Audiovox signed a non-binding letter of intent to sell a majority stake in its Audiovox Communications subsidiary to South Korean handset supplier Curitel, after Curitel made an unsolicited bid for the company.
Audiovox said it will also entertain other proposals, but as of February 24, no bids were received.
The terms of the transaction were not disclosed. Curitel has been selling handsets to the subsidiary for several years and in the past year became the subsidiary’s largest CDMA handset supplier.
Currently, Audiovox owns 75 percent of the communications subsidiary. Toshiba, which also supplies handsets to Audiovox, owns the remaining 25 percent.
Subsidiary president/CEO, Phillip Christopher, said that a partnership “with a strong manufacturer, such as Curitel … will permit expansion of our product line and render us very competitive.”
Strategy Analytics analyst Chris Ambrosio said the deal could be good for both companies. “Curitel can take a giant leap forward from where it would be trying to break into the market on its own.” Curitel’s phone expertise and capital could enable Audiovox to regain market share that has fallen from 9 percent in 2000 to less than 3 percent in 2003, he contended, because “delays and misaligned feature-set configurations sabotaged its ability to carve a profitable niche with its sourced products.”
Curitel will “likely consolidate its product line within the Audiovox brand,” make a “strong value statement to the entry-level market at Verizon,” and with its camera phone expertise, make “a clear value statement to the high-end camera phone market,” he continued.
Audiovox’s margins on cellular are in the single digits, while Audiovox’s consumer electronics margins hit 17.6 percent in last year’s fourth quarter.
Audiovox sold its first cellular phone in 1984, following the launch of the first cellular network in late 1983. In 1996, Audiovox created the Audiovox Communications subsidiary out of its cellular division. In 1999, Audiovox sold a 5 percent stake in the subsidiary to Toshiba. In 2003, Toshiba increased its stake to 25 percent as part of an agreement that gives the subsidiary the exclusive right to market Toshiba-made wireless products through carrier channels in North and South America.
In recent years, Audiovox has been expanding its portfolio in consumer and mobile electronics, in large part through acquisitions. Cellular revenue has represented between 65 percent to 80 percent over the years, most recently 60 percent of Audiovox’s consolidated revenue of $1.3 billion for its most recent fiscal year, ending last November. o