Iomega Becoming Chinese Company

Last August 1, EMC and Lenovo published a press release that was not much commented, at least concerning the future of Iomega.

Abstracts of this announcement: “EMC and Lenovo plan to bring certain assets and resources from EMC’s Iomega business into a new joint venture which will provide NAS systems to SMB and distributed enterprise sites. (…) In the joint venture, Lenovo will contribute cash, while EMC will contribute certain assets and resources of Iomega. Upon closing, Lenovo will hold a majority interest in the new joint venture. (…) The joint venture is subject to customary closing procedures including regulatory approvals and is expected to close by the end of 2012.”

Consequently this joint venture, owned at 51% by Lenovo and 49% by EMC, will get the global Iomega’s activity, R&D, product development, both companies being in charge of the sales of the Iomega’s NAS line (the company has completely stopped its low end storage products like external and multimedia HDDs, and, of course, all its Zip and REV devices).

It’s not the first time that Iomega was not far to become a Chinese firm. In a complicated deal through Chinese HDD maker, Excelstor, Great Wall Technology was supposed to get Iomega. But EMC finally put more money ($213 million) in June 2008 and got the company that became a division of the storage giant. Since this deal, EMC never published any financial figures on Iomega’s business, and even its name never was cited in the press releases announcing the quarterly financial results of EMC. The last known figures is $336.6 million in revenues and net income of $10.1 million in FY2007, good figures but far from the tremendous success it has with Zip many years go. In FY1998, when it was called “The Zip Company”, sales recorded $1,740 million and net $115 million.

It’s not sure that sales are currently greater than before the acquisition, as Iomega is now only focused on NAS for the CE, SMB and branch offices of large enterprise markets. According to Iomega’s VP EMEA sales Jan Jensen, Iomega counts around 350 people in the world and is profitable.

It was not officially announced but note also that Jonathan Huberman, former CEO of Iomega since 2006 and then its president following the acquisition by EMC, left the company in March 2012 to join private equity firm The Gores Group. He has been replaced by EMC SVP veteran Joel Schwartz, according to Jensen.

$30 billion Lenovo was an OEM of HDS for storage but this relation was disappointing, now replaced by EMC, who was relatively successful in China. According to Gartner, it generated $297 million from China in storage hardware. Lenovo will help to increase its enterprise storage share in the country. Furthermore, EMC will progressively integrate the servers of Lenovo (and no more of Dell in bad terms with EMC) into its storage line.

Since getting Iomega, EMC never was into the low-end IT market and its sales force ignores it. The brand name of Iomega is much more well known by the consumers than EMC. But Lenovo is aware of this sector after its acquisition of IBM PC business in 2004 for as much as $1.75 billion. Like Dell or HP, the Chinese group wants to put a foot in enterprise.

At the end, the EMC/Lenovo agreement could be a win-win deal.