Strategy & Competition

Imation Brings Dead Brands Back to Life


You might think a brand is dead when stores stop selling it. Jeff Meredith knows better. The vice-president for global marketing and product development at Imation (IMN), the world's largest seller of recordable compact discs, has spent the last couple of years reincarnating Memorex as a line of consumer electronics. Now he's bringing back another relic from the predigital age, TDK, as a high-end line of stereo gear. After that, Meredith wants to rejuvenate at least one other brand: Imation itself. (Remember Imation floppy disks? Remember floppy disks?)

Meredith's work may be make or break for his employer. The 1996 spinoff from 3M (MMM) has lost money for three years running. Last year's revenue of $1.65 billion was down 20% from the company's peak in 2007 as consumers skip past data-storage media like compact discs and put their data on flash memory, where Imation is only a minor player, or on the Net instead. Charles Murphy, an analyst with Sidoti & Co., says Imation has two years to turn itself around before it could be forced to start burning through its $163 million cash cushion. "It's paramount that they find some way to grow," he says.

Mark Lucas, Imation's chief operating officer, who will move up to CEO in May, says the company is in no danger of running short of money any time soon since it is cash-flow positive. But he says directors want to see better numbers tomorrow. "We're pedaling as fast as we can to demonstrate improvements in our performance," he says.

TDK, Memorex, and other "zombie" brands have an understandable appeal to marketers like Meredith because they come with built-in consumer awareness. That can slash the cost of a marketing launch. Memorex dropped its signature TV ads, with their "Is it live or is it Memorex?" tagline, more than 30 years ago. And yet, Meredith says, research surveys showed that 95% of U.S. consumers knew the name, even among people in their 30s. TDK scored almost as high. "Even though they're defunct, brands still kind of have their own life," says Greg Silverman, global managing director of analytics and valuation at consultancy Interbrand. "The upsides are usually pretty strong."

Memorex was a ghost of its former self when Imation bought it in 2006 for $330 million. Sales of blank audio cassettes had been declining since Sony's (SNE) CD-playing Discman came out in 1991. Imation says recordable CDs and other optical discs seem to have peaked, too: Revenue from those products fell 13% in 2009. As a result, Imation has had to come up with new product categories to refresh the Memorex brand.

The Oakdale (Minn.) company surveyed consumers to find a target audience—that turned out to be mothers 28 to 40 years old who like technology the family can use together—and hired Ziba Design of Portland, Ore., to create electronics for them. Today Imation is selling Memorex-branded iPod accessories, digital photo frames, DVD players, MP3 players, karaoke machines, and TVs at retailers such as Wal-Mart Stores (WMT) and Target (TGT).

The company is extending its rescue efforts. It unveiled a new Memorex collection of Wii accessories at the Consumer Electronics Show in January, and Meredith says it plans to sell speakers, turntables, and other audio gear costing as much as $500 under the label TDK Life on Record in the second half of this year. Imation paid $260 million for TDK in 2007.

The big question for Imation is whether the revivals will work. Sales of the company's electronic gear fell in 2009 but now account for 21% of total revenue, vs. 6.1% in 2006; the electronics unit lost $7 million last year and $13 million in 2008, according to Sidoti's Murphy. He says Imation would be better off finding new data-storage markets rather than pushing deeper into "commodity" gadgetry. "Will consumer electronics make the difference for them?" he asks. "No."

Lucas says Imation is using Memorex and TDK to move into higher-margin products. Soon that will extend to Imation. With sales of magnetic tapes for backup data storage in decline, the company has retained Ziba to find new markets for the Imation brand. Among possibilities: audio/visual products. "The combination of having good solid technology along with a portfolio of brands and a goal of differentiation is going to set us apart," Lucas says.

Michael_arndt
Arndt is editor of Bloomberg Businessweek's innovation and design coverage.

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