Rimage Corp.

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Rimage Corp.

7725 Washington Avenue South
Edina, Minnesota 55439
U.S.A .
Telephone: (952) 944-8144
Fax: (952) 944-7808
Web site: http://www.rimage.com

Private Company
Incorporated: 1987 as IXI, Inc.
Employees: 205
Sales: $103.25 million (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: RIMG
NAIC: 334119 Other Computer Peripheral Equipment Manufacturing

EARLY YEARS

DEBUT OF CD-ROM PRINTER: 1995

INTRODUCTION OF PERFECT IMAGE PRODUCER: 1996

ACQUISITION OF CEDAR TECHNOLOGIES: 2000

INTRODUCTION OF EVEREST PRINTER: 2001

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

EARLY YEARS

Rimage was founded as IXI, Inc., near Minneapolis, Minnesota, in February 1987, when its founders purchased the assets of a manufacturer of computer diskette production equipment. In August 1988 the company also bought control of California-based duplication equipment maker Media Systems Technology, Inc., and moved its operations to Minnesota.

In late 1992 the firm, now known as Rimage Corp., made an initial public offering (IPO) of stock on the NASDAQ. It sold 770,000 shares at $5 each, with much of the proceeds going to reduce debt. For the fiscal year the company had sales of $13.3 million and recorded a net profit of $720,000.

Following the IPO, Rimage began a major campaign of expansion, in 1993 buying duplicating firms Duplication Technology, ALF Products, Inc., and Datapath Technologies, as well as Secure Data Network, Inc., a data backup firm. The latter was soon relaunched as Rimage Televaulting, which provided automatic data backup over telephone lines in several major cities. The firm’s customers at this time included Microsoft Corporation, for whom it installed eight software diskette duplication systems at its Redmond, Washington, headquarters. By this time, Rimage had opened sales offices in Frankfurt, Germany, and Dublin, Ireland, with one-fourth of its revenues coming from overseas.

During 1994 the company bought authoring and retrieval software maker Knowledge Access International and backup system maker Pereline Data Systems. In the fall President and CEO David McCaffrey resigned and was replaced by Executive Vice-President David Suden, who took the title of president while a new CEO was sought. Sales for 1994 were nearly double the figure of two years earlier, reaching $25.3 million.

DEBUT OF CD-ROM PRINTER: 1995

In 1995 the company introduced a new product called the Rimage CD-R Printer, which could print high-resolution text and graphics on recordable compact discs (CD-Rs) using thermal technology. It was a dramatic improvement in quality over the adhesive labels typically used at the time.

Continuing to show faith in the 3.5-inch computer diskette format, during 1995 Rimage merged with Dun-hill Software Services, Inc., a diskette duplication firm that had been a major buyer of its equipment. Dunhill had sales of $16 million, and the purchase price was 1.1 million shares of Rimage stock.

In early 1996 the company closed a development center and software production unit so it could focus on equipment manufacturing and duplication services, writing off $1.7 million in losses. Rimage had also lost a major customer that accounted for 31 percent of its 1995 revenues of $51.5 million.

In the spring of 1996 the company was chosen by Kodak to market its Disc Transporter and Writer products in Europe, with Rimage supplying printer components. The firm also opened an Asian sales unit in Singapore and formed a new division called Rimage Optical Systems to sell CD-stamping presses that were built by a European firm. Its Plover, Wisconsin, diskette manufacturing plant began to produce CD-ROM discs as well.

INTRODUCTION OF PERFECT IMAGE PRODUCER: 1996

In the spring of 1996 Rimage introduced a new CD-R production system that could create a burned disc and then print a label on it. Dubbed the Perfect Image Producer, it was priced at $26,000 and began shipping later in the year. A variety of uses were envisioned, including data archiving, software distribution, and financial services record keeping.

The firm was facing growing losses in its diskette-manufacturing business, which was struggling in the face of new and better storage media such as CDs. In November 1996 Rimage hired former Colwell General executive Bernard Aldrich as president and CEO to help turn the company around. President David Suden would take the title of chief technology officer, while interim CEO Ron Fletcher was named board chairman.

Soon after Aldrich’s appointment Rimage announced it would shift its focus to duplication systems and services, and laid off 7 percent of its workforce due to the declining sales of diskettes. The company also expanded its management team and began to convert its small in-house sales staff to a value-added reseller network of 130 that would offer installation and training services. Sales for the year fell by nearly 20 percent to $41.8 million, and the firm recorded a loss of $5.2 million.

Rimage was actively working to restructure, and in July 1998 closed its Bloomington, Minnesota, services operation and sold its CD-ROM duplication equipment and some diskette duplication equipment to Advanced Duplication Services, Inc., of Minnesota, taking a write-off of close to $500,000 on the deal. In the fall the firm received a major order from Kodak for Perfect Image Producer devices, which would be used in the production of the Kodak Picture CD. Sales for 1998 fell to $37.4 million, but net profits surged to $5 million. Revenues from sales of duplicating systems were $28.5 million, an increase of 36 percent over the year before.

COMPANY PERSPECTIVES

A pioneer and innovator in CD/DVD/Blue Laser production technology, Rimage provides state-of-theart CD/DVD/Blue Laser publishing, duplication and printing solutions. From economical desktop systems to high-volume production units, Rimage manufactures over 20 systems, in three different product families, to fit every need. Rimage also offers a full line of consumables and support programs to ensure the quality of the finished disc and uptime of the system.

In April 1999 Rimage announced the Perfect Image Prism Printer, the first thermal transfer printer to offer full-color images on CD-Rs, and in June a new partnership was formed with Kodak to create a hybrid CD-R disc for a variety of uses. In July the firm sold its Colorado-based services division to Advanced Duplication Services for $2 million as it completed the shift to production of duplication systems. Customers included such major corporations as AT&T, Chase Manhattan, IBM, and Microsoft, who used Rimage CD-R production equipment to make data storage discs; and music vendors including Musicland, Wherehouse Entertainment, CDnow, and MP3.com, who had begun using Rimage CD-makers to create custom music discs for in-store and online sales.

ACQUISITION OF CEDAR TECHNOLOGIES: 2000

In early 2000 the company bought Minneapolis-based Cedar Technologies, Inc., a CD-R desktop publishing and duplicating equipment manufacturer, whose operations would be moved to a Rimage facility. The $6 million deal enabled the company to broaden its market to office and small business users.

In April 2000 the firm introduced its first DVD-R publishing system, which used the new, larger-capacity digital discs that were especially well-suited for videos. The Protégé system, with two Pioneer DVD burners and the Prism thermal label printer, was priced at $45,000 and could produce two DVDs per hour. Rimage was working with makers of blank CD discs including Kodak, Verbatim, Mitsui, and Maxell to improve the characteristics of blank discs to ensure adherence of the firm’s thermal printing.

In December 2000 the company unveiled its Desktop Family line of office-sized CD publishing systems, which were small, customizable, and could be used in a network situation. Based on the offerings of recently acquired Cedar, they were priced at $4,500 and up. During the year the company increased its value-added resellers to a total of 376 worldwide, with 30 percent of sales taking place outside the United States. For the fiscal year the firm had record sales of $49.8 million and net income of $8.3 million.

INTRODUCTION OF EVEREST PRINTER: 2001

In 2001 Rimage introduced the Everest thermal re-transfer color printer, which was capable of photo-quality printing on CD or DVD discs. The device was targeted at users including wedding photo studios, software makers, and music studios. It was subsequently made a part of the Producer system, which added faster CD-burning drives. During 2001 the company also increased its focus on sales to medical customers, who were increasingly using optical discs to store images from X-rays, MRIs, and other tests that had previously used film.

With the 2000–01 technology stock bust Rimage’s share price began to fall, slipping from $24 per share to $9 by May 2001, and the firm began a 300,000-share buyback program to boost its value. Though it remained profitable, some customers had evaporated in the previous months as money-losing dot-coms folded. The stock’s value dipped further in July when a Rimage director, George Kline, was convicted of insider trading involving the firm’s and other companies’ stock, and his 388,000 shares were forfeited to the government as part of his sentence. With others forfeited by an associate of Kline, the government would later sell 550,000 Rimage shares.

In the spring of 2002 the company sold $2 million worth of Producer II systems and other equipment to Kodak for use in its Qualex photo finishing labs, which produced Kodak PictureCDs for consumers at locations around the United States. The firm also added a distributor called Data Distributing, which gave it better access to the healthcare, financial, and entertainment industries, and formed a partnership with TDK Electronics Corp. to integrate Rimage systems into its Medical CD Recording Station. Over the next year, medical imaging became the firm’s fastest-growing market segment.

In 2003 the company was selected by Protocall Technologies to supply it with Protégé II CD/DVD production systems for software-on-demand kiosks slated for CompUSA stores. Rimage also licensed Video CD technology from ECI, which would allow the creation of discs that could play on a DVD player to show a photo slide show on television. For the fiscal year the firm had sales of $53.8 million and net income of $7.7 million. Foreign orders accounted for 42 percent of the total, while sales of maintenance contracts, parts, printer ribbons, and recordable media made up 30 percent of Rimage’s revenues.

KEY DATES

1987:: Rimage is founded as IXI, Inc., to produce disk and tape duplication equipment.
1992:: Firm goes public on the NASDAQ, begins making acquisitions.
1995:: Rimage merges with diskette duplication firm Dunhill Software Services.
1996:: Company introduces CD-R duplicator/printer; Bernie Aldrich is named CEO.
1998-99:: Rimage exits diskette business and other sidelines to focus on CD-R equipment.
2000:: Rimage acquires Cedar Technologies and adds Desktop line; first DVD-R product debuts.
2006:: Sales top $100 million.
2007:: Firm begins offering high-definition Blu-Ray disc capability.

In early 2004 the company formed a partnership with Anacomp, Inc., to provide maintenance support for its products in North America and Europe, augmenting its existing reseller network. The firm opened an office in Tokyo in the fall, and also introduced DiscLab, a small-sized, automated CD/DVD production system for networked use in medical imaging and retail digital photography applications. At year’s end the firm reached an agreement for Tech Data Corp. to distribute its Desktop line to retailers around the United States.

In 2005 the company introduced the Rimage 360i, an automated CD/DVD burner designed for desktop use which was priced at $2,500, and announced it would guarantee the integrity of data stored on its discs for 100 years. Sales of Media Kits, which contained discs, printer ribbons, and other consumable supplies, continued to grow, and combined with maintenance contracts accounted for more than a third of revenues.

In 2006 Rimage equipment was chosen by Hewlett-Packard for use in its Photosmart Studio CD kiosks. The firm also partnered with TDK to offer the first thermal-printable recordable higher-capacity Blu-Ray discs, and introduced the Producer III disc publishing system, the latest version of its premium product. The company had record sales of more than $103 million and net income of nearly $13.1 million for the year.

In 2007 Rimage introduced the Medical Disc System, an improved CD printing device that offered rapid output, multiplatform software capabilities, and compact design. The firm had an estimated 80 percent of the medical CD-R/DVD-R equipment market. The company continued to experience strong growth during the year, receiving new orders for $8 million and $6.5 million, for disc publishing systems and associated maintenance and supplies respectively from two major U.S. retailers. A new Blu-Ray disc publishing device was offered in the early summer, as well.

In 20 years Rimage Corp. had transformed itself from a producer of computer diskette manufacturing equipment into a leading maker of CD and DVD recording devices that offered high-quality color labels. Its product line ranged from networked office-size units to professional-grade models for customers that produced large numbers of discs. Further growth appeared certain as customers adopted new technologies such as Blu-Ray.

Frank Uhle

PRINCIPAL SUBSIDIARIES

Rimage Europe GmbH (Germany); Rimage Japan Co., Ltd.; Rimage S.A.R.L. (France); Cedar Technologies, Inc.

PRINCIPAL COMPETITORS

Primera Technology, Inc.; Teac Corp.; Microtech Systems, Inc.; LSK Data Systems GmbH; Microboards Technology, Inc.; Formats Unlimited, Inc.; Mediatechnics Systems, Inc.