended to be read in conjunction with Item 1. Business, the Consolidated Financial
Statements and related notes that appear elsewhere in this Annual Report on Form 10-K.
Overview
We are a leading global technology company dedicated to helping people and organizations store, protect and
connect their digital world. Our portfolio of data storage and security products, electronics and accessories reaches
customers in more than 100 countries through a powerful global distribution network. We seek to differentiate our products
through unique designs, product positioning, packaging, merchandising and branding.
Strategy
Our vision, as a technology company focusing on targeted applications, will leverage our deep data storage core
while addressing opportunities for growth in emerging storage, electronics and accessories.
•Financial Goals. In the near-term, we do not expect revenues to rise in 2011 due to declines in traditional
storage products and our intent to rationalize low-margin products. We also expect that earnings, excluding
charges, will decline in 2011 partially due to organic investments needed to drive long-term growth. However, we
will continue our focus on cash and continued margin improvement in 2011. Looking forward, our mid-term financial
goals include double-digit earnings growth in 2012 and a return to top-line growth by the end of 2012. Longer
term, we have a return on invested capital (ROIC) target of 10 percent or more, operating income profitability
target of 4 to 5 percent, and an expectation of product gross margins moving toward 20 percent.
•Corporate Strategies. We intend to 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. In 2011, this
process is expected to drive new product launches with at least 20 percent gross margin as an entry target. We
also plan to invest in four core product technology areas: secure storage, scalable storage, wireless/connectivity
and magnetic tape. These investments will include organic research activities already underway, with an increase of
more than 30 percent in research, development, and engineering (RD&E) resources expected in 2011. We also
anticipate investments through small to medium acquisitions each in the range of several million dollars up to
$50 million.
•Product Strategies. In our traditional storage products, which include magnetic tape media and optical media,
our strategy is to optimize profitability, returns and cash in a declining market. In emerging storage, including flash
and removable hard disk drives, we plan to invest in higher growth and margin opportunities, such as our award-
winning Defender
TM
line of secure removable storage products and scalable storage offerings for small to medium
size businesses, including removable hard disk systems such as RDX. In electronics and accessories, our strategy
is to launch differentiated, higher margin products such as the new XtremeMac and TDK Life on Record premium
audio lines. Lastly, our strategy includes rationalizing low-margin businesses across product categories.
•Investment Strategies. In 2011, we expect incremental organic investment of $15 million, focused on technology;
expanded sales and marketing coverage for the value-added reseller and OEM channels; improved decision-
support tools in IT; and international expansion, focused on China. We also intend to grow through acquisitions
focused on data protection, storage hardware, removable hard drive systems, and related software, with the
potential for several small to medium acquisitions during 2011.
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