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Klipsch Gets Equity Investor, Buys Jamo

2/15/2005 08:32:00 AM Eastern

Indianapolis — Klipsch Audio is stepping up its international expansion strategy with an equity investment from a major venture capital firm and the purchase of Danish audio supplier Jamo.

The purchase is “a targeted first acquisition,” said Paul Jacobs, Klipsch Audio Technologies’ president and newly appointed president of Jamo International. The purchase gives Klipsch “a solid position across multiple channels of distribution in all key markets around the world,” he said. Jamo, he explained, has “a more significant presence than Klipsch in every country outside the U.S. and Canada and has massive distribution in China,” while Klipsch enjoys top speaker-market share in the United States.

Vantage Point Venture Partners purchased a minority stake in Klipsch Audio Inc., which will operate Jamo as a wholly owned subsidiary as it does Klipsch Audio. Majority control of Klipsch Audio Inc. remains with Fred and Judy Klipsch.

Vantage’s investment will serve multiple purposes, Jacobs said. It will enable Klipsch “to take complementary brands that cover a wide range of loudspeaker-based products across the globe,” and it will better position the two brands to improve their standings in growing speaker-related businesses outside the home cabinet-speaker market, he added. Those markets include custom-installed speakers, home theater electronics/speaker packages and personal listening products, such as Klipsch’s recently introduced amplified speaker system/docking station for iPods. For Jamo, known for its Danish design, logical new products would include high-performance table radios, Jacobs noted.

The purchase of Jamo will also deliver efficiencies in back-end operations such as warehousing and finance, and it will increase the purchasing power of the two brands, Jacobs said. Jamo, however, will be run independently with separate marketing and design teams to maintain separate identities. Jamo’s U.S. marketing and sales operation will remain in Chicago and continue to be led by U.S. managing director Helge Fischer.

Jamo’s U.S. operations are profitable, but Jamo itself wasn’t, said Jacobs, who noted that Klipsch was in a position to buy Jamo without Vantage’s equity stake.

Although the size of Vantage’s minority stake wasn’t disclosed, Vantage’s Web site points out that the firm “prefers to take a position of some substance (typically 25 percent to 50 percent) in its portfolio companies.” Vantage’s portfolio consists of more than 50 technology companies that have received more than $2.8 billion in capital from Venture.

All of Vantage’s companies are outside the consumer electronics industry except for speaker startup Tympany and Klipsch. Vantage invests primarily in five types of industries: clean energy technology, communications, healthcare, semiconductors and components, and software and the Internet, the company’s Web site said.

In other changes, Klipsch hired John Carter, former chief engineer at Bose, as chief technical officer, and Tom Jacoby, former Harman Consumer Group president, as chief development officer and vice chairman. Both executives were partners in a consumer electronics consulting company that developed Klipsch’s global expansion strategy, said Jacobs.

In expanding on the fit between the two brands, Jacobs noted that Klipsch and Jamo’s U.S. distribution and position are complementary. In the United States, Jamo sells through regional distributors, mainly to customer installers. Most of the U.S. operation’s sales are in custom-installed speakers, although the company offers cabinet speakers and has diversified into home theater systems, component-audio electronics, a distributed-audio system and plasma TV. Because of rapid price compression, however, Jamo is withdrawing from flat-panel TV, Jacobs said.

In contrast, Klipsch sells direct, and most of its sales are in home and pro cabinet speakers. The brand, however, recently raised its custom-speaker presence, diversified in a small way into home theater systems, and last year obtained exclusive worldwide rights to market Oxmoor’s ZON distributed-audio systems. Klipsch intends to buy Oxmoor at some point, Jacobs said.

Also as part of a diversification drive, Klipsch in late 2000 bought select assets of Mondial, which marketed the Aragon and Acurus audio electronics brands. Today, Klipsch markets Aragon-branded amplifiers and an Aragon preamp/processor to complement its speaker selection. The Acurus brand is inactive.