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B&O Turns 80, Targets New Segments

11/21/2005 02:00:00 AM Eastern

Arlington Heights, Ill. — Change is possible when you get old.

On its 80th anniversary, Bang & Olufsen is entering such new business segments as factory-installed autosound and battery-powered portable radios. Both products will be available in Europe and the United States. In recent years, the company also entered the headphone MP3 market.

In another change, the company is launching new opening price points for an amplified-speaker pair at $1,200/pair compared to a current opening price of $2,200/pair.

B&O is also increasing its presence in the compressed-music market by offering MP3 and WMA playback in the new portable radio and in the new compact system, which is the company's first to rip CDs and transfer their contents and recorded-radio content to removable flash memory cards. Both devices use removable SD cards, which are also used in B&O's headphone MP3 player.

The company already offers a CD music system with built-in HDD for ripping and storing music.

While changing with age, B&O also seems to be making ends meet, unlike many 80-year-olds. Its Bang & Olufsen America (BOA) subsidiary has operated on a break-even basis during each of the two fiscal years, ended May 2005, after three to four years of posting losses that totaled millions of dollars per year, said Torben Sorensen, president/CEO of the Struer, Denmark, company. The U.S. business, he contended, was “always marginally OK” because cash flow was never negative. The main problem was high “indirect costs in the back office,” he said.

Now, he said, the U.S. business is getting better as evidenced by strongly rising same-store sales through B&O-branded stores in the United States. For the fiscal year, ended May 2005, total sales in North America rose only 4 percent to about $70 million after Bang & Olufsen America (BOA) reduced the U.S. store count by three outlets, to a current 51. During the same period, five corporate stores got divested from corporate ownership to independent ownership.

For the fiscal year, BOA wholesale sales of products to independent and B&O-owned shops rose 14.6 percent. The organic growth “is a good sign that our strategy is fundamentally good,” Sorensen said.

The same-store gains are attributable in part to new programs that allow B&O stores to distribute products out-side their trading areas to custom installers and to a new store-in-store program that allows dealers to establish branded stores inside other retail stores that share B&O's demographic. Dealers have set up seven stores within other stores.

Worldwide, B&O boosted revenues by 4 percent for the year, to $590 million, and EBIT (earnings before interest and taxes) by 14 percent to $61 million. Operating profit was up 13 percent to $60 million. The company didn't report net profit. Return on investment grew to 18 percent from 15 percent during that time.

Another new revenue generator for the current fiscal year is B&O's first OEM autosound system, which will be available through Audi dealerships in the United States and Europe as a factory-installed option in Audi's top-end A8. The option costs $7,100 at the euro exchange rate of $1.18 per euro. The car itself will cost up to $148,000 in the United States and will be available here in April 2006, B&O said.

B&O developed the amplification, DSP and speakers in conjunction with Audi engineers. The system features 14 individually amplified drivers, two of which rise from the dash when the system is turned on. The two motorized tweeters use B&O's home-speaker acoustic lens technology (ALT), which disperses high-frequency sound to widen the stereo image. The Audi system also features equalization that dynamically changes with speed and ambient noise conditions, plus four-position DSP settings to optimize imaging for four seating positions.

For home and outdoor use, B&O plans late-year availability of its BeoSound 3 portable radio, December availability of its BeoLab 4 active speaker pair, and first-quarter availability of its BeoSound 4 compact system.

The BeoSound 3, at $850, is an aluminum-chassis 16.57-inch by 3.54-inch by 5.3-inch tower with a black, circular rubberized handle and a red LED display that shines through the cabinet's small perforations. The wall-mountable FM-only radio, which operates off a 10-hour rechargeable battery, plays through an embedded speaker in mono and through optional headphones in stereo. It also plays MP3 and WMA music files stored on SD memory card.

The $2,750 BeoSound 4 music system can be floor-, table- or wall-mounted. Its glass door automatically opens with the wave of a hand. It incorporates single CD mechanism, RDS-equipped FM tuner and MP3/WMA decoder to play music stored on a removable SD card slot. The system encodes CDs into MP3 or WMA for transfer to SD cards, which can be inserted into B&O's headphone MP3 player. It also records FM broadcasts to SD card.

BeoSound 4 can be mated with any of B&O's amplified speaker systems, including the new bookshelf-size pyramid-shaped BeoLab 4 models at $1,200/pair. They're B&O's smallest speakers to date despite the inclusion of internal amplifiers that deliver a combined 2x35 watts. Their cloth covers are available in five colors, and they're wall-, floor- and table-mountable.

Other B&O music systems include the opening-price $2,400 BeoSound 3000 and the $3,400 BeoSound 3200 HDD-equipped model.

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