Imation to Sell Memorex, XtremeMac Units; Losses Mount
Imation Corporation said Wednesday that it plans to sell its Memorex and XtremeMac consumer electronics businesses during the first half of the year—news that came in conjunction with dismal fourth-quarter results.
The Oakdale-based data storage company has been struggling to turn a profit in recent years and reported a loss of $310.2 million, or $8.34 per share, for the quarter that ended in December—much more significant than its $12.9 million loss during the same quarter a year earlier. Revenue for the quarter dropped 12.6 percent to $299.1 million.
Imation said that the planned divestures are part of its strategy to improve profitability by exiting lower-margin businesses. They also align with the company’s shift away from consumer electronics.
Imation was founded as a maker of data storage media, but several years ago, it was billing itself as a “brand and product management” company and selling consumer electronics under various brands. Then, in January 2011, the company announced that it would shift its focus back to data storage, protection, and connectivity.
“Divesting the Memorex and XtremeMac consumer electronics brands will allow us to direct our time and resources to the right opportunities in data storage and security,” Imation CEO Mark Lucas said in a statement.
The company, however, doesn’t plan to sell its TDK Life on Record business, another consumer electronics unit that sells audio products such as speakers and headphones.
For all of 2012, Imation reported a net loss of $340.7 million on revenue totaling $1.1 billion. That compares to a $46.7 million net loss in 2011 on revenue totaling $1.3 billion.
The company said that it is in the midst of a “strategic transformation to build a long-term platform for growth, increased margins, and improved profitability.”
According to Imation, the company’s late-December acquisition of Nexsan Corporation, a “successful, higher-margin” storage-systems company, will help Imation to grow in the small- and medium-sized business storage markets.
Imation said that it is also “aggressively implementing cost savings initiatives to right-size the company.” Those initiatives include reducing its global work force by 20 percent during the first half of this year—plans for which were announced in October, in conjunction with its third-quarter financial results. The company reported an operating loss of $6.3 million during that quarter, and revenue dropped 20 percent to $248.2 million.
Imation spokeswoman Marian Briggs told Twin Cities Business on Wednesday that some of the layoffs have already occured but declined to comment on how many jobs in Minnesota have been or will be affected.
Imation also has started diversifying its offerings in hopes of turning itself around. The company, which has long sold data-storage devices such as magnetic tapes and DVDs, announced late last year the launch of two new services that allow businesses to store data on remote servers. Imation said at the time that the services allow businesses to back up and recover their data efficiently.
“We are committed to transforming the company and building a sustainable platform for growth, increased margins, and long-term shareholder value,” Lucas said in a statement. “In 2013, we are building on these actions and moving as swiftly as we can to become a major player in data storage and security on a global basis.”
Mark Miller—a senior research analyst at Boca Raton, Florida-based Noble Financial Capital Markets, who closely follows Imation—told Twin Cities Business in October that closing or selling unprofitable businesses in order to obtain and preserve cash needs to be the company’s first and top priority.
“[T]hrough divestitures or closing down [businesses], I think [Imation] can find a profitable nucleus,” Miller said, adding, “I do think they have the resources to be successful.”
Imation is among Minnesota’s 30-largest public companies based on revenue. Twin Cities Business last year explored what’s behind the company’s recent struggles, how it’s progressing with its turnaround plan, and its prospects for the future—including whether it was time for the company to be sold, either in pieces or in its entirety. To read that story, click here.