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Harman Reports Higher Q2 Sales, Lower Earnings

Washington — Harman International Industries reported higher sales but lower net earnings due to portable navigation devices, product mix and higher costs for its second fiscal quarter, ended Dec. 31.

Net sales for the quarter were $1.066 billion, a 14.4 percent increase compared with $932 million for the same period last year. Net income was $43 million for the quarter, down from last year’s $81 million.

“Although we continue to increase sales across all divisions, our automotive earnings are under pressure due to portable navigation devices (PND), product mix, and higher engineering and material costs during a period of record launch activity,” said Dinesh Paliwal, Harman’s CEO. “We are accelerating a number of strategic actions to improve our cost structure and optimize our global footprint in the automotive sector, while flattening our broader organization to instill a strong culture of execution.”

Net sales continued to grow across all three divisions, Harman reported with the growth in overall net sales due primarily to increased shipments of infotainment systems to automotive customers and higher sales of consumer and professional products to major distributors.

In the Harman consumer division,n net sales for the quarter were $184 million, an increase of $21 million, or 12.7 percent, compared with the same period last year. Operating income was $17 million, up $2 million from the previous year’s second quarter.

In the consumer division, Harman said market trends continue to show additional focus on the integration of large flat screens, iPod music players and wireless applications. Key Harman rollouts in 2008 will offer greater integration and connectivity of audio and entertainment systems. These include the Harman Digital Lounge, a “store within a store” merchandising concept for retailers, and the Harman/Kardon DMC 1000 Media Server that delivers content to as many as four separate household zones.

In the automotive division Harman’s net sales for the quarter were up 15.5 percent to $730 million from the same period one year ago. But operating income was down 60 percent to $36 million compared with last year’s second quarter.

Sales continued to be strong to key automotive customers including Audi, BMW, Chrysler, Toyota/Lexus and Porsche. The majority of PND sales are recorded in the automotive division. PND sales fell by $29 million compared to the same period last year. Both PND sales and margins decreased due to aggressive price reductions by competitors, the delay of new products and the sale of older products at substantial discounts.

Just prior to announcing its fiscal second quarter results Harman announced strategic initiatives which in the company’s words will “improve simplicity and cost.” Corporately Harman’s headquarters will move to Stamford, Conn. It currently has offices there, as well as Washington and Northridge, Calif. Dr. Sidney Harman, chairman and founder, will continue to maintain an office in Washington.

The Harman Specialty Group also announced plans to consolidate offices during the next several months. The Group markets the Mark Levinson, Revel and Lexicon brands.