LenovoEMC Storage Solutions in North America

Under Lenovo Iomega brand

LenovoEMC Ltd, a joint venture established in December 2012 between Lenovo and EMC that includes the Iomega network storage product business, announced that the LenovoEMC portfolio of NAS products are now available through Lenovo channel partners and direct from Lenovo in North America.

With this announcement, LenovoEMC products are now integrated into Lenovo's channel partner program.

Effective now, with new product orders, the EZ Media and ix Series Desktop line now carry the Lenovo Iomega brand while the px Series Desktop and px Series rack mount families, with additional enterprise capabilities, are now branded as LenovoEMC products. Enterprise capabilities provided by the LenovoEMC products include hot-swap, server-class drives, volume encryption and snapshots.

"The Lenovo Iomega ix Series Desktop, LenovoEMC px Series Desktop and px Series rack mount families combine Lenovo and EMC leadership into backup, shared virtualization and DR storage solutions that complement Lenovo's ThinkServer line," said Kevin Nelson, executive director, enterprise, Lenovo North America. "Lenovo is providing server and storage solutions with leading performance, true openness and value that today's organizations are seeking."

The LenovoEMC joint venture was finalized on January 3, 2013. In addition to the joint venture, the strategic partnership between Lenovo and EMC encompasses an x86 server technology development program, as well as an OEM and reseller relationship for EMC's storage solutions.

ANALYSIS: Top 12 Storage Companies in 2012

EMC, Seagate and WD only ones above $10 billion

EMC continues to be ≠1 in storage. It's the case since 2004.

The big change for 2012 results of the acquisition of Hitachi GST by WD and Samsung HDD business by Seagate. Last year, we expected that Seagate will surpass WD, but it will happen in this year.

Seagate was down 8% in 2012 and up 36% in 2012. It's respectively -3% and 31% for WD. EMC grew more slowly, from 13% to 6%.

In 2013 there is also a good possibility that EMC will lose its ≠1 position as Seagate could surpass $14 million and especially WD $15 billion in revenue. EMC was at $15.5 billion in 2012 but it's not sure that this amount will be superior in 2013.

In our previous report, all top companies saw their sales growing except HDD manufacturers because their revenue deesp drastically in the last quarter of calendar 2011 -  entirely due to the Thailand flood - as well as SanDisk and Dell by more than 10%.

The Top 12 all together increased sales by 10% in 2012, being a good year globally for the storage giants. It was 5% in 2011 and their annual revenues are all above $2 billion, except Dell.

Some comments for three Asian companies: Hitachi, Samsung and Toshiba:

• For Hitachi, we only rank here wholly-owned subsidiary HDS (including storage systems sold in Japan). But the Japanese group has two other storage activities: wholly-owned subsidiary Hitachi Maxell in storage media and the joint venture Hitachi-LG storage with LG in optical disc drives not included here.
• Samsung, no more in HDDs, could merit to be included in the Top 12 but the company does not precisely publish revenue in NAND flash chips and SSDs. The only figure we got: for 2011, the chip unit registered revenue of 36.99 trillion won ($33 billion).
• It also not easy to get numbers from Toshiba. We just learned that it recorded 1,298 billion yens in FY12 ended March 2012 in HDDs and flash products, the equivalent of around $12.8 billion.

Notes:

• Here storage is defined as the activity of recording and retrieving computer data using any form of digital devices (based on magnetic, tape, optical, non volatile solid-state - not RAM -, and subsystems) including all associated connectivity, software and services.
• For this ranking we used the companies' financial results for their fiscal year 2012 - not the calendar year - ending in any month of 2012. We got official figures, no estimations - but for IBM - for all of them for storage only.

Imation: Fiscal 1Q13 Financial Results

Imation Corp. released financial results for the quarter ended March 31, 2013.

The company reported Q1 2013 net revenue of $224.4 million, down 14.8% from Q1 2012, an operating loss of $14.7 million including special charges of $4.2 million, and a diluted loss per share from continuing operations of $0.39. Excluding special charges, Q1 2013 operating loss would have been $10.5 million and diluted loss per share from continuing operations would have been $0.31.

Imation president and CEO Mark Lucas commented: "Imation's strategic transformation continues to center on leveraging our roots in storage to build a platform for long-term growth and profitability. In the first quarter, our storage and security solutions business delivered strong results, led by our recently acquired Nexsan portfolio of products. Additionally, we made good strides in reducing our operating costs and implemented our reorganization into two business units to streamline decision making."

Lucas continued: "Though we are making good progress, we are not yet where we need to be long-term and more work remains."

Business Update
The company announced in February that a process would be run to divest both the Memorex and XtremeMac consumer electronic businesses. That process is moving forward and progress has been made in identifying interested parties. The consumer storage business under the Memorexand TDK Life on Recordbrands will be retained.

Starting January 1, 2013, the company reorganized into two new business segments: Consumer Storage and Accessories (CSA) and Tiered Storage and Security Solutions (TSS). With these two business segments, Imation is becoming a more customer-centric and nimble organization.

Imation's CSA business unit generates solid cash flows for the company. This segment includes consumer storage media, primarily optical and flash, as well as storage and electronic accessories. With the planned consumer electronics divestitures, Imation will be able to refocus on storage at the retail level. For example, the company recently introduced a 3.0 external SSD with ultra-quick data transfer in a portable form under the TDK Life on Record brand. The CSA business unit plans to launch several other new products in the upcoming quarters.

The TSS business unit provides strategic opportunities for revenue growth and margin expansion. TSS includes both Imation and Nexsan branded tiered and scalable storage solutions, IronKeybranded mobile security solutions and commercial storage media. During the quarter, gross margins in the TSS segment increased to 22% compared to 19.4% in the prior-year period.

Imation's Nexsan products have strong momentum and posted double-digit growth. The mobile security platform gained a significant win with the Japanese government by landing a contract for Imation's portable workspace PC on a Stickproduct IronKey Workspace 300, which is Microsoft - Certified for Windows to Go. Additionally, Imation launched several other new IronKey flash drives. These storage and security solutions categories delivered gross margins well in excess of 40%. Commercial storage media declined 22.4%, as expected, driven by magnetic tape.

Lucas concluded: "In the first quarter, our businesses performed as we expected across all major geographies and product categories. Going forward we are continuing to work on introducing differentiated products, building gross margins, improving our cost structure and supporting our two business units. We are committed to achieving growth and profitability, and becoming a key player in storage and security worldwide."

Detailed Q1 2013 Analysis
As a result of the planned consumer electronics divestitures, the financial results for those operations are now presented as discontinued operations. The following financial results are presented for continuing operations for the current and prior periods unless otherwise indicated.

Net revenue for Q1 2013 was $224.4 million, down 14.8% from Q1 2012. From a segment perspective, TSS grew 1.4% and CSA declined 24.9%. Foreign currency exchange negatively impacted total Q1 2013 revenues by 2.5%.

Gross margin for Q1 2013 was 18.8%, down from 20.4% in Q1 2012. Gross margin in Q1 2013 was 19.7% excluding inventory write offs of $2.1 million, which were part of the company's restructuring program, compared to 20.4% on the same basis in 2012. TSS gross margin for Q1 2013 was 22.0% up from 19.4% in Q1 2012. CSA gross margin was 17.7% down from 21.0% in Q1 2012 (See Table Five for non-GAAP measures).

Selling, general and administrative (SG&A) expenses in Q1 2013 were $49.3 million, down $3.0 million compared with Q1 2012 expenses of $52.3 million. The reduction of 5.7% was driven by our cost reduction efforts and prior intangible write-offs, which reduced these costs by approximately 18%, partially offset by the Nexsan operating expenses added as a result of the acquisition.

R&D expenses in Q1 2013 were $5.4 million, down $0.2 million compared with Q1 2012 expenses of $5.6 million.

Special charges were $4.2 million in Q1 2013 compared with Q1 2012 charges of $1.3 million.

Operating loss was $14.7 million in Q1 2013 compared with an operating loss of $5.6 million in Q1 2012. Excluding the impact of special charges described above, adjusted operating loss would have been $10.5 million in Q1 2013 compared with adjusted operating loss on the same basis of $4.3 million in Q1 2012.

Income tax provision was $0.4 million in Q1 2013 compared with income tax provision of $1.3 million in Q1 2012. The company maintains a valuation allowance related to its U.S. deferred tax assets and, therefore, no tax provision or benefit was recorded related to its U.S. results in either period.

Discontinued operations was an after tax loss of $5.5 million in Q1 2013 compared with a $3.0 million loss in Q1 2012. Discontinued operations represent the direct results of the XtremeMac and Memorex consumer electronics businesses and included $1.1 million of restructuring charges in Q1 2013.

Loss per diluted share from continuing operations was $0.39 in Q1 2013 compared with $0.25 in Q1 2012. Excluding the impact of special charges described above, adjusted loss per diluted share would have been $0.31 in Q1 2013 compared with $0.21 in Q1 2012 (See Table Five for non-GAAP measures).

Cash and cash equivalents balance was $98.2 million as of March 31, 2013, down $10.5 million during the quarter, driven primarily by anticipated changes in working capital and payments for restructuring.