Memorex 2007 Annual Report Download - page 41

If we do not successfully implement our global manufacturing strategy for magnetic data storage products
and changes to the Research and Development organization and realize the benefits expected from the
restructuring, our financial results may be affected. In 2007, we announced a strategy focused on transforming
Imation to a brand and product management company. This transformation included a cost reduction restructuring program
in our manufacturing and R&D organizations to align our resources with our strategic direction. We may not be able to
realize the expected benefits and cost savings if we do not successfully consolidate or outsource magnetic tape cartridge
converting operations that are spread among three plants. We also need to align the R&D organization to focus on future
advanced magnetic tape formats. Combining certain operations of our Company has required significant effort and
expense. Personnel have left and may continue to leave or be terminated because of the restructuring. Our management
may have its attention diverted as it continues to combine and outsource certain activities of the manufacturing and R&D
organizations. If these factors limit our ability to restructure the operations successfully or on a timely basis, our
expectations of future results of operations, including certain cost savings expected to result from the restructuring may not
be met. If such difficulties are encountered or such cost savings are not realized, it could have a material adverse effect
on our business, financial condition and results of operations.
We must make strategic decisions from time to time as to the products and technologies in which we invest
and if we choose the wrong product or technology, our financial results could be adversely impacted. Our
operating results are dependent upon our ability to successfully develop, manufacture, source and market innovative new
products and services. New product and technology innovations may require a substantial investment before we can
determine their commercial viability.
Unfavorable economic conditions could negatively affect our revenues and profitability. Our business,
financial condition and results of operations may be affected by various economic factors. Unfavorable economic conditions
may make it more difficult for us to maintain and continue our revenue growth and profitability performance. In an
economic recession or under other adverse economic conditions, customers and vendors may be more likely to fail to
meet contractual terms or their payment obligations and product areas such as consumer electronics may be significantly
affected. Such failures may impact our cash flow and ability to repay our indebtedness. A decline in economic conditions
may also diminish consumer demand for our products, which would have a material adverse effect on our business.
Because of the rapid technology changes in our industry, we may not be able to compete if we cannot
quickly develop, source and introduce differentiating and innovative products. We operate in a highly competitive
environment against competitors who are both larger and smaller than us in terms of resources and market share. Our
industry is characterized by rapid technological change and new product introductions. In these highly competitive and
changing markets, our success will depend to a significant extent on our ability to continue to develop and introduce
differentiated and innovative products and services cost-effectively and on a timely basis. The success of our offerings is
dependent on several factors including our differentiation from competitive offerings, timing of new product introductions,
effectiveness of marketing programs and maintaining low manufacturing, sourcing and supply chain costs. No assurance
can be given with regard to our ability to anticipate and react to changes in market requirements, react to the actions of
competitors or react to the pace and direction of technology changes.
Since price competition is a common factor in both the removable data storage media and consumer
electronics markets, we risk reducing profitability if we cannot reduce costs and manage inventory in line with
price declines. We expect price pressures across our portfolio of products, but it cannot be easily predicted since it can
vary in intensity by specific product and region and can fluctuate from quarter to quarter. Our financial results in any
quarter can be impacted by the intensity of price pressure and the amount of impacted revenue relative to our overall
revenue mix. We cannot provide assurance that we will successfully anticipate and react to price declines or successfully
implement cost reduction strategies in manufacturing or sourcing.
We may be dependent on third parties for new product introductions or technologies in order to introduce
our own new products. We are dependent in some cases upon various third parties, such as certain drive
manufacturers, for the introduction and acceptance of new products, the timing of which is out of our control. In addition,
there can be no assurance that we will maintain existing or create new OEM relationships. There can be no assurance
that we will continue to have access to significant proprietary technologies through internal development and licensing
arrangements with third parties, or that we will continue to have access to new competitive technologies that may be
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