General
Imation Corp., a Delaware corporation, is a global scalable storage and data security company. Our portfolio includes tiered storage and security offerings for business and products designed to manage audio and video information in the home. Imation reaches customers in more than 100 countries through a global distribution network. As used herein, the terms “Imation,” “Company,” ‘‘we,” “us,” or “our” mean Imation Corp. and its subsidiaries unless the context indicates otherwise.
In July 1996, Imation was established as a manufacturer of magnetic tape products under the Imation brand, sold to commercial end users through multiple distribution channels. We then expanded our business into other removable data storage media such as optical media, flash and solid state drives, and removable and external hard disk drives. In 2006, we acquired substantially all of the assets of Memorex International Inc. (Memorex), followed by the acquisition of the TDK Recording Media business (TDK Life on Record) in 2007. In 2007, we also acquired certain assets of Memcorp, Inc. and Memcorp Asia Limited (together Memcorp) used in or relating to the sourcing and sale of consumer electronic products, principally under the Memorex brand name. This acquisition established our foundation in audio and video consumer electronic products. In 2008, we expanded our presence in consumer electronic products with the acquisition of certain assets of Xtreme Accessories, LLC (XtremeMac), a maker of accessories for Apple consumer electronics products. In 2011, we launched our strategy to grow in the secure and scalable storage markets and create a global leadership position in high-security data storage and device management with the acquisitions of the Encryptx security solutions for removable storage devices and removable storage media from BeCompliant Corporation, the secure data storage hardware business of IronKey Systems, Inc. (IronKey) and the portable security solutions and technologies of MXI Security from Memory Experts International, Inc.
Our global brand portfolio includes the Imation™ brand, the Memorex™ brand, the XtremeMac™ and MXI Security™ brands. Imation is also the exclusive licensee of the TDK Life on Record™ brand, one of the world’s leading recording media brands, and the IronKey brand.
Our Products
We have three major product categories: traditional storage, secure and scalable storage, and audio and video information.
Traditional Storage
Traditional storage products include optical media products, magnetic tape media products and other traditional storage media products.
Our optical media products consist of CDs, DVDs and Blu-ray recordable media. We have the leading global market share for recordable optical media however the overall market for CDs and DVDs is declining as digital streaming, hard disk and flash media replace optical media in some applications such as music and video recording. We sell high capacity Blu-ray discs which are used primarily for recording high-definition video content. Our recordable optical media products are sold through a variety of retail and commercial distribution channels and sourced from manufacturers primarily in Taiwan and India. Optical storage capacities range from 650 megabyte CD-R (recordable) and CD-RW (rewritable) optical discs to 9.4 gigabyte (GB) double-sided DVD optical discs and Blu-ray discs with 25GB to 100GB of capacity. Our optical media is sold throughout the world under brands we own or control, including Imation, Memorex and TDK Life on Record, and under a distribution agreement for the Hewlett Packard brand.
Our magnetic tape media products are used for back-up, business and operational continuity planning, disaster recovery, near-line data storage and retrieval and for cost-effective mass and archival storage. Capacity of our tape products range from less than 10GB up to 3.0 terabytes (TB) per cartridge. We enjoy a leading market share, a significant intellectual property portfolio, a solid industry reputation, and strong relationships with key original equipment manufacturers (OEMs). Some of our legacy tape formats are proprietary or semi-proprietary and have higher gross profit margins than non-proprietary products. Our magnetic tape products are sold throughout the world under various brands.
Other traditional storage products include primarily optical drives and audio and video tape media.
Secure and Scalable Storage
Secure storage products and software include USB flash drives and external hard drives designed to meet the most stringent security standards to protect data at rest with Federal Information Processing Standard (FIPS) validation, password and biometric authentication, including biometric USB drives, encrypted and biometric hard disk drives, secure portable desktop solutions, and software solutions. Flash media products with security features provide margins significantly higher than traditional flash media without data security. These products are sold throughout the world under the Imation Defender™, MXI Security and IronKey brands. We also sell standard USB flash drives and external hard disk drives throughout the world under our Imation, Memorex and TDK Life on Record brands. We source these products from manufacturers primarily in Asia and the United States and sell them through a variety of retail and commercial distribution channels around the world. USB flash drives have capacities ranging from 1GB up to 64GB and capacities continue to increase as new products are introduced. External hard disk drives have capacities ranging from 250 GB to 5 TB. Scalable storage products include data protection appliances such as DataGuard network attached storage backup appliances and InfiniVault ™ active archive appliances. The Imation RDX™ removable hard disk cartridge is a high-capacity, rugged and removable 2.5-inch hard disk drive cartridge with 160GB to 1TB capacities.
Audio and Video Information
Our audio and video information products include Apple iPad®, iPod® and iPhone® accessories, headphones, CD players, alarm clocks, portable boom boxes, MP3 players, and speakers sold under the Memorex, TDK Life on Record and XtremeMac brands. The portfolio continues to evolve with consumer demand and with development of our brands. We design products to meet user needs and source these products from manufacturers throughout Asia.
The table below describes our revenue by product category:
Years Ended December 31,
2011
2010
2009
Revenue
% of
Total
(Dollars in millions)
Traditional storage
Optical products
$
511.9
39.6
%
619.3
42.4
738.0
44.8
Magnetic products
327.4
25.4
347.8
23.8
406.0
24.6
Other traditional storage
47.7
3.7
62.8
4.3
77.7
4.7
Total traditional storage
887.0
68.7
1,029.9
70.5
1,221.7
74.1
Secure and scalable storage
210.1
16.3
207.5
14.2
165.4
10.0
Audio and video information
193.3
15.0
223.5
15.3
262.4
15.9
Total
1,290.4
1,460.9
1,649.5
Our Brands
The Imation brand has been at the forefront of data storage and digital technology since inception. Imation brand products include magnetic tape media, recordable CDs, DVDs and Blu-ray discs, flash products and hard disk drives. The Imation brand includes the DataGuard Data Protection Appliances, InfiniVault™ Storage appliances and RDX® Removable hard disk storage systems. Imation Defender products include secure storage flash drives and external hard drives. Imation brand products are sold throughout the world and target the commercial user and individual consumer. Imation Defender products include secure storage flash drives and external hard drives.
The Memorex brand was acquired by Imation in 2006. Memorex brand products include recordable CDs, DVDs and Blu-ray discs, CD players, alarm clocks, portable boom boxes, iPod and iPhone accessories, headphones and speakers. Memorex brand products are sold primarily in North America.
The rights to the TDK Life on Record brand were acquired by Imation in 2007 under an exclusive long-term license from TDK Corporation (TDK). TDK Life on Record brand products include recordable CDs, DVDs and Blu-ray discs, flash drives, tape cartridges, headphones and computer speakers which are sold to commercial
customers and individual consumers. TDK Life on Record brand products are sold throughout the world.
The XtremeMac brand was acquired by Imation in 2008. XtremeMac brand products include cases, chargers and audio solutions to protect, power and play Apple iPad, iPod, iPhone and other devices. XtremeMac products are developed for Apple enthusiasts and are available worldwide.
The MXI Security brand was acquired by Imation in 2011 and includes secure storage flash drives and external hard drives, as well as software solutions to help manage portable security devices on the network.
During 2011 Imation and IronKey entered into a strategic partnership whereby Imation received an exclusive license from IronKey for its secure storage management software and service, and a license to use the IronKey brand for secure storage products.
Business Segments
Our business is organized, managed and internally and externally reported as segments differentiated by the regional markets we serve: Americas, Europe, North Asia and South Asia. Each of these geographic segments has responsibility for selling generally all of our product lines.
The Americas segment, our largest segment by revenue, includes North America, Central America and South America. The United States represents the largest current market for our products. It has a great variety and sophistication of distribution channels including value-added resellers, OEMs, retail outlets, mass merchants and on-line resellers. The countries in South America and the Caribbean represent potential growth markets with increasing penetration of Information Technology (IT) in the commercial and consumer markets.
The Europe segment includes Europe and parts of Africa. Western Europe exhibits traits similar to North America in terms of overall breadth of product offerings, high penetration of end user markets and breadth and sophistication of distribution channels. Emerging markets in Eastern Europe represent potential growth markets for our products as IT end user and consumer markets grow.
North Asia is our second largest segment by revenue, and includes Japan, China, Hong Kong, Korea and Taiwan. Japan is the single largest market in the segment and is similar to North America and Western Europe in terms of overall penetration of IT into the market, though its distribution channels are less developed than those of other regions.
The South Asia segment includes Australia, Singapore, India, the Middle East and parts of Africa. It is similar to North America and Western Europe in terms of overall penetration of IT into the market, though its distribution channels are less developed.