Imation Corp.Q1 2010 Earnings Call Transcript
Imation Corp.
(IMN)
Q1 2010 Earnings Call
January 21, 2010 10:00 pm ET
Executives
Tim Gallaher - IR
Frank Russomanno - VC and CEO
Paul Zeller - SVP and CFO
Analysts
Chuck Murphy - Sidoti & Company
Presentation
Operator
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Good day, ladies and gentlemen, and welcome to your Imation Corporation first quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference call is being recorded.
I would now like to introduce your host for today’s presentation, Mr. Tim Gallaher. Sir, you may begin.
Tim Gallaher
Thank you, Howard. Good morning, everyone, and welcome to our quarter 1, 2010 earnings conference call. On today’s call, you will be hearing from our Vice Chairman and CEO, Frank Russomanno and our Senior Vice President and CFO, Paul Zeller.
Before I turn the call over to them for their comments followed by your questions, I want to remind everyone that certain information discussed on this call that does not relate to historical information may be deemed to constitute forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from any projected results.
Risk factors that could cause results to differ are outlined in both the press release as well as our filings with the SEC.
With that, I’d like to turn the call over to Frank Russomanno, Frank?
Frank Russomanno
Thank you, Tim, and good morning everyone. As we noted on our press release this morning, we are pleased by the solid start to 2010, in both revenue and earnings. Continuing the momentum we established in the second half of 2009. Our cash generation in the quarter was especially strong, with our continued focus on working capital management, we added $60.8 million to our cash balance ending the quarter with $224 million in cash.
From our revenue perspective we continued to see a moderation in the rate of decline in our tradition tape and optical storage of businesses compared to 2009. In addition we saw a very strong growth in several important products in our emerging storage categories including external and removable hard disk, flash, and Blu-ray disks. Paul will go into more detail on the quarter in just a few minutes.
For the remainder of my comments I’d like to provide a bit more color on our technology and product focus. How we are leveraging our global brands and how our global organization continues to focus on achieving operational excellence. First, we continue our market leadership in our traditional storage category of magnetic tape where we have the number one share position across our brand portfolio. In March we announced that Imation began shipping the world’s first multi terabyte magnetic tape. The Ultrium LTO-5 format with double the capacity of existing cartridges.
Imation continues to invest in research and developing magnetic tape. We are already working on the next generation LTO offerings. At the same time we are making excellent development progress with another advance tape program using barium ferrite pigment. A format that will provide even more capacity and speed expected to be commercialized in 2011.
In our other traditional storage category, optical media we likewise continue our global market leadership reflecting the success of our brand consolidation strategy. We have the number one share position and offer the broadest portfolio of brands to retailers. The new Blu-ray format continues to grow primarily in Japan and we are already working with our partner TDK on next generation Blu-ray technology.
Our emerging storage products of flash and removable and external hard disk drives showed strong growth in the first quarter. Strategically in March we announced the Imation’s $5 million investment in ProStores, RDX removable hard disk drive technology reflecting our commitment to this format. This is a growth category that has been adopted by IBM, HP and Dell.
As a founding member of the RDX storage alliance and supplier to both Dell and IBM, Imation is well positioned as a leader in RDX. Imation is also responding to a rapidly growing customer need to secure, protect, store data to meet increasing compliance requirements driven by HIPAA, SOX and fixed regulations.
In the quarter we announced partnerships with data security leaders, MXI and EncryptX to develop and launch a full portfolio of fixed certified products including flash drives, optical media and hard disk drives. In the coming weeks we will launch our new secure storage line called the Imation brand defender collection. Engineered to meet rigorous domestic and international encryption standards. This line was developed for government, financial, health care, consumer and other industries for which data security is critical. With these new definitive products as well as the tape tracking and diagnostics products such as Secure Scan and DataGuard rf systems that we previously announced. We are significantly increasing our focus on secure data storage.
As we discussed in the past, our strategy includes not only optimizing our traditional storage areas and growing an emerging storage, but also extending our brand selectively into electronics and accessories. Our new electronics and accessory products are being designed to deliver higher margins through carefully engineered differentiation and are aligned carefully with our brand targets. Just a few examples of this brand leverage to watch for in the remainder of the quarter. Our Memorex brand designed for Mom and her family will launch new audio products designed for iPod and iPhone or full line of gaming accessories for the Wii platform and a new line of AV cables.
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