VENDOR PROFILE. Imation Is Transforming Its Business with Secure and Scalable Storage IDC OPINION IN THIS VENDOR PROFILE.

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1 VENDOR PROFILE Imation Is Transforming Its Business with Secure and Scalable Storage Laura DuBois Ashish Nadkarni Dan Iacono Robert Amatruda Phil Hochmuth Global Headquarters: 5 Speen Street Framingham, MA USA P F IDC OPINION Imation Corp., a publicly traded company and a spin-off of 3M back in 1996, is transforming its business from being solely a tape and removable media vendor to a solution provider focusing on the security and scalable storage growth markets. Over the course of the past 24 months, Imation has executed five key acquisitions to jumpstart its offerings in the data protection and archive appliance markets and secure data, workspace, and identity management offerings. In addition: Imation's new offerings are engineered primarily for SMB customers, with an emphasis on ease of use, ease of deployment, and simplified management. The new storage and security products, focused at the enterprise buyer, augment Imation's USB-attached storage products. Imation's mobile security offerings are targeted at enterprise and government customers, with an emphasis on secure USB flash and hard drive devices that provide FIPS-validated data encryption and strong user authentication to give mobile workers secure and convenient access to their data. Today, approximately 60% of Imation's $1.29 billion in revenue is derived from the company's traditional tape and optical media businesses. However, Imation anticipates that its revenue makeup will shift, with nearly 50% of its sales coming from its secure and scalable storage offerings in the next few years. Imation has made prudent and judicious acquisitions in the scalable storage and mobile security markets to gain critical time-to-market advantages and provide the company with its own intellectual property. We believe this is a sound strategy, given the time, effort, and resources a company, even Imation's size, would need to extend its core competencies beyond that of a purveyor of removable storage media. IN THIS VENDOR PROFILE This IDC Vendor Profile analyzes Imation, a global technology company focused on storing, protecting, and connecting digital information. Filing Information: September 2012, IDC #237118, Volume: 1 Storage Systems: Vendor Profile

2 SITUATION OVERVIEW Company Overview Imation is a publicly traded 16-year-old company with 1,130 employees. The company generated $1.29 billion in revenue in 2011 and maintains a strong cash position with no long-term debt. Imation became an independent company in a spinoff from 3M on July 1, Today, Imation's business lines are segmented into traditional storage, audio and video information (AVI), and secure and scalable storage offerings. Imation is a global company with over 60% of the firm's sales outside of the United States and facilities in 35 countries around the world. Imation's installed base of storage and security customers spans over 100 countries. Prior to its strategy expansion, which started in 2010 with the appointment of Mark Lucas as chief executive officer (CEO), Imation was predominantly known for its traditional storage business, which included both optical and magnetic tape media. Imation continues to invest in this segment, and in 2010, this segment made up 66% of the company's business. The other segment for which Imation is known is its offerings in audio and video information business, comprising consumer offerings such as removable disk drives, audio and video electronics, and accessories. In 2010, this segment made up 20% of Imation's annualized revenue. Imation expects revenue growth in the next few years from its AVI products and its secure and scalable storage offerings. This change in Imation's product revenue mix is a critical component of the company's strategic transformation. Company Strategy In 2010, the Imation Board promoted internal executive Mark Lucas to chief executive officer. Under Lucas' direction, Imation embarked on a series of acquisitions as well as organic development that would reinforce its strategy as a global company focused on scalable data storage and data security. Since then, Imation has acquired companies and/or assets in the scalable storage and security domains. Details include: Imation acquired ENCRYPTX Corp. and its encryption and security solutions for removable storage devices and media. Imation acquired the assets of MXI Security, including MXI's portable security solutions and technologies. Imation acquired IronKey's secure hardware business while maintaining an ongoing strategic partnership with IronKey for online services. Imation also acquired certain assets of ProStor Systems, including InfiniVault, to augment a multitiered data archive and data protection appliance strategy targeted at the small and medium-sized businesses. The company acquired patented data deduplication technology from Nine Technology, which will be leveraged across the Imation products to enable shorter backup windows, faster recovery, and lower costs. 2 # IDC

3 Together, these offerings as well as internally developed solutions form the foundation for Imation's secure and scalable storage business, which offers storage and protection for data at rest, in motion, and in the cloud. We expect Imation will enjoy long-term success by investing in its newly acquired portfolio of scalable storage and mobile security solutions. Unlike some of its competitors, Imation is a company with worldwide reach. Imation brings a wellestablished global brand with facilities in more than 35 countries and customers spanning over 100 countries. Additionally, Imation brings a broad-based distribution model with mass merchants, big-box retailers, OEMs, and VARs. However, Imation may need to invest in new branding efforts in order to tap into new, faster-growing markets such as mobile security. The current Imation family of brands, such as Memorex and TDK Life on Record, may not carry the name recognition or cache needed to grow the solutions businesses beyond their existing customers. Imation should articulate a brand strategy that leverages the global strength of Imation and its consumer brand recognition (Memorex and TDK Life on Record). Furthermore, Imation needs to adapt its current set of solutions to adopt technology to new use cases such as cloud storage and archiving as well as safeguarding the explosion of mobile devices growing at the edge of many organizations. Imation understands how to build an annuity-based revenue model from its long history as a removable media vendor. Now it needs to build, innovate, and integrate its new set of solutions to position them for future growth and rapid expansion. We believe Imation possesses all the tools to capitalize on its new vision. Imation Scalable Storage Offerings Imation's scalable storage products are broadly in four areas: backup appliances (DataGuard data protection appliances), archive appliances (InfiniVault archive appliances), RDX-built appliances and RDX removable disk drive media, and storage media (LTO drives, LTO tape media, and portable storage). Details include: DataGuard data protection appliances serve as backup appliances, which leverage hard drives, removable RDX disk, replication, and cloud storage. On the front end, these appliances present standard NAS interfaces to leading backup applications, while on the back end, the appliance can support hard disk drive (HDD), RDX, and cloud storage from Amazon S3 and so forth. InfiniVault archive appliances serve as a repository for the long-term retention of data according to regulatory and/or legal requirements. These appliances support hard drives, removable RDX disk, and replication as well as write once, read many (WORM) and DICOM interfaces for specialized security and access. InfiniVault appliances typically interface with , file, or medical image archiving applications to retain data for long periods of time while providing fast access to information using application-specific search mechanisms. RDX-built appliances are storage systems made up of RDX media. RDX combines the benefits of traditional hard disk drives and makes it removable like traditional tape media; Imation RDX HDD storage systems offer the performance and capacity of disk drives, with the flexibility of tape storage. RDX appliances use removable disk cartridges and docking stations (similar to tape drives and 2012 IDC #

4 media) but with random access characteristics. RDX media spans from 320GB to 1.5TB and can be used as a replacement for legacy tape drives/systems. Imation will continue to integrate into its scalable storage offerings its leading authentication, encryption, and key management capabilities that come as a result of its strategic acquisitions of MXI, IronKey, and ENCRYPTX. Imation Mobile Security Offerings With the acquisitions of MXI, IronKey, and ENCRYPTX, Imation has a series of mobile security offerings in use by thousands of customers, predominantly largeenterprise and government bodies. Imation's data, identity, and workspace products enable organizations to control, manage, and set policies to ensure compliance for data resident on USB devices. Security functions including authentication, encryption, and key management are encapsulated into the devices as well as leveraged for Imation's scalable storage offerings. Details include: Secure data offerings include secure USB storage devices powered by IronKey and the Defender Collection. Imation's storage devices and media combine data encryption and strong user authentication to give mobile workers secure and convenient access to their data. Imation solutions include secure flash drives, hard drives, and optical media, enabling choice of the mobile storage solution. Secure identity management solutions from Imation simplifies the task of securing mobile identities and storage by offering robust identity management capabilities on encrypted Imation Enterprise S200 and D200 USB flash drives. Imation Enterprise drives provide enterprise-class identity management capabilities built around PKI certificates, two-factor authentication, and strong password management. And by using the identity management features within Imation Enterprise Management Service powered by IronKey, enterprises can centrally administer policies and activate third-party authentication capabilities. Imation's secure workspace allows business workers to bring their Windows desktop with them. Windows desktops can be booted from an Imation USB device. Following a reboot and authentication, Imation Secure Workspace transforms any computer into a specific employee's own personal workspace. The Imation USB security processor is FIPS Level 3 validated to protect content and shield the desktop from tampering, intrusion, and piracy. Accessing the hardware-encrypted desktop can require a password, optional biometric, or both. According to IDC's Security Survey, 2011, the challenge of preventing the exposure of confidential information and the issue of controlling unmanaged devices (i.e., smartphones, tablets, and personal laptops) were cited among the top 5 security challenges facing enterprises. Imation's mobile security offerings fit right into this problem area by addressing issues of BYOD and data security with capable and compact offerings, which appeal to both SMBs and larger customers. 4 # IDC

5 FUTURE OUTLOOK IDC anticipates that Imation will continue to make acquisitions that align with its storage focus on the SMB customer, including investments in cloud and mobile device management offerings. Additionally, it is also probable that the security functions that came with acquisitions will get embedded into the data protection and archive appliances. Areas where Imation will continue to focus on expanding will be in its channel development, increasing the commitment and focus among its VAR and DMR base of 600 resellers. From a selling and route-to-market perspective, Imation's scalable storage offerings are sold through indirect channels with a current installed base of hundreds. This route is optimal in targeted SMB customers. Conversely, Imation sells its security solutions to large-enterprise and government accounts via a direct and channel selling model and has 5,000 customers. In the future, it would benefit Imation to try to develop synergy in its sales and go-to-market strategy to minimize the dilution of internal resources and present opportunities for product cross-selling. On the security front enterprise, borrowing product and go-to-market strategies from Symantec (on storage/security integration) and CA Technologies (on identity/data access) would be a good path to take. ESSENTIAL GUIDANCE Advice for Imation Imation has made an external commitment to changing its growth trajectory and future outlook. In doing so, it has made some cost-effective acquisitions that will serve the company well for the future. Because Imation is moving into market segments that are competitive, with large market incumbents in position, Imation must continue to evaluate its underlying business operations and execution capabilities. The company has been successful in acquiring technology, and IDC believes that Imation has the following opportunities: Company repositioning. While Imation has a portfolio of technology/product brands such as Imation, Memorex, and TDK Life on Record, these brands highlight technologies from 20 years ago rather than leading and modern technologies. As a result, if Imation wants to be successful in today's storage market, it must break away from a fascination with its legacy brand equity and reposition the company for the future. Security market approach. By solidifying its storage/security product integration strategy around IronKey, ENCRYPTX, and MXI Security, Imation will be addressing one of the most critical and fast-evolving trends in enterprise IT security: the intersection of data storage and role-based encryption/access rights management. Imation's tight coupling of security to storage products will go far with SMBs, which often struggle to integrate advanced encryption and data access protection products beyond basic tools built into PC operating systems or free/low-cost tools found on the Internet. Imation's offerings around secure storage, identity, and BYOD/controlled workspace can bring enterprise-class 2012 IDC #

6 solutions to a market segment that has been priced out of the market for such advanced security offerings. However, the vendor is also competing in an enterprise market with multiple large vendors offering advanced encryption and information protection and control offerings Symantec, McAfee, and Sophos, as well as EMC/RSA and SafeNet. (Prior to its acquisition of IronKey, the pure-play encryption vendor was under pressure from these and other large security vendors with broader offerings.) Such competitors have the upper hand in terms of product integration, maturity of offerings, and mindshare in terms of security leadership and strategic partnering. Imation should position its offerings as complementary. Security vendors sell to customers with deep concerns about data security and protection; positioning the Imation solutions as another layer of protection, or a complementary tool (i.e., the classic "belt and suspenders" security approach), will go much further in the minds of enterprise customers as opposed to making an incumbent displacement sell approach. Innovation in sales and marketing. Imation will find itself competing with leading storage suppliers including EMC, NetApp, HP, Dell, and IBM. While some of these companies are partners with Imation on the media front, the strategy which Imation is taking to sell storage solutions/systems in the data protection and archive market aligns directly with the objectives of these large suppliers. These suppliers have market-leading sales, channel, and marketing engines that Imation will not be able to outspend. Imation must innovate in new ways to be competitive. Market and product strategy. While Imation will face pressures to move up market from the SMB to larger-enterprise accounts with its archive and data protection appliances, rather than dilute its efforts across both SMB and enterprise, it may prove best utilization of its internal resources to stay focused on the SMB market, which is less competitive than the enterprise and also has more synergy with Imation's consumer offerings particularly, in light of BYOD and consumerization of IT trends. From a product perspective, Imation should look to consolidate functions of its appliances with general-purpose NAS storage. Presenting a solution that can serve multiple use cases in a single architecture/platform will have economic advantage to cost- and usability-minded midmarket customers. LEARN MORE Related Research Taking Enterprise Storage to Another Level: A Look at Flash Adoption in the Enterprise (IDC #236366, August 2012) Storage User Demand Study, 2011 Fall Edition: Customers Still Want Choice (IDC #234651, June 2012) 6 # IDC

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