Brand strength in numbers



The demand for data storage capacity is on a steep upward curve. Indeed, global data storage needs are expected to more than triple by the end of the decade. And Imation is a company fully intent on capitalising from this explosion in demand.


This year marks Imation’s tenth anniversary as an independent company, but its roots – and experience – go back another 50 years when it came under the umbrella of former parent 3M. Today, Imation focuses on removable data storage in four areas: magnetic, optical, flash and removable hard disk storage.


Since spinning off from 3M, Imation has concentrated largely on organic growth and relied on JVs to strengthen its position in existing markets and penetrate new ones, rather than jumping on the acquisition bandwagon. But this year, the time was right for a change, say two of the company’s long-serving executives, president of Imation’s consumer division for the Americas, Ron Zinke, and Brian Plummer, VP of EMEA.


OPI: You’ve marked your tenth anniversary with your biggest ever acquisition – Memorex International. What does each party bring to the table?


RZ: The acquisition of Memorex adds the leading US consumer brand for recordable media to Imation’s global technology leadership and already broad product and brand portfolio. Imation now offers Memorex CD and DVD media, optical drives and accessories as well as USB flash drives. This is in addition to the full line of Imation, IBM and Exabyte products we already offer.


It’s unique in our industry to have this breadth of product and four strong brands. Channel partners will experience operational effectiveness in merchandising, sourcing, logistics and IT, besides the organisational synergies that come with having just one company – Imation – providing their full range of data storage product needs.


OPI: Memorex is particularly strong in the consumer channel, while Imation has a bigger focus on the commercial side. What are your strategies with regards to channel distribution?


RZ: One of the reasons the acquisition makes so much sense is that the brands, product lines and organisations are complementary. Imation’s brand is very strong in the commercial channels, serving small and medium-sized businesses as well as large enterprises. We offer desktop products like optical, USB flash drives and diskettes through to network and data centre tapes as well as our newest removable hard disk drives, Ulysses and Odyssey technologies. Imation remains the global leader in data centre tape and we also have a deep patent and IP portfolio in optical that we can leverage across both brands at retail.


Memorex, on the other hand, is centred in the office channel at retail level, in the consumer electronics and mass channels. The Memorex brand is the US share leader in CDs and DVDs, and among the top two or three brands in USB flash drives. Our combined consumer team has a deep understanding of the retail markets and the needs of retailers, and is ready to strengthen the overall shelf presence of both the Memorex and Imation brands with this expanded portfolio.


Historically, Memorex did not place as much focus on developing and marketing products for the commercial market. Now, as part of Imation’s portfolio, Memorex products will be offered through commercial channels.


OPI: How does Memorex fit into Imation’s European picture?


BP: Memorex does not yet have the strength in market position in Europe that we enjoy in the United States and Canada. Another interesting difference in our markets is that brand penetration and preference can vary widely by country and channel. These factors provide a wonderful opportunity in Europe for Imation to strengthen the Memorex position through its core product portfolio, and also to launch the new products that have been developed.


By being able to bring to our customers and partners both the Imation and Memorex brands, we will be able to add value in all segments of the channels, and increase our European market chare. Currently, we are within the top three players in optical media in Europe, and in the top five in the flash market.


OPI: How do customers benefit?


RZ: By having two brands from one supplier we can deliver supply chain efficiencies to our retail distributors. We see cost and operational synergies as well. Each brand has established a unique position with a loyal following and we intend to build on that.


OPI: Memorex’s range comprises accessories and optical drives. I believe the optical field is very important for Imation – what is happening in this sector?


BP: High-definition television (HDTV) will capitalise on the increased resolution available through this technology and deliver pictures of unsurpassed clarity and brilliance. An HD screen processes 62 million pixels per second, about six times more than a standard definition screen. Both Blu-ray and HD DVD optical media provide the high capacities required by these high-definition formats in capacities of up to 50 gigabytes.


Building on a legacy of innovation in optical storage, including the introduction of the first video disc in 1982, Imation continues to pioneer superior optical media technologies. We recently invested more than $10 million in advanced optical R&D and "modular" manufacturing capabilities at our Discovery Technology Center in the US. We are scaling up the first US manufacturing line for both blue laser recordable formats, positioning the Imation and Memorex brands among the industry leaders in these high-capacity formats.


Hard coating technologies are critical to protecting high-definition optical discs. Imation has invested in proprietary hard coating technologies such as ProGuard and ForceField coatings to better protect these optical discs. Earlier this year, we also launched inkjet printable CDs and DVDs with AquaGuard water-fast surface for the fast-growing printable media market as an efficient and cost-effective solution for duplicators who create CDs and DVDs, and the businesses and consumers they serve. This proprietary surface, developed in our laboratories, is the world’s first water-resistant and smudge-resistant inkjet-printable medium.


OPI: How is the flash drive market progressing? You’ve only been in this product segment for a couple of years…


RZ: Memorex entered the USB flash market in 2002 and Imation a couple of years later, in 2004. This sector will be worth well over $3 billion in 2010. The number of units produced in this period is expected to nearly double, going from 85 million in 2005 to 168 million in 2010. With the addition of Memorex, Imation holds the second largest market share in the US today.


BP: In Europe, our share is over 4 percent and we expect to grow our portfolio rapidly with a very clear focus on product differentiation. The company has secured strategic partnerships that allow us to keep pace with supply and demand fluctuations in the NAND flash market, along with the ability to introduce new, value-added technologies. Today, both brands are recognised for innovative, award-winning flash drive products for both consumer and business applications, including Memorex TravelDrives and the line of Imation Swivel, Clip and Pivot Flash Drives.


OPI: More generally speaking, what are the trends in the European market Brian?


BP: We expect to see a decline in the CD market over the next five years in Europe, while at the same time, the DVD market is expected to grow at a rate of 15-20 percent.


We see increasing PC hardware installations and household penetration of DVD recordable drives, particularly in the fast-growing eastern European countries. Imation still has a strong focus on the traditional European market, but we are increasingly penetrating eastern Europe and the Middle East countries with our full portfolio of optical and flash products.


My responsibilities are to lead and grow Imation’s operations throughout this extensive geography. Our region encompasses more than forty countries and fifteen currencies, and is a blend of mature economies offering a stable, strong business and rapidly developing countries with tremendous market opportunities.


OPI: What about North America Ron, what’s happening where you are?


RZ: In the US and Canada, sales growth is strong for consumer electronics and many categories within the computer products segment. Specifically, the home theatre trend is booming in the US, with sales of set-top DVD recorders on the rise.


Other direct-recording devices are on the rise as well, including direct-to-DVD camcorders. On the PC side, laptops have buoyed the computer products segment for the past year, and with this demand for portability comes the demand for equally portable accessories, such as USB flash drives.


OPI: It’s been three months now since you bought Memorex. How far have you come down the integration road?


RZ: We began integration planning the day we announced the acquisition, then began implementing as soon as we closed. Dedicated teams have been working on it and we are on plan.


OPI: I believe you are personally very involved in the whole process?


RZ: Yes, I am. My immediate focus is ensuring the smooth and successful integration of the Memorex brand and organisation into Imation.


When Imation bought Memorex in May, I was appointed president of Imation’s consumer division for the Americas, which includes both the Imation and Memorex brands for consumer channels. I now lead Imation’s consumer business for the Americas, with a strong focus on maintaining Memorex’s brand leadership in retail channels while leveraging the breadth of the Imation branded product line and its strong position in commercial channels.


OPI: Following integration, will Imation’s restructuring process be complete?


RZ: Now that Imation is solely focused on data storage, the large restructurings necessitated by divesture of legacy businesses are over. We will always focus on having a competitive cost structure.


OPI: What impact will the acquisition and everything that comes with it have on your competitors and the industry as a whole?


RZ: This is a highly competitive market and we’ve just got stronger.


OPI: Financially speaking, Imation stands on very solid ground now and I believe there’s more cash available – perhaps for further acquisitions?


BP: We will continue to look for uses of cash that earn a return in excess of our cost of capital to fuel profitable growth.