The four pillars of Hercules
Of Imation actually
Imation makes its profitable movable feast from removeable media. Barry Edmonds, its UK MD, gave Techworld his perspective on the removable media business and market and what Imation is doing in it.
Edmonds sees four parts to the removable media market: optical; flash; magnetic - tape and floppy disk; and removable hard drives. Imation's traditional strength is tape and that represented 90 percent of its business when it was spun out of 3M.
The removable media market has been affected by the rise of virtual tape (disk) as disk prices have fallen. This has affected tape sales. The floppy disk market is decaying and being replaced by USB thumb drives, which have a speed advantage over floppies. Barry said: "The public sector was the biggest user of floppy disk. It is now moving to flash, even schools. Floppy disks are still quite strong in parts of Europe."
In the tape market: "Travan and DAT technology is starting to give way to disk-to-disk (D2D) backup and removable hard drives." D2D is faster but tape still has portability. Removable hard drives (RHD) bring portability to D2D. RHD is the best alternative to low end tape for the SME and SOHO market.
Imation's Odyssey technology provides 20 or 40 GB capacity and 30-36MB/sec transfer speed. A docking station and 20GB cartridge is about £120 to the trade with a street price likely to be £145-150. The drive's POGO connector pin is good for around 20,000 insertions - it won't wear out practically speaking.
"I think the RHD will become a feature of our storage life. The producers will come with more software and they'll be adopted by more storage suppliers. This is a storage category which has legs and we'll invest in it as we continue to invest in the optical and magnetic removable media markets."
Super tape and enterprise changes; the long, long tail
Imation makes high-end tape for everybody of note: IBM; Sun/STK; LTO; and DLT. The market's make-up is changing steadily: "What we've seen over five years is area switch. DLT was king of the heap. HP, IBM and Seagate came up with LTO to compete and it's carrying all before it." LTO is definitely the winner and IBM and HP are very happy about that.
DLT was like a Norman castle under siege from three armies at once: "If Quantum had made DLT open it might have had more success."
LTO4 media is out for testing and it will launch early in a very short time.
Quantum bought Certance because it saw the writing on the wall. When it bought ADIC it was, in effect, confirmation that LTO is unstoppable, but also that backup to disk was important. (By making these two acquisitions Quantum has positioned itself in the only growing tape market of any note and in the growing D2D market. These were two key acquisitions by Quantum.)
At the enterprise tape level, IBM and StorageTek were the only two players in town. The StorageTek acquisition by Sun showed that it realised that enterprise tape had a strong future.
Tape media has a very long life. IBM 'end-of-lifed' the 3490 seven years ago: "IBM will announce it's finished in July. We're still selling 3490 tape, and probably still will be in five years time."
"We still sell Mammoth tape. Media has a very, very long tail. People are not going to change until they have a level of dissatisfaction sufficient to prompt a change."
No tail for flash
USB flash media manufacturing has no long tail at all. A Mammoth tape drive can only read Mammoth tapes. An IBM 3490 tape drive can only ... You get the picture. A USB port is completely open. There is only on USB storage format and the port doesn't care if you connect an ATA drive, a 10GB flash thumb drive; a SAS disk or an 8GB flash drive; it's all flash storage.
This means it makes less sense for Imation to manufacture its own flash drives; it's completely different from the tape market where manufacturing quality is vital. Instead Imation buys in flash components and assembles its drives instead. But Imation thinks branding can become very important to business flash buyers. Why is that?
"Flash memory started with many brands. Now there are fewer. We believe that brands will become more important as business and corporates and consumers realise that different brands have different qualities. Many consumers still don't know about USB flash drives. There is still a job of education to do. It's still early days in the flash market."
In the optical market branding is also important. But there manufacturing quality is still vital and Imation with its own and its Memorex brand is doing very well. What about the holographic side of the optical market?
"I saw the first iteration of holographic media in 1996 at a lab demonstration. We have a couple of relevant patents. The big issue is bringing it to market at a price point that is affordable."
On the consumer side optical media price points have moved down. But the market is affected by such things as DVD format craziness. Still the quality is extraordinary and you can buy a multi-format DVD recorder in Tesco's for £200.
"We make both Blu-ray and HD-DVD media. But demand is low. Why? You only benefit from these formats when you have continuous high-definition video. You need an HD-TV. Without broadcast programmes and sufficient TV set quality why would anyone buy HD=DVD or Blu-ray?"
Technology has got ahead of the consumer. Consumers may also expect these technologies to be a lot cheaper. High definition movies are stunning and the definition razor sharp compared to DVD.
There is a manufacturing problem too. Blu-ray is manufactured almost completely by hand. It's because of quality control and there is nowhere near the level of automation found in DVD manufacture.
Edmonds said: "We want to become a manufacturer's distributor of choice for this year and as we move on." He sees Imation as having global sales and marketing qualities that are unrivalled. But: "The whole removable storage market is ready for consolidation. There are too many manufacturers and too many distributors. When could it happen? Who knows! But Imation wants to be a consolidator and not a consolidatee, witness the Memorex purchase."
"Imation has taken lots of small steps over the years to be in control of its destiny, to be more important to drive manufacturers: Sun; IBM; etc. My thinking is that this will continue." (For evidence of this see here.)