Imation Makes Big Data Move with Acquisition

Imation Makes Big Data Move with Acquisition
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Nexsan buy moves Imation closer to enterprise and away from consumer market.

Imation this week announced the acquisition of Nexsan, a hybrid storage company, indicating a new trend that attracts companies with a primary focus on consumer products into the lucrative data center business. For Imation, Nexsan represents the peak of a strategy shift that diversifies the company from being perceived as a USB stick vendor to a mid- to enterprise-level storage company that will create a new competitor for established firms such as Dell and EMC.

Every now and then when we learn about the acquisition of a consumer technology company by an enterprise technology company, or vice versa, there is always the question whether a particular move makes sense or not. For example, back in 2008, EMC acquired Iomega for $213 million with the stated intent to move down-market into the consumer and small business markets.

Imation is taking the other route and just announced that it will acquire privately held Nexsan for $120 million in cash and stock.Imation often viewed as simply a USB stick vendor. Imation often viewed as simply a USB stick vendor.

We know Imation, which was created via a spin-off from 3M in 1996, especially for its removable storage and consumer products that reach from CD-RW media to USB sticks and hard drives. So far, the company has little to no visibility in the storage appliance market, which it began addressing more aggressively with entry-level SMB devices in 2011 and 2012. Nexsan could bump Imation's credibility in this space and open new opportunities in combination with its resources from about 1,100 employees as well as channel and customer reach.

In February 2011, Imation announced that it had about $305 million in cash available to make acquisitions to dive deeper into the tiered-storage market. Then, in March, the company purchased encryption and security specialist Encryptx, MXI Security followed in June, ProStor in August, Iron Key's security hardware business in September and Nine Technology's data deduplication engine in December.

All of these acquisitions laid the foundation for Imation to position itself not just as a removable storage company, but as a "data security company.”

"Imation’s acquisition of Nexsan is an exciting next step in our strategic transformation, which includes investing in growth platforms in data storage and security solutions, where we are targeting markets with strong growth rates," said Mark Lucas, president and CEO of Imation, in a prepared statement.

"Our strategy includes focusing on the underserved SMB market with purpose-built storage systems and appliances. This is a market that Nexsan knows well. Nexsan’s management team has grown this business from start-up to more than $80 million, with strong gross margins."

Imation said that it hopes that it can combine its security assets with Nexsan's archive products, which could address some market gaps that have been left open by recent acquisitions such as 3Par by HP back in 2010.

Rusty Rosenberger, scalable storage product management director at Imation told Tom's IT Pro that "Nexsan's brand carries a lot of equity" and there is the clear hope that "synergy values" will be created. According to Rosenberger, it made more sense for Imation to buy Nexsan to move from the low-end into the mid-level storage market than building this business on its own: "We are both running at 70 MPH already."


Wolfgang GruenerWolfgang GruenerWolfgang Gruener is a contributor to Tom's IT Pro. He is currently principal analyst at Ndicio Research, a market analysis firm that focuses on cloud computing and disruptive technologies, and maintains the conceivablytech.com blog. An 18-year veteran in IT journalism and market research, he previously published TG Daily and was managing editor of Tom's Hardware news, which he grew from a link collection in the early 2000s into one of the most comprehensive and trusted technology news sources.

See here for all of Wolfgang's Tom's IT Pro articles.

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