Memorex 2007 Annual Report Download - page 33

voice recorders. The Memcorp acquisition also included a brand licensing agreement with MTV Networks, a division
of Viacom International, to design and distribute consumer electronic items under certain Nickelodeon character-
based properties and the NPower brands.
Industry Background
We compete primarily within the global information technology industry. Our worldwide data storage media products
are designed to help our customers capture, create, protect, preserve and retrieve valuable digital assets. Our primary
products include recordable and rewritable optical discs, magnetic tape cartridges, USB flash drives, removable hard drives
and a variety of consumer electronic products and accessories.
We rely on various industry analysts and our own estimates to gauge market size, growth rates and market shares
as discussed below. The total global data storage market, including hardware and services, is currently estimated to be in
excess of $100 billion, of which the removable data storage media market is approximately $17 billion and includes
magnetic, optical and flash drives, but excludes accessories. We also sell a variety of consumer electronic products and
accessories. The consumer electronics market is broadly defined as traditional analog-based audio and video devices
(e.g. televisions and radios) as well as digital-based audio, video and information technology hardware and accessories for
creating, manipulating, storing and sharing digital information. The global consumer electronics market is in excess of
$600 billion. We participate in the U.S. market and are expanding into other American markets. Our current product
offerings focus on a subset of this market whose size is approximately $45 billion.
The growth in demand for removable data storage capacity is estimated to exceed 30 percent annually for the next
several years. However, new formats deliver greater capacity in a single piece of storage media, which results in overall
revenue growth being significantly lower than the overall growth in demand for storage capacity. This demand is driven by
multiple factors as an increasing quantity and diversity of information is created and managed digitally for both business
and consumer applications. These factors include the rapid growth of information in digital form, the growth of complex
databases as a result of new hardware and software applications, increased ability to access data remotely and across
multiple locations, increased regulatory requirements for record retention and the pervasive use of the Internet. These
factors have put data security, archiving and reliable back-up procedures at the forefront of critical business processes.
Further, the continued growth in the variety and functionality of consumer electronic devices has increased demand for a
range of convenient, low-cost removable storage media to capture, store, edit and manage data, photographs, video,
images and music.
Decisions about the kind of data storage platforms to use depend on a multitude of considerations including total
storage capacity needs, data transfer rates required, reliability, scalability, portability, permanency, physical media size,
compatibility with other components and systems and total cost of ownership. Removable data storage media products
enable commercial users to easily expand capacity and provide data transportability, data management and data security
at a significantly lower relative cost than fixed hard disk storage. Fixed disk storage generally provides faster transfer rates
and immediate access to data, which are advantages in some applications but at a higher cost than removable media. As
a result, typical commercial installations include a combination of removable and fixed storage configurations.
In addition to organization-wide or department-level storage solutions, there are many removable storage formats that
meet the diverse individual personal storage needs for both consumer and business applications. Personal storage
solutions generally encompass recordable CDs, DVDs, USB flash drives, flash cards and removable or portable hard
drives. Criteria for personal storage applications include many of the factors cited for commercial applications as well as
availability of products in preferred retail channels and brand preferences.
Business Segments
We operate in two markets; selling removable data storage media and accessories for use in the personal storage,
network and enterprise data center markets and selling consumer electronic products and accessories. We completed the
Memcorp acquisition and entered into the consumer electronics market during the third quarter of 2007. Our data storage
media business is organized, managed and internally and externally reported as segments differentiated by the regional
markets we serve: Americas, Europe and Asia Pacific. Each of these segments has responsibility for selling virtually all
Imation product lines except for consumer electronic products. Consumer electronics are sold through our new Electronic
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