It has been quite a year for Imation so far. Not only has the data storage manufacturer posted a healthy 7.2 per cent revenue rise in 2005 to $1.173 billion, it also announced its acquisition of Memorex for $330 million, which is expected to shoot revenue at Imation up by 23-27 per cent this year.
"The acquisition is a strategic milestone for Imation," VP of investor relations and corporate communications for Imation, Brad Allen, told OPI+. "We are aiming to integrate Memorex as rapidly as possible for maximum benefit in 2006. Now we have signed the deal we have started discussions on how we will integrate the two companies and expect to close the acquisition by mid-Q2."
Mike Evans, marketing manager for Memorex EMEA, added: "The move will be hugely beneficial for Memorex. Imation is a bigger organisation and it gives us a longer-term strategy."
Being a market leader in the consumer electronics industry, Memorex is undoubtedly a healthy gain for Imation. Under the competent leadership of president/CEO Michael Golacinski, the Cerritos, California-based company has developed a strong brand, etched out a sizeable portion of the digital media pie and has experienced year-over-year growth averaging 20 per cent since the year 2000.
The move will also tip the business/consumer revenue balance at Imation. At present, B2B sales represent 55-60 per cent of Imation’s revenues. The addition of Memorex’s CDs, DVDs, optical drives, flash drives and media accessories into the mix will mean the larger part of revenues will now be garnered from the consumer channel.
It makes sense. Although the business segment is more profitable, the consumer segment is growing at a far higher rate. Allen claimed that a business model for each segment going forward will help Imation to generate its market position.
The company has a solid starting block from which to build on. "Imation currently has a solid plan in place to protect and enhance its base business and meet its financial goals," said Allen. "We are also in the process of implementing lean transformation across all our key business processes."
Last year the company focused on three key areas and made good progress. These areas included the implementation of lean principles in manufacturing; implementing lean management to finance; and improving efficiencies in its supply chain. In addition, the company saw sales gains across all product categories last year, with strongest growth coming from the UK and Europe and fastest growing categories being optical and USB flash and magnetic tape.
It helps that Imation’s chairman and CEO Bruce Henderson is somewhat of a "lean guru". He hales from the automotive industry, where he was the advocate of the Toyota production system. He has also written a book on lean transformation.
But as well as going lean, Imation may also look to size-up through more acquisitions, Allen told OPI+. "We have been growing organically but without a great return. With $500 million in cash on the balance sheet, we are looking at ways we can make investments and return cash to shareholders. Acquisitions can be a good use of our cash."
But Imation are not committed solely to moving in the consumer direction. "We would look at anything in the data storage arena, whether it be consumer or B2B," said Allen. "We just need to think about growth and demand for data."
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