Memorex 2013 Annual Report Download - page 9

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pricing practices and ongoing variable price erosion. Competition is based on a multitude of factors, including product design,
brand strength, distribution presence and capability, channel knowledge and expertise, geographic availability, breadth of
product line, product cost, media capacity, access speed and performance, durability, reliability, scalability, intellectual
property, compatibility and global product support capability.
Our primary competitors in recordable optical media include Maxell, JVC, Sony and Verbatim brands. Our primary
competitors in magnetic tape media include Fuji, Sony, Maxell and HP brands. These companies generally compete with us in
all our regional business segments. While the parent companies that own these brands compete in the removable data
storage media market, they generally do not report financial results for these business lines on a stand-alone basis.
Therefore, it is difficult for us to estimate our relative market share. However, we use a variety of industry sources to estimate
market size and share and we estimate we held a leading market share in 2013 in optical and magnetic products with more
than one-third of those markets. Our primary competitors for our Nexsan products include mid-range storage systems and
products from Dell, EMC, NetApp and Nimble as well as a number of smaller, privately-held storage system companies. Our
primary competitors in mobile security products include Kingston, Spyrus, Apricorn and Rocstor. In standard flash media our
primary competitors include Kingston, SanDisk, Lexar and PNY. Our primary competitors in standard external and removable
hard drives are Western Digital and Seagate.
The magnetic tape industry has consistently addressed the growth in demand for storage capacity with higher capacity
cartridges resulting in a lower cost per gigabyte which results in a decline in actual number of units of media shipped. These
non-proprietary formats experience greater price competition than proprietary formats with lower gross margins. In addition,
lower cost disk and storage optimization strategies such as virtual tape and de-duplication remain a factor in certain sectors of
the market. As a result, we expect our tape revenue to continue to decline.
Nexsan storage system products operate in a large and competitive data storage market. Demand for data storage
capacity is expected to grow and flexible customer solutions are required that include data security and protection,
performance and scalability. We believe we have a diverse and competitive portfolio of products that addresses a wide range
of customer needs in this market.
The optical market is in secular decline as digital streaming, hard disk and flash media replace optical media in some
applications such as music and video recording. While our different brands have varying strengths in different regions of the
world, in aggregate we have the leading overall share for recording optical media globally.
The traditional flash media market is competitive with highly variable price swings driven by NAND chip manufacturing
volume and capacity as well as market demand in the much larger embedded flash market. Focused and efficient sourcing
and distribution, as well as diligent management of portfolio size, inventories, channel placement and promotional activity are
critical elements for success in this market.
Audio and accessories products are sold based on a variety of factors, including brand and reputation, product features
and designs, distribution coverage, innovation and price. Our competitors in the audio and accessories products market
consist of numerous manufacturers and brands. The global audio and accessories products market is a very large and highly
diverse market in terms of competitors, channels and products. Our current product offerings focus on a subset of this market.
Product Sourcing
We contract for the manufacturing of all products we sell and distribute from a variety of third-party providers that
manufacture predominately outside the United States. We seek to differentiate our products through unique designs, product
positioning, packaging, merchandising and branding.
On July 31, 2007, we acquired substantially all of the assets relating to the marketing, distribution, sales, customer
service and support of removable recording media products, accessory products and ancillary products being sold under the
TDK Life on Record brand name (TDK Recording Media), from TDK, including the assets or capital stock of TDK’s operating
subsidiaries engaged in the TDK Recording Media business. In conjunction with our acquisition of the TDK Recording Media
6