Fourth quarter profits plummet as the company takes special charges of $305.2 million.
Profits plunged at Imation Corp. as the struggling data storage company booked special charges of $305.2 million in the fourth quarter related to an ongoing makeover.
The Oakdale-based company said Wednesday that it will divest its Memorex and XtremeMac consumer electronics businesses in the first half of 2013. The move, which it had signaled in the third quarter, will allow the company to focus its energies on data storage and security, its retail optical business under the Memorex and TDK Life on Records brand, Imation said in its fourth quarter earnings release.
Imation spokesman Scott Robinson said in an interview that the company plans to sell the two lines.
Imation will retain the optical media portion of Memorex. It’s also keeping the TDK business, an audio line that includes high margin headphones and headsets popular in Europe and Asia. However, the company said the TDK unit will continue “on a more focused basis.”
The carve-off, together with the company’s acquisition of California-based Nexsan Corp. during the fourth quarter, complicated comparisons with Imation’s fourth quarter results a year earlier.
Imation reported a steep net loss of $310.2 million, or $8.34 per share, for the quarter which was significantly deeper than the $12.9 million loss during the same period a year earlier. Fourth quarter revenue fell 12.6 percent from a year earlier to $299.1 million.
The quarter’s results included a special charge of $305.2 million that the company said was related primarily to its failed acquisitions of Memorex International Inc. in 2006 and TDK Recording Media in 2007. But it also included restructuring costs and other charges.
Minus the special charges, the company’s fourth quarter operating loss would have been $5.2 million, or about 14 cents a share.
For the full year, Imation lost $340.7 million, or $9.09 per share, and revenue fell nearly 15 percent to $1.1 billion.
Imation shares rose more than 2 percent following the news to trade around $3.92.
In a conference call with analysts, Imation’s CEO Mark Lucas emphasized the urgent steps the company is making in response to continued declines.
“We are making dramatic changes in this company,” Lucas said. “We are looking at every part of our organization in order to reduce operating expenses more than 25 percent over time.”
“We aren’t where we want to be yet, but we are definitely moving toward our goal,” he said.
The tough results were no surprise. The 3M spinoff has been struggling with the decline in their traditional business of electronic and data storage components for years, and has been taking major steps to focus on newer technologies and secure and scalable storage appliances, such as network attached storage devices.
At the end of December it closed the $120 million acquisition of Nexsan, a privately held company in Thousand Oaks, Calif., that sells disk storage systems to small and medium-sized companies.
Currently, digital storage appliances are only about 21 percent of Imation’s sales, including the Nexsan business, said Mark Miller, an analyst with Noble Financial Capital Markets in Boca Raton, Fla.
“It still remains to be seen if they can find a profitable nucleus,” Miller said. “That’s the big question. Can they do that?”