Storing, Protecting and Connecting a Digital World. Investing in the Future

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1 Storing, Protecting and Connecting a Digital World Investing in the Future February 1, 2011

2 Risks and Uncertainties Certain information contained in this press release which does not relate to historical information may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Such statements are subject to certain risks and uncertainties that could cause our actual results in the future to differ materially from our historical results and those presently anticipated or projected. We wish to caution investors not to place undue reliance on any such forward-looking statements. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements to reflect events or circumstances arising after such date. Risk factors include our ability to successfully implement our strategy; our ability to grow our business in new products with profitable margins; the possibility that our assets may become impaired; our ability to introduce new offerings in a timely manner either independently d or in association with OEMs or other third parties; the market acceptance of newly introduced d product and service offerings; the potential dependence on third parties for new product introductions or technologies in order to introduce our own new products; our ability to realize the benefits from our global sourcing and development strategy for magnetic data storage products and the related restructuring; our ability to identify, integrate and realize the expected benefits from any acquisition which may occur in connection with our strategy; continuing uncertainty in global and regional economic conditions; foreign currency fluctuations; the volatility of the markets in which we operate; our ability to successfully manage multiple brands globally; our ability to successfully manage multiple brands globally; our ability to achieve the expected benefits from our strategic relationships and distribution agreements; the competitive pricing environment and its possible impact on profitability and inventory valuations; the ready availability and price of energy and key raw materials or critical components; our ability to meet our revenue growth, gross margin and earnings targets; our ability to secure adequate supply of certain high demand products at acceptable prices; the rate of revenue decline for certain existing products; our ability to efficiently source, warehouse and distribute te our products globally; significant changes in discount rates and other assumptions used in the valuation of our pension plans; our ability to secure and maintain adequate shelf and display space over time at retailers which conduct semi-annual or annual line reviews; the future financial and operating performance of major customers and industries served; our ability to successfully defend our intellectual property rights and the ability or willingness of our suppliers to provide adequate protection against third party intellectual property or product liability claims; the outcome of any pending or future litigation; the volatility of our stock price due to our results or market trends, as well as various factors set forth from time to time in our filings with the Securities and Exchange Commission. 2

3 Today s Agenda Our Opportunity Strategies Financial Goals 3

4 Information is Growing Exponentially Producing a Storage Gap 4

5 Data Protection is Becoming a Critical Issue Data breaches are relatively common and extremely costly In 2009, 498 breaches were reported in the U.S., causing 222,477,043 individual record exposures (Source: Identity Theft Resource Center) 5

6 Digital Connectivity is Becoming Increasingly Important Content is split between mobile platforms, CE devices, local storage, and the cloud Becoming extremely difficult to manage for businesses as well as for consumers Solutions Needed It is estimated that there will be 1 billion mobile broadband devices by 2016 (Source: UMTS Forum) 6

7 We Have a Clear Vision To be a global technology company dedicated to helping people and organizations store, protect and connect their digital world 7

8 Our Product Categories Align with Growing Applications 8

9 We Are Implementing Specific Strategies to Achieve Our Vision Product Category Strategies to Drive Higher Growth and Margins Optimize profitability and cash in declining market Invest in higher growth and margin opportunities Launch differentiated products and rationalize low margin businesses Corporate Strategies Invest in four core product technologies Continue to drive disciplined product life cycle management 9

10 Strategy: Invest in Four Core Product Technologies Secure Storage Authentication & Encryption Central Management Software New Standards: FIPS 140-3; Opal HDD Secure Portable Computing Scalable Storage (for SMB space) Data Reduction: De-duplication & Compression RHDD Automation & Integrated NAS Back-up Secure RHDD Cloud Connectivity Wireless/Connectivity Wireless Audio: Kleer & BlueTooth Wireless AV & Data: Ultra-Wide Band, WiDi and Next Gen WiFi Magnetic Tape Partnering with TDK to develop future multi-terabyte tape formats based on Barium Ferrite technology 10

11 Our Financial Goals Returning to top-line growth by end of 2012 Improving product gross margins towards 20% through product differentiation (average of 15% to 16%, before charges, in recent past) Increasing operating margins to the 4% to 5% level (average of 1%, before charges, in recent past) Driving results through organic and inorganic investment Continuing to generate operating cash flow 11

12 Our Financial Goals Product Category Level Improve ROIC and continue to drive cash flow; hold gross margins in upper teens Invest to create differentiation; increase Flash category revenues driven by Defender; grow HDD revenues driven by removable hard drive systems; improve gross margins to upper teens+ Focus on fewer, higher margin SKUs; grow TDK Life on Record & XtremeMac to reach combined margins of 20%+ 12

13 Our Financial Goals Total Company 2011 Revenue decline rates continue moderating, but 2011 revenue not likely to rise given plans to rationalize certain low margin businesses 2011 earnings (excluding charges) will decline due to organic investments Continued focus on cash flow and margin improvement 2012 Revenues return to growth by the end of 2012 Double-digit earnings growth in 2012 and beyond Longer Term Gross margins moving toward 20% Target operating income profitability of 4% to 5% Target ROIC of 10%+ 13

14 Attaining Our Financial Goals Requires Both Organic and Inorganic Investment Organic Incremental investment in $15M Inorganic Focus: secure storage, storage hardware, scalable storage and related software: Potential for several acquisitions beginning in 2011 Targeting small to medium sized transactions, ranging from a few million dollars to a high of $50M 14

15 Uses of Cash in 2011 Organic investment $15M incrementally in 2011 Acquisitions Anticipate making investments Capital spending $10M (depreciation and amortization approximately $35M) Restructuring Approximately $40M in total Stock buyback Restarting share purchases under existing board authorization, which stands at 2.3 million shares 15

16 Summary We are well positioned in large and growing g markets Our financial goals include: Returning to top-line growth by end of 2012 Improving product gross margins towards 20% through product differentiation Increasing operating margins to the 4% to 5% level Driving results through organic and inorganic investment Continuing to generate operating cash flow We plan to restart our stock buyback program 16

17 Q&A