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Imation Announces Global Manufacturing Strategy for Magnetic Data Storage Products and Changes to R&D Organization

Published on 2007-05-10. Author : SpecialChem

OAKDALE, Minn. -- Imation Corp (NYSE: IMN), a worldwide leader in removable data storage, announced its global manufacturing strategy to support its magnetic data storage tape products and announced changes to its research and development (R&D) organization that align technical resources with the strategic direction for the Company.

Key elements of announcements include the following:

  • The Company will focus manufacturing on magnetic tape coating operations at its existing plants in Camarillo, Calif. and Weatherford, Okla., and will consolidate and outsource all converting operations for tape cartridges that are currently spread among three plants.
  • The Company will end assembly of magnetic "floppy" diskettes and discontinue all manufacturing operations at its Wahpeton, N.D. plant, which it plans to exit by mid-2009.
  • The restructuring will include the Company's Oakdale, Minn. R&D organization, which will be aligned to focus development and engineering resources on key programs in support of future advanced magnetic tape formats and in support of the Company's continued growth and increased focus on consumer digital storage products and accessories.
  • Approximately 675 positions out of a current worldwide total of 2,070 will be eliminated by mid-2009, the vast majority of which will be in manufacturing operations.
  • The Company anticipates it will incur $25 million to $30 million in restructuring charges over the next two years, primarily to cover the costs of these actions. Approximately half of the charges will be recorded in the second quarter of 2007, with the remaining charges spread throughout the life of the program. Cash payments for severance and lease buyouts represent approximately two-thirds of the charges. The remaining non-cash charges will be mainly for asset write-offs associated with facilities and equipment.
  • The restructuring program is expected to result in $25 million to $30 million in annualized cost eliminations. However, these benefits will not be completely realized until the program is fully implemented. As previously discussed when Imation reported its Q1 results on April 19, the company has not updated its prior 2007 business outlook, but intends to update and revise it on May 22.

"As we continue to see growth in open format tape products with lower gross margins, these difficult but necessary organizational changes are required for Imation to remain competitive in the manufacture of advanced magnetic tape products," said Frank Russomanno, chief executive officer and president, Imation.

"Imation is well known and trusted as a leading developer and manufacturer of magnetic tape formats. That will not change. We will continue to focus on delivering the high quality, capacity and performance required for these tape formats by concentrating our magnetic development and manufacturing resources on current and future magnetic tape products," Russomanno continued. "However, as Imation's portfolio expands into new areas, we need a more focused R&D organization with the skill sets to engineer, prototype and test new consumer technologies and fast-growing product areas like flash media and drives. We are aligning our organization to better address those emerging requirements."

Final converting and assembly of the magnetic tapes will be transitioned to an outside company. These finishing operations include the winding of coated magnetic tape into cartridges, final inspection and packaging of the finished tape product. A carefully managed transition plan will be implemented to ensure a smooth transfer of these operations and no disruption of supply to Imation customers.

The Company also announced plans to close its Wahpeton, N.D. plant by mid-2009. It is currently the site of diskette manufacturing, tape converting operations, limited-volume CD-RW optical disc production, machining and plastic part molding.

"Diskettes have been a significant portion of our product portfolio for more than two decades, but they are now only a small, rapidly declining part of the market and they are nearing their end of life," said Dr. Subodh Kulkarni, vice president, research and development and manufacturing for Imation. "While we added other operations, such as small format optical media and contract manufacture of molded plastic parts, the markets for these products did not materialize to a level to justify their continuation. The decision to exit the Wahpeton plant and to consolidate and outsource converting operations from all of our plants is difficult but necessary as we move forward to optimize our manufacturing strategy. We are giving advance notice of our plans so that we can work with the affected communities and employees in this difficult transition."

In addition to the manufacturing consolidation, Imation will reorganize its R&D organization to support an increasing focus on engineering and rapid prototyping of consumer technologies, and in qualification of new products.

The implementation of these programs is expected to be completed by mid-2009. The Company will provide separation packages and outplacement support services to impacted employees.

About Imation

Imation Corp is the only company in the world solely focused on the development, manufacture and supply of removable data storage products spanning the four pillars of magnetic, optical, flash and removable hard disk storage. With more than 50 years of data storage leadership beginning with the development of the world's first computer tape, Imation proudly marked its tenth anniversary as an independent company in 2006. In addition to the Imation brand, Imation Corp.'s global brand portfolio includes the Memorex brand, one of the most widely recognized names in the consumer electronics industry, famous for the slogan, "Is it live or is it Memorex?"

Certain information contained in this press release which does not relate to historical financial information may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause our actual results in the future to differ materially from our historical results and those presently anticipated or projected. We wish to caution investors not to place undue reliance on any such forward-looking statements. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements to reflect events or circumstances arising after such date. Risk factors include our ability to successfully close the acquisition of the TDK recording media business and the Memcorp business and achieve the anticipated benefits including synergies in a timely manner; our ability to operate the Memorex product lines as an integrated entity; our ability to successfully defend our intellectual property, including the Memorex brand and patent licenses and the Philips patent cross license; continuing uncertainty in global economic conditions that make it particularly difficult to predict product demand; our ability to meet our cost reduction and revenue growth targets; our ability to successfully implement our global manufacturing strategy for magnetic data storage products and changes to our R&D organization and to realize the benefits expected from the related restructuring charges, our ability to introduce new offerings in a timely manner either independently or in association with OEMs or other third parties; our ability to achieve the expected benefits from the Moser Baer and other strategic relationships and distribution agreements such as the GDM joint venture and Tandberg relationships; the competitive pricing environment and its possible impact on inventory valuations; foreign currency fluctuations; the outcome of any pending or future litigation; our ability to secure adequate supply of certain high demand products; the ready availability and price of energy; availability of key raw materials or critical components; the market acceptance of newly introduced product and service offerings; the rate of decline for certain existing products, as well as various factors set forth from time to time in our filings with the Securities and Exchange Commission.

Source: Imation Corp

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