Memorex 2012 Annual Report Download - page 2

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In data storage, with approximately 40 percent
margins, the Nexsan portfolio is becoming the
center of our Tiered Storage business. Together,
our products address the need for better
performance and affordability for databases,
virtual servers, public and private cloud
environments, and more. We are targeting the
underserved small and medium business (SMB)
and distributed enterprise storage, or SME,
markets with purpose-built storage systems and
appliances.
On the data security side, we advanced our
mobile portfolio in 2012 with the introduction of
Imation’s PC on a Stick™, which is certified as a
USB 3.0-based mobile workspace for deployment
of Windows To Go®. Microsoft chose only a few
partners for this product, and we are happy to be
one of them!
In order to right size the company, we
implemented cost-saving initiatives in 2012
that will continue in 2013, to cut operating
expenses by at least 25 percent over time.
We are accomplishing this through global process
improvements, office consolidations, product line
rationalization, infrastructure efficiencies
and staff reductions. These are difficult actions
but necessary for our long-term growth
and competitiveness.
We need to do fewer things better and allocate
our resources to priority growth businesses.
Therefore, with a strong focus on data storage
and data security, we announced our intent
to divest Imation’s Memorex and XtremeMac
consumer electronics businesses, and anticipate
closing on these transactions in 2013.
LOOKING FORWARD
We will continue to enhance Imation’s data
storage and security portfolio to complete our
strategic transformation. We are 100-percent
committed to returning to growth, and we are
confident that our course is correct. We anticipate
further progress on this important transformation
journey in 2013.
Sincerely,
DEAR FELLOW IMATION SHAREHOLDER,
L. White Matthews, III
Non-Executive
Chairman of the Board
Mark E. Lucas
President and
Chief Executive Officer
In our letter to you last year, we outlined Imation’s
transformation strategy, which is to leverage our
core strengths in data storage for growth in new,
higher margin product categories that address the
world’s need to store, protect and connect digital
content. We are focused on two high-growth
markets—data storage and data security—across
all channels.
After making several technology acquisitions in 2011
that began to establish our platform for growth,
we accelerated Imation’s transformation in 2012 by
taking a number of important steps, including:
• Acquiring Nexsan, a successful data
storage provider;
• Launching differentiated products;
• Restructuring our global operations to
reduce costs; and
• Exiting low-margin businesses.
Our goal is to return to growth long-term,
and our recent actions reflect that.
2012 FINANCIAL RECAP
Revenue totaled $1.1 billion compared with $1.3
billion in 2011. Because the secular decline in our
traditional businesses occurred more rapidly
than we expected in 2012, we accelerated
our transformation.
To become profitable, gross margins are a key focus
for us. We are not introducing new products unless
their margin exceeds 20 percent. The opportunity
for higher margin, differentiated products lies in our
Secure and Scalable Storage portfolio, which rose
to 21 percent of total revenues in the fourth quarter
—up from 15.7 percent a year earlier. This is the
direction we need to pursue.
Further, the Company’s gross margin rose to 18.4
percent in 2012, up from 16.8 percent the prior
year. Our goal is, at a minimum, a 20-percent gross
margin, and while we have more work to do, we are
encouraged by our progress.
IMATION’S TRANSFORMATION
We are truly creating a new company. This
transformation is wide ranging and dramatic. It is
designed to make Imation a major player in data
storage and data security. (See graphic on inside
back cover for more information.)
As part of our transformation, we are reorganizing
the company into two business units—Tiered
Storage and Security Solutions, or TSS, and
Consumer Storage and Accessories, or CSA.
These two independently managed segments
align Imation with our key commercial and retail
segments, and provide a more customer-centric
structure—leading to faster decision making and
greater accountability.