AUDIOVOX TO SELL STAKE IN WIRELESS UNIT
Audiovox’s move to sell a controlling stake in its wireless unit to S. Korea’s Curitel Communications appears to sharpen further its focus on its growing CE business. Audiovox said late last week that it had signed a preliminary letter of intent to sell a stake in Audiovox Communications Corp. (ACC) to Curitel, Korea’s 3rd-largest mobile phone maker. Terms weren’t released and an Audiovox spokesman declined further comment.
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Audiovox owns 75% of the wireless unit, while Toshiba, which supplies it with CDMA-based cellular phones controls the remaining 25%. Toshiba initially bought a 5% stake in ACC in 1999 for $5 million. It increased the investment 3 years later to 25% with the acquisition of $23.8 million of stock and an $8.1 million convertible subordinated note. Unclear at our deadline Fri. was how the proposed sale to Curitel, which requires due diligence and the signing of a definitive agreement, might alter Toshiba’s investment in ACC. Also unclear was how Curitel’s proposed investment in ACC might affect existing management, including Pres. Philip Christopher, whose contract carries a $500,000 annual base salary and runs through May 29, 2007.
“We welcome the interest shown in our company and its management and recognize that partnership with a strong manufacturer, such as Curitel, will permit expansion of our product line and render us very competitive,” Christopher said in a prepared statement. Among ACC’s major handset customers is Verizon Wireless.
Curitel, a former Hyundai subsidiary that started out with analog mobile phones in 1993 and gradually added CDMA, GSM and GPRS models, already is one of ACC’s major suppliers. Curitel, which raised $100 million with a listing last year on the Korean stock exchange, forecast selling 17 million phones in 2003 in Korea, China and the U.S. Its facilities in Inchon, S. Korea, have an annual capacity of 10 million units. In addition to standard cellphones, Curitel developed Korea’s first 330,000- pixel digital camera phone and introduced models for 3G wireless networks. Among its larger customers is Hutchison-CAT, which reportedly has 400,000 customers in Thailand.
The sale of a stake in ACC would appear to free Audiovox to continue expanding its CE business, which accounted for 50% of its $271 million revenue in the 3rd quarter ended Aug. 31. That was up from 34% a year earlier and came as wireless declined to 49.1% of total revenue from 65.3%. The CE segment benefited from Audiovox’s $42.3 million purchase in July of bankrupt Recoton’s home audio business, which gave the company access to the Advent and Acoustic Research (AR) brands in the U.S. and Magnat and Mac Audio in Europe. Audiovox has since moved Advent and AR brands beyond audio and into a select number of flat-panel displays. Audiovox also sells DVD home and portable decks under its own brands and has made a strong push in the mobile category with rear seat entertainment packages. Audiovox is due to report its 4th-quarter and year-end earnings on Tues. Its stock was trading up 5.68% at $15.43 on Fri. afternoon on volume of 225,794 shares, more than double the 3-month daily average of 102,361.