Imation Buys Nexsan For $120M To Beef Up Its SME Enterprise Storage Business

Some consolidation in the world of enterprise storage to kick off the new year: the storage and data security giant Imation Corp. has acquired Nexsan Corporation, a specialist in disk-based storage systems, for $120 million, with $105 million of that in cash and the remainder in publicly-traded Imation shares, according to a statement from the companies. The move appears to be a part of Imation’s efforts to rebuild its business around more high-growth areas, as it comes off a particularly bad quarter of declining revenues in all of its existing lines of business. Like many other startups in the enterprise space, Nexsan was a success story that somewhat flew under the radar. Nexsan competes against companies like EMC and HP selling storage specifically to companies in the small- and medium-business sector. It appears to have only raised $7.5 million in funding since being founded in 2000. In 2011, it had revenues of $82 million with margins of over 40% on its products. For Imation, which offers storage solutions both to enterprises and consumers, the deal will add 11,000 customers to its books, and give it a boost in its business targeting the SMB segment — a sector that has followed in the footsteps of larger enterprises by increasingly needing remote storage alternatives for their data, a key area to target as business growth among larger enterprises slows down and faces more competition from larger players (like HP and EMC). As Mark Lucas, the president and CEO of Imation, puts it, Imation is “targeting markets with strong growth rates.”: “Our strategy includes focusing on the underserved SMB market with purpose-built storage systems and appliances,” he noted in a statement. “This is a market that Nexsan knows well.” Investing in healthily-growing areas is an imperative at the moment for Imation: the company in Q3, at the end of October, reported that its revenues were $248.2 million, down 19.6% from Q3 2011, on the back of missing revenue expectations in “almost all lines of business” and all regions, but with specific problems in the company’s traditional media storage business — which will have been disrupted massively by the big rise in lower-cost cloud-storage services. Imation also posted an adjusted operating loss of $6.5 million: that included a benefit in restructuring and other charges of $3.6 million, and a diluted loss per share of $0.17. Excluding those charges the loss would have been $10.1

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