Audiovox Unfazed By Qualcomm Suspending Flo TV Sales

Audiovox was “disappointed” with Qualcomm’s recent decision to suspend direct-to-consumer sales of FLO TV devices (CED Oct 5 p8), but doesn’t expect much of an impact to Audiovox’s business from it, CEO Pat Lavelle said on a Wednesday earnings call. The manufacturer reported mixed results for Q2 of fiscal 2011 ended Aug. 31.

Audiovox was a “firm believer” in the FLO TV service and its “market potential long-term,” and continued to believe “the time is right for affordable live content in the vehicle as it remains the number one consumer request for entertainment options” in vehicles, Lavelle said. But he said Qualcomm’s decision “will not have a significant impact” on Audiovox’s fiscal 2011 revenue because “we had not anticipated overly high sales of the product in its first year.” Audiovox knew that, as with any new technology, FLO TV “would take time to catch on,” he said. The manufacturer will “work with FLO TV to transition out of this business with no loss to Audiovox,” he said. Audiovox will also “replace these sales as new technologies like mobile HDTV rolls out during fiscal 2012,” he said.

Q2 sales grew 3.5 percent from a year earlier to $129.3 million. Profit tumbled to $645,000, 3 cents a share, from $2.8 million, 12 cents. Electronics sales jumped 20.5 percent to $95.2 million.

Lavelle was “most encouraged … by the positive growth” in the company’s mobile electronics business, “with all signs pointing to continued increases in car sales over the coming year,” he said. Mobile electronics sales soared 56 percent from Q2 last year on increased car sales, its purchase of rear-seat entertainment device maker Invision Automotive Systems and “strong performances in all of our aftermarket mobile segments,” he said.

The company’s audio, video and security sales all grew from Q2 last year, while OEM sales grew more than $20 million from Q2 last year, Lavelle said. But he said CE and accessory sales continued to be hurt by “lower consumer spending.” Overall CE sales fell about 3 percent. CE “could have posted small gains had it not been for some supply issues we experienced which continued from” Q1, he said. Digital camcorder and media player sales were up only “slightly,” he said. Global accessory sales fell 25.6 percent to $34.1 million, “with the biggest shortfall coming from domestic antenna sales,” Lavella said. “Strong sales” in that category in Q2 last year were “driven by the transition from analog to digital TV,” he said. Excluding antennas, accessory sales were down 5.3 percent, the company said. Electronics accounted for 73.6 percent of sales for Audiovox in Q2, up from 63.3 percent a year earlier, it said.

"We remain cautious,” Lavelle said. “With unemployment still at all-time highs and consumer spending for non-essential items at all-time lows, we are planning conservatively for this holiday season."

Audiovox was “in the final stages for” the introduction of 14 multimedia car head units at CES in January that will include satellite radio, HD radio, iPod compatibility and navigation built in, Lavelle said. They are “designed for factory replacement,” and it expects “good reception from our expediter channel which services new car dealers,” he said. The company also entered the final testing stage for its new AirPower device under the RCA brand that will launch in early 2011 at CES, the company said. Lavelle described AirPower as a “portable power-harvesting device that will capture and store stray RF energy that can be used to charge small portable electronics."

The company recently introduced a new online Audiovox store and will roll out online stores for its RCA and Acoustic Research brands “in the next month or two,” Lavelle said. Audiovox is “taking an active role in e-commerce,” but its new products will be listed online at MSRP, and it plans to focus on discontinued merchandise and close-outs, he said. The company wants to increase e-commerce sales, but “we do not want to be in competition with our large retailers,” he said. Online sales accounted for an “insignificant” part of the company’s business last year, he said. Lavelle said the company is “evaluating our sites on a constant basis to make sure that they're fresh and up-to-date,” so he would “look into” a possible e-commerce solution for mobile devices.