Memorex 2012 Annual Report Download - page 6

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rationalization and infrastructure, and includes a reduction of approximately 20 percent of our global workforce. These actions
are being implemented beginning in 2013. We anticipate we will incur cash charges up to $40 million, with total charges
between $50 million and $60 million (excluding charges associated with goodwill and intangible asset impairments), the
majority of which will occur in 2013. See Note 7 — Restructuring and Other Expense in our Notes to Consolidated Financial
Statements for more information on the restructuring program.
In conjunction with the acceleration of our strategic transformation in the fourth quarter of 2012, we evaluated our
intangible assets, including goodwill, for impairment and recorded non-cash impairment charges of $283.8 million in the
quarter. The intangible asset charges are primarily due to an accelerated secular optical market decline. See Management’s
Discussion and Analysis of Financial Condition and Results of Operations — Goodwill Impairment, Critical Accounting Policies
and Estimates and Note 6 — Intangible Assets and Goodwill in our Notes to Consolidated Financial Statements for further
information on the impairment charges.
Our Products
We have three major product categories: traditional storage, secure and scalable storage, and audio and video
information.
Traditional Storage
Traditional storage products include optical media products, magnetic tape media products and other traditional storage
media products.
Our optical media products consist of CDs, DVDs and Blu-ray™ recordable media. We have the leading global market
share for recordable optical media, however, the overall market for CDs and DVDs is declining as digital streaming, hard disk
and flash media replace optical media in some applications such as music and video recording. We sell high capacity Blu-ray
discs which are used primarily for recording high-definition video content. Our recordable optical media products are sold
through a variety of retail and commercial distribution channels and sourced from manufacturers in Taiwan and India. Optical
storage capacities range from 700 megabyte (MB) CD-R (recordable) and CD-RW (rewritable) optical discs to 8.5 gigabyte
(GB) dual layer DVD optical discs and Blu-ray™ discs with 25 GB to 100 GB of capacity. Our optical media is sold throughout
the world under brands we own or control, including Imation, Memorex and TDK Life on Record.
Our magnetic tape media products are used for back-up, business and operational continuity planning, disaster
recovery, near-line data storage and retrieval and for cost-effective mass and archival storage. Capacity of our tape products
range from less than 10 GB up to 6.25 terabytes (TB) per cartridge. The market for magnetic tape products has been in
decline, but we continue to enjoy a leading market share. We have a significant intellectual property portfolio, a solid industry
reputation, and strong relationships with key original equipment manufacturers (OEMs). Some of our legacy tape formats are
proprietary or semi-proprietary and have higher gross profit margins than non-proprietary products. Our magnetic tape
products are sold throughout the world under various brands.
Other traditional storage products primarily include optical drives and audio and video tape media.
Secure and Scalable Storage
Secure storage products and software include USB flash drives and external hard drives designed to meet the most
stringent security standards to protect data at rest with Federal Information Processing Standard (FIPS) validation, password
and biometric authentication, including biometric USB drives, encrypted and biometric hard disk drives, secure portable
desktop solutions and software solutions. Flash media products with security features provide margins significantly higher
than traditional flash media without data security. These products were sold throughout the world under various brands and as
of the end of the 2012 we have consolidated the brands under the IronKey name. We also sell standard USB flash drives and
external hard disk drives throughout the world under our Imation, Memorex and TDK Life on Record brands. We source these
products from manufacturers primarily in Asia and sell them through a variety of retail and commercial distribution channels
around the world. USB flash drives have capacities ranging from 2 GB up to 128 GB and capacities continue to increase as
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