Imation Outlines Strategy

Imation strategy focuses on transformation to brand and product management company

May 23, 2007

5 Min Read
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NEW YORK -- Imation Corp. (NYSE:IMN) todayunveiled its strategy of increasing its presence in the fast growing andevolving consumer storage and product arena, through brand acquisition andextensions, while keeping a solid foundation in its profitable commercialdata storage tape market. Imation Corp. President and CEO Frank Russomannooutlined the strategy in a meeting with the financial community today.

"With the recent announcement of our pending acquisition of the TDK BrandRecording Media business in addition to our Memorex acquisition last year,we are aggressively stepping out front in this industry, as a new brandcompany, building a portfolio of strong brands that we own, manage, ordistribute in both consumer retail and commercial markets," Russomanno said."This is an industry in need of consolidation. We sell Imation, Memorex,IBM, Sun StorageTek, HP and Exabyte branded media today and look forward toselling the TDK brand of recording media in the future. We also sell storagerelated accessories such as drives, cases, and supplies under severalbrands. With the announcement of our intention to acquire certain assets ofMemcorp, we will extend the Memorex brand as we add their portfolio ofconsumer electronics products as well."

"Our strategy is clear, straightforward and actionable. We are building aportfolio of brands in both consumer and commercial markets. We areoptimizing our solid core position in magnetic tape as we continue to investin current and future tape formats. In addition, we are growing our consumerproduct portfolio across multiple brands and extending brands selectivelyinto the consumer electronics arena. In fast-growing and rapidly changingtechnology markets, our channel and distribution partners look to us tobring the right products, with the right brands into the right markets andregions around the world."

"With this strategy, we have targeted ten to fifteen percent compound annualgrowth in revenue and earnings over the next five years. We believe we havethe elements in place to continue our success into the future. We have thenumber one market share position overall in removable media, strong brandsacross all major regions, leading positions in magnetic and opticalproducts, and growing revenues in flash products in all regions. We willmaintain the financial strength and flexibility necessary to continue ourstrategic process. With these actions we can leverage our globaldistribution coverage and supply chain expertise across channels andregions. We can expand our product portfolio, technology base, operationalexcellence and cost efficiency, and the brands complement one another interms of their offerings, geographic and channel coverage and brand promise.We've added significant consumer and retail experience to our managementteam with the recent addition of former Pillsbury marketing executive SteveMoss, as Chief Marketing Officer for Imation."

"We will transform Imation into a brand and product management company witha balanced portfolio of strong commercial and consumer brands. As the leaderin tape technology, we remain committed to being first to market with newtape formats. We intend to be the number one or number two removable mediasupplier, regionally or globally, in our four pillars of storage --magnetic, optical, flash and removable hard drives. Through our investmentin brands, we will increase customer loyalty and channel preference acrossmultiple brands in both commercial and consumer markets while increasingshelf presence with major retailers," Russomanno concluded.The company also announces its intent to off-set the dilution from theplanned issuance of shares associated with the pending TDK transaction. Thecompany will implement a $100 million Rule 10b5-1 plan to repurchase stockunder an existing five million share authorization. A 10b5-1 plan allows thecompany to enter into a trading plan at a time when all material informationis available to the markets which can then be executed over a period oftime. In addition, purchases under the Imation share repurchase program maybe made from time-to-time, in the open market, through block trades orotherwise, and in privately negotiated transactions.

"Under this plan, we can purchase our stock over time consistent with theterms of the plan, without being blacked out or restricted from purchasingshares in the market due to subsequent material developments. Through thisplan and other repurchase activity, we intend to return excess cash toshareholders and to off-set the dilution associated with the pending TDKBrand Recording Media transaction over time. We believe this is adisciplined way to improve our capital structure," said Chief FinancialOfficer Paul Zeller.

The company also provided an updated 2007 outlook including the estimatedimpact of recent acquisition announcements and restructuring actions (seedetails in business outlook below).

2007 Business Outlook

This business outlook includes the anticipated impact from the integrationof the pending acquisitions of the TDK Brand Recording Media and the Memcorpbusiness as well as recent industry wide pricing pressures and continuedpricing pressure on certain products and is subject to the risks anduncertainties described below. This outlook is changed, as noted below, fromthe previous business outlook issued in January, 2007.

  • Our revenue for the full year 2007 is targeted between $2.00 billion and $2.05 billion, representing growth of approximately 25 percent to 30 percent over 2006. Previously, the company had targeted revenue between $1.775 billion to $1.825 billion.

  • Full year 2007 operating income is targeted between $82 million and $87 million, including charges for restructuring and acquisition amortization noted below. This includes operating income targeted between $108 million and $113 million on the Imation base business. This is a non-GAAP measure which is discussed below. Previously, the company had targeted operating income between $124 million and $129 million.

  • Operating income excluding the restructuring expense but including the anticipated 2007 impacts from the pending TDK Brand Recording Media and Memcorp acquisitions is targeted to be in the range of $110 million to $115 million and diluted EPS in the range of $1.91 to $2.04. These are non-GAAP measures which are described below.

  • Diluted EPS is targeted between $1.41 and $1.54 for the full year 2007. Previously, the company had targeted fully diluted EPS between $2.29 and $2.42. The revised diluted EPS target reflects a higher number of shares outstanding due to the expected share issuance related to the TDK transaction partly offset by planned share repurchase activity which reduces targeted diluted EPS by $0.10 to $0.12 per share.

  • Capital spending for 2007 is targeted to be approximately $15 million to $20 million, unchanged from previous guidance.

  • The tax rate in 2007 is anticipated to be in a range of 36 to 38 percent also unchanged from previous guidance.

  • Depreciation and amortization for 2007 is targeted to be approximately $45 million including amortization of intangible assets resulting from the pending TDK Brand Recording Media and Memcorp acquisitions of approximately $5 million. Depreciation and amortization was previously targeted to be approximately $40 million.

Imation Corp.

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