Memorex 2011 Annual Report Download - page 12

read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330.
We also make available free of charge through our website (www.imation.com) our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or
furnished pursuant to the Exchange Act as soon as reasonably practicable after we electronically file such material with, or
furnish it to, the SEC.
Item 1A. Risk Factors
Our business faces many risks. Any of the risks discussed below, or elsewhere in this Form 10-K or our other SEC
filings, could have a material impact on our business, financial condition or 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. In February
2011 we announced our transformation strategy, which includes improving gross margins, exiting low margin products,
introducing new products in secure and scalable storage, and organic and inorganic growth. These strategies require
significant investment. If we are not successful in implementing these strategies or if we choose the wrong focus for our
strategies, our financial results could be negatively impacted.
The future revenue growth of our business depends in part on the development and performance of our new
products. We have experienced revenue declines over prior year in 2011 and 2010 of $170.5 million or 11.7 percent and
$188.6 million or 11.4 percent, respectively. Historically, magnetic and optical products have provided the majority of our
revenues. While demand for data capacity is expected to increase, removable magnetic media market size is expected to
decrease in terms of revenue. Demand for optical media products is decreasing due to a shift in demand to the use of data
streaming and other media for storing data. We expect new product revenue growth to eventually offset the product revenue
declines of our products in mature markets so that our total company revenue will grow. If we are not successful in growing
new product revenues, our financial results could be negatively impacted.
Our security products must provide appropriate levels of security to adequately store and protect our
customers’ data. Many of our secure storage products include software and hardware security such as user
authentication, data encryption, and portable digital identities which are designed to prevent digital security breaches. If our
products do not provide adequate security and that security is compromised, our customer(s) could be subject to declining
product sales, which could subject us to litigation and loss of reputation. As an outcome our financial results could be
negatively impacted.
Because of the rapid technology changes in our industry, we may not be able to compete if we cannot quickly
develop, source, introduce and deliver 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 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, actions of competitors or the pace and
direction of technology changes.
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 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
relationships or forge new OEM relationships. There can also 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
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