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AUDIOVOX UPCOMING RESULTS WILL SHOW IF STRATEGY SHIFT WORKED

The hefty number of strong, new competitors entering the handset market doesn’t intimidate longtime terminal supplier Audiovox Communications Corp.

“Look how many have exited in recent years, like Clarion, Sharp, Panasonic, Sanyo, NovAtel,” said Philip Christopher, president and chief executive officer of the Hauppauge, N.Y.-based company. “New companies in this market are just a second wave, brought by the new technology. So really, it’s no different. There were powerful groups before, too,” Christopher said.

Audiovox Communications is expected to release financial figures this month that will reveal whether strategic changes made in the last two years have increased the company’s strength in the face of pricing pressures.

Audiovox Communications Corp. was created in October from the cellular division of Audiovox Corp. It operates as a wholly owned subsidiary of Audiovox, which also sells products for the automobile security and stereo industry.

Audiovox says it has a 20 percent market share of the cellular terminal business, with most of its sales inside the United States.

“Audiovox has more than 7 million phones in the market. Our special promotion in 1996 was digital features for analog phones, called Analog Plus. In 1997, all our analog phones will have digital features,” Christopher said.

Audiovox designs phones but has no manufacturing plants. It buys the majority of its phones from Toshiba Corp. in Japan, committing to substantial quantities.

“Carriers are in the airtime business, not the terminal business. We relieve the headache of terminals for them. We’ll private label phones, and provide unique features. We provide them with flexibility because we can be flexible,” Christopher said.

John Shalam, chairman of Audiovox Communications, added, “We can go to the manufacturer who makes the best products and move faster than competitors with factories.”

For instance, Toshiba will build a Code Division Multiple Access phone for Audiovox because Toshiba supports CDMA technology. But Toshiba doesn’t support the Time Division Multiple Access standard. So Audiovox looked elsewhere.

Audiovox formed a joint venture with the Shintom Company Ltd. of Japan to create Talk Company Ltd. Audiovox owns 30 percent of Talk, which is developing a TDMA chipset with Texas Instruments of Dallas. And Talk will build TDMA phones in Japan for Audiovox.

As segments of the wireless market begin to specialize, terminal sales can increase, Christopher said. “An expanded product line is opportunity for many to specialize in a niche market,” he said.

Audiovox’s niche product is the ACT-900, which Audiovox developed for BellSouth Cellular Corp. and expects to commercially introduce in March. The ACT-900 is a “combo phone” that operates at 800 MHz cellular and 900 MHz cordless frequencies.

The phones will be branded BellSouth inside the BellSouth service area and Audiovox outside of BellSouth’s region.

Audiovox also is one of three terminal providers that have contracted with the cellular purchasing partnership Tomcom L.P., owned by AirTouch Communications Inc., U S West NewVector Group Inc. and Bell Atlantic Nynex Mobile. Motorola Inc. and Nokia Mobile Phones are the other providers for Tomcom.

Audiovox is introducing its dual-mode CDMA phone for cellular users by the middle of this year. By November, Audiovox hopes to have a CDMA phone for 1900 MHz carriers. Audiovox also plans to provide a phone that supports Global System for Mobile communications technology at 1900 MHz by fall.

The supplier also is working with Omnipoint Corp. to develop a phone based on Omnipoint’s Interim Standard 661 technology. An Audiovox-branded Omnipoint phone could be ready in 1998. Omnipoint recently launched its New York network using GSM, with plans to migrate to IS-661 service.

Quintex Communications, a division of Audiovox, sells the phones and activates service as an agent. Quintex is an agent in the Northeast for Bell Atlantic Nynex Mobile; has a Virginia contract with GTE Corp.; activates phones for BellSouth Cellular in 13 stores; and does AirTouch activations in three stores in California and one in Washington state.

However, Quintex hasn’t garnered any contracts with PCS operators. Some cellular contracts won’t allow Quintex to activate for a competing PCS carrier.

“We see the market approach of PCS, with direct stores and large retailers-no commissions, no residuals,” Christopher said. “The concept is to simplify and the PCS carriers are having an influence. But the days of the agent are not over. Most carriers are committed to indirect distribution.”

Quintex had 105 retail stores in 1995, but last year reduced the number of stores to 30. Sales went down slightly, but the move is making the remaining stores more profitable, Shalam said.

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