Colorado vNet Shuts Down Again After Asset Purchase by Russound Can’t Pay Off

Colorado vNet, whose assets were purchased by Russound when it ceased operations in October 2009, will shut down operations for a second time, company executives said Wednesday in a conference call with reporters. After “much discussion and evaluation,” CEO Charlie Porritt said, “we've decided to discontinue shipping the Colorado VNet product line and wind down sales operations.” Porritt said the company will reassess the product line “as it relates to the evolving custom install market and focus on R&D for the future."

The decision is the latest blow to the custom electronics market, which has been hard hit by the economic crisis, consumer expectations of lower-priced product and by the crippling fall-off in new home starts. According to Petro Shimonishi, vice president of sales and marketing for Colorado vNet, “turning around a company after such an abrupt closure is difficult work.” Colorado vNet automation and lighting control products had a luxury market focus, and Shimonishi said in light of current economic conditions, the company decided it was best for the organization and channel partners to shelve the current line. Down the road, she said, the company may choose to “revise the line in a different format and make it available to a broader market.” Price performance and the target market of higher end luxury homes were too small to support the business and the revenue the company needed to generate, she said. She said the company stands by the purchase of the assets last year, believing they still offer a “great amount of potential.” The assets include technology and intellectual property “that’s relevant for the long term,” she said.

Authorized Colorado vNet dealers will be able to purchase products and receive tech support on products through March, allowing them to complete jobs and service customers, Shimonishi said. The company has roughly 450 dealers nationwide, she said, and a “decent amount” of international distributors. Shimonishi said the company would continue to support dealers “as much as we possibly can within the scope and the bounds of the business” but added that as operations wind down she expects dealers “will also wind down the relationship with Colorado vNet."

Installing dealers will continue to provide tech support to customers through March 31, she said. “There are some slight modifications” to warranty for products by installing dealers from Colorado vNet Corp., she said. The company will continue to honor warranty claims received on or before March 31 of 2011 for any products purchased after Jan. 1, she said. Regarding what happens following March 31, Shimonishi said, “We will make our best effort to make sure there are replacement parts to honor any warranty claims,” she said, but “we can’t guarantee that."

Regarding a timeline for a possible next-generation product line, Shimonishi said, plans are still unfolding. The company will have updated information about next steps in the first half of 2011, she said, but currently there are no plans for Colorado vNet technology to be incorporated into the Russound product line. As a manufacturer of distributed audio systems, “Russound doesn’t have a presence in the home automation market,” she said, “so re-branding the product line is not an answer.” Whether the Colorado vNet brand will be in future plans hasn’t been decided, she said.

At Colorado vNet’s Loveland, Colo., offices, sales personnel will be hardest hit by the shutdown, Shimonishi said. She didn’t have the final numbers about how many workers would lose their jobs, she said, but “it affects the majority of employees."

Shimonishi, who has had an “evolving career” with both Colorado vNet and Russound, was hired originally as vice president of business development for Russound. After Colorado vNet assets were purchased, she was tapped to head sales and marketing for that company. In the past month, she said, she’s been straddling sales and marketing for Colorado vNet and marketing for Russound and believes her efforts “may be focused there in the future."

She said the announcement doesn’t have a direct or indirect effect on Russound’s business because the companies are separate entities. When asked whether Russound, too, is reevaluating its focus and target market, Shimonishi said she hasn’t been focused on the Russound side of the house enough to know future plans at this point: “All manufacturers have gone through difficult times over the past 18-24 months.” As the custom installation market continues to evolve through IP-based connected technologies, control devices like the iPad, and “other disruptive technologies,” she said, “I'm sure everybody is evaluating their next strategic move.”