Imation’s Tapes to Be Manufactured by TDK

Imation Corp. has signed a strategic agreement with TDK Corporation to jointly develop and manufacture magnetic tape technologies. Under the agreement, the companies will collaborate on the research and development of future tape formats in the two companies’ research centers in the U.S. and Japan, while consolidating tape coating operations to the TDK Group Yamanashi manufacturing facility.

"This strategic tape alliance between Imation and TDK brings together two of the world’s leading data storage technology companies to jointly develop and manufacture the next generations of advanced tape," said Mark Lucas, president and chief executive officer, Imation. "By leveraging both companies’ deep tape knowledge and decades of invention and innovation, we expect to accelerate the development and commercialization of future tape formats. TDK’s high-performance dual-layer coating technology, combined with Imation’s proprietary advanced servo-writing, bring the industry’s best technologies together to enable future multi-terabyte formats."

Commenting on the critical role of magnetic tape in global IT infrastructures, Lucas continued: "Because of its superior archival capabilities, low cost per gigabyte, and robust future roadmaps that include rapidly increasing capacities matched with high performance, advanced magnetic tape remains the storage media of choice for archival applications. In fact, most of the world’s critical data, whether government, enterprise, or cloud applications, is stored on magnetic tape."

"Our partnership with Imation is a logical progression of our two companies’ strong strategic relationship," said Takehiro Kamigama, president and chief executive officer, TDK Corporation. "Imation acquired the TDK brand recording media sales business in 2007 and has successfully expanded the portfolio with high-quality, innovative data storage and audio product offerings marketed under the TDK Life on Record brand. Now, TDK is very pleased to partner with Imation to leverage the strength of each company’s deep technology and manufacturing expertise in magnetic tape, working closely together to develop and commercialize next-generation tape formats."

Imation also announced that it will discontinue its magnetic tape coating operations at the company’s Weatherford, Okla. facility by April 2011, and subsequently close this facility. Approximately 115 positions will be eliminated, the vast majority of which are in manufacturing operations. Imation will maintain its research, development, and engineering (RD&E) facility at the company’s world headquarters in Oakdale, Minn.

"The decision to exit coating operations at our Weatherford facility is a difficult but necessary step as we continue to improve our operating efficiency and optimize our magnetic tape business as part of our overall strategy," said Lucas. "We are committed to working with our impacted employees, providing financial assistance and outplacement support during the upcoming transition."

"Imation and TDK – who have partnered successfully together for many years – are now taking the lead to consolidate global manufacturing, while continuing the critical research and development work for future tape formats. Imation remains committed as a leading developer and supplier of magnetic tape worldwide," concluded Lucas.

In conjunction with the shutdown of the facility and the rationalization of certain product lines Imation anticipates recording approximately $50 million of charges for asset impairments, restructuring and other charges of which $45 million is non-cash. The vast majority of these charges will be recognized in the fourth quarter 2010 results.

The Company’s fourth quarter 2010 tax provision will include a net expense in the U.S. preliminarily estimated at $90 million. This net expense primarily relates to establishing a full valuation allowance required to be established against the Company’s net U.S. deferred tax assets offset by the tax benefit from the charges discussed above. As disclosed in prior periods, the Company has significant deferred tax assets in the U.S. These assets may still be used in the future; however, the weight of these charges and recent results requires a full valuation allowance.