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Imation looks for Aquisitions - Is ProStor a Target?

Buying into Growth Storage Markets, could this potentially be Imation's new strategy?

CEO and president Mark Lucas wants double-digit growth in 2012 and overall top-line growth from then on. It won't get it by getting more profit from its declining businesses and so it has to go into new areas. The only growth business Imation has at first glance is in removable hard drives – however Tandberg Data is currently a more relevant player in the ProStor RDX space.

Imation says it plans to invest in four core product technology areas: secure storage, scalable storage, Wireless/connectivity, and magnetic tape. But this doesn't mean these are are the growth areas. For example, Imation has just got out of tape media manufacture by signing a deal with TDK, with the company now saying: "The recent strategic alliance with TDK to develop and manufacture next-generation tape is an example of an optimisation action expected to maximize ROIC (return on invested capital) in the magnetic category."

In what it calls Emerging Storage which includes including flash and removable hard disk drives, where it sees growth potential, Imation plans to invest in higher growth and margin opportunities. These include its Defender line of secure removable storage products and portable and external hard drives for small-medium businesses (SMBs).

In its Electronics and Accessories area, the strategy is to launch differentiated, higher margin products such as the XtremeMac and TDK Life on Record premium audio lines, while rationalising (meaning killing the crap) low-margin businesses, such as TVs and assorted video products.

Other investments inside Imation and its channel will include expanded sales and marketing coverage for VAR (value added reseller) and OEM channels, improved decision-support tools in IT, and international expansion, focused on China.

Acquisitions

Now, to the acquisitions, with Imation saying these will be "focused on data protection, storage hardware, removable hard drive systems, and related software, with the potential for several acquisitions each ranging from a few million dollars to $50 million."

The leading removable hard drive company is ProStor, a venture capital-backed startup. It tapped VCs for $12.2m in 2006, which made total funding $18.4m, and hasn't raised any more funds since then. El Reg's storage financial whizz kids think Imation has just erected an I Wanna Buy You Sign in front of ProStor's head office.

A "storage hardware" buy is so open-ended as to be impossible to interpret and "data protection" is also pretty vague. Is Imation going to buy a backup company? If it is then buying one with a good run rate business, OEM deals and a cloud strategy would be a good idea. That should narrow the field a bit.

With Imation and Dell both being on the acquisition prowl they will get lots of calls from board directors of companies, especially VC-backed companies looking to cash in their investments, hoping to tap Imation's signalled willingness to spend.

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