Toshiba raised its ownership stake in Audiovox's communications subsidiary to 25 percent from 5 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.
As part of the $32 million deal, Audiovox Communications also gets the exclusive right to use the Toshiba name on wireless products in those markets, although the company isn't obligated to do so. If Audiovox markets a Toshiba-brand product, it would mark the brand's return to the U.S. market after an absence of eight years.
The deal was structured primarily to secure the two companies' long-term partnership, said Audiovox Communications president Phil Christopher. "We wanted to secure our future with Toshiba technology," and Toshiba "wanted to ensure a vehicle for its products to be sold in the western hemisphere," he said.
Toshiba has been building wireless phones for Audiovox on a private-label basis since the wireless industry's birth in the United States in 1984, but Audiovox never used the Toshiba brand. Between 1992 and 1994, Toshiba itself marketed Toshiba-brand phones in the United States.
The deal will also help Audiovox increase its market penetration, Christopher added. "We will use the Toshiba name where it adds value, particularly in [wireless] PDAs," he explained. He also pointed to Toshiba's expertise in digital still cameras, which Audiovox plans to incorporate in wireless phones and wireless-equipped PDAs in 2003.
With rights to the Toshiba name, Audiovox could also sell the same product to one carrier under the Audiovox name and to another carrier under the Toshiba name. The product could also be marketed under a carrier's brand or co-brand.
The agreement wasn't designed to raise cash, even though parent Audiovox Corp. posted a net loss in fiscal 2001, Christopher said. For the 12 months ended last November, parent company Audiovox Corp. recorded a net loss of $8.2 million compared to fiscal 2000 net income of $27.2 million.
Audiovox Corp.'s ownership stake in its subsidiary is now 75 percent.