Imation Plans Layoffs, Possible Restructuring

Data storage systems maker Imation Corp. announced Thursday that it will miss analysts' expectations for earnings for the quarter and that it is exploring alternatives including financial restructuring, stock repurchases and potential mergers.

The company warned that operating income, excluding restructuring charges and write-offs, will be 16 percent below the US$346 million in sales it registered during the quarter ended Sept. 30 last year, according to a statement from the company. Profits during that quarter totaled $10.8 million, but the company expects to break even this quarter.

It has retained investment banking firm Goldman, Sachs & Co. to explore ways to bolster shareholder value.

Imation didn't return calls by press time for additional comment.

The Oakdale, Minn.-based company attributed the third-quarter shortfall to lower sales of its SuperDisk floppy drive, continued pricing pressures and the negative effect of foreign currency, especially the euro.

Imation is scheduled to release its third-quarter results Oct. 24.

In order to stem the loss, Imation will cut approximately 10 percent from its workforce of 4,700 employees by the end of next year. It will also take other measures to cut losses, recording $32 million in restructuring charges and a $66 million noncash software write-off, Imation said. The restructuring will result in an annual savings of $40 million.

Steve Duplessie, an analyst at Enterprise Storage Group in Milford, Mass., said Imation's third-quarter news was "less than stellar."

"It's easy to blame the euro, but that doesn't help sell more low-margin products," he said. Imation has moved into other areas, such as a storage-area network interoperability lab, but these moves haven't spurred the company's financial direction as of now, Duplessie said.

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