Pantech was once the second largest cell phone maker in South Korea, but as the smartphone market took off the company was one of many manufacturers unable to carve out a profitable niche in the tiny space left between Apple and Samsung.
Two years ago Pantech was rescued from bankruptcy by two other Korean companies, Solid and Optis. According to Ken Sandfeld, president of Solid Americas, the South Korean government was determined to see Pantech survive.
“The government really wanted the assets to be purchased and wanted someone to make a go of it,” Sandfeld said. “It really has cost a lot of money to keep a company like that going.”
Sandfeld said that because the Solid loans to Pantech were impaired, Solid wrote them off its balance sheet at the end of last year. The Korea Exchange temporarily halted trading in Solid shares while the company explained the situation to market regulators. The review was completed in four days with no adverse finding, Sandfeld said, and the stock resumed trading.
After Solid bought part of Pantech, its net income plunged from roughly $12 million in 2014 to about $3.3 million in 2015. Then in 2016, Solid reported a $59 million loss, despite a 53% increase in revenue. The company reported big increases in research and development expenses, depreciation, and most notably in expenses associated with sales and administration, which tripled in 2016.
“Expenses and R&D, 98% of that … is a result of the acquisition … basically that was all related to Pantech,” said Sandfeld. He added that the part of Solid that makes and sells distributed antenna systems is financially strong.
“Solid Gear, the entity name that the DAS division runs under, is completely separate, although ultimately it all does roll up,” Sandfeld said. “But we’re very financially sound.” He said his business in the Americas is growing 30% a year.
Addressing the IoT market
Solid is not giving up on Pantech. Instead the company is supporting the device maker as it tries to find new life as a developer of IoT solutions as well as handsets. Sandfeld said Pantech is working on sensors, radios, chips and software, all related to the internet of things.
One positive for the company is its patent portfolio, Sandfeld said. He said Pantech had a global IP package related to LTE and radios. It’s unclear whether these patents are relevant to lower categories of LTE that will be used for many IoT use cases. But whether or not Pantech finds success as an IoT solutions provider, Solid is ready to move on, according to Sandfeld.
“As part of the write-off, as part of the way it was transacted, there is no further obligation to Pantech,” Sandfeld said. “Basically Pantech has to survive or not.”
