Imation Q1 suffers industry-wide issues

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25 April 2007 — Oakdale (MN): Imation has reported Q1 revenue of $421.9 million, up 25.9 per cent compared with Q1 2006 revenue of $335.2 million. Growth was said to have been driven by optical and flash products "primarily due to the addition of Memorex brand revenue".

 

Diluted EPS were $0.44 on operating income of $23.6 million compared with EPS of $0.55 in Q1 2006 on operating income of $29.3 million.

 

An Imation spokesperson said that both revenue and earnings in the quarter were negatively impacted by two factors, which affected the entire industry. Flash products were said to have experienced industry-wide price erosion, primarily in the US early in the quarter, due to excess capacity of NAND flash. This is believed to have reduced operating income by $4.5 million due to lower than expected margins. The industry is also understood to have experienced pricing pressure on LTO tape media due to the continued delay of the introduction of LTO 4 drives.

 

Despite these factors, Imation believes flash pricing has stabilised and expects shipment of LTO 4 drives to begin in Q2.

 

CEO and president Frank Russomanno said: "While the industry-wide issues affected our first quarter results, the company had several positive developments that provided increased momentum for the rest of the year.

 

"We recently announced the Sun/STK distribution agreement and are working on additional distribution agreements which continue to build our presence and our total market coverage. We are now seeing solid growth in the T10000 market and expect it will continue to ramp up throughout 2007. We are well positioned with LTO 4 media availability and look forward to the opportunity to start selling this product later this quarter.

 

"With the announcement of the acquisition of TDK’s recording media business, Imation has become a leading global product and brand management company in recordable media. As a result of the acquisition, Imation is building a very balanced portfolio of business-to-business and consumer brands. Our objective is to grow these brands through strong marketing, brand asset management and disciplined global product positioning."

 

Last week the company announced plans to acquire the TDK brand worldwide recording media business and use of the TDK brand name for recording media products, for $300 million in a mix of common stock and cash.