HTC One, More Infotainment Wins Spur Harman to Upgrade Fiscal 2014 Revenue Outlook

Harman revised its revenue outlook north for fiscal 2014 to $5.27 billion, its second guidance revision for the fiscal year. The company projected revenue of $4.7 billion in August and upped the figure to $5.1 billion in January. All three company divisions had double-digit growth in fiscal Q3, said CEO Dinesh Paliwal. Sales grew 32 percent to $1.4 billion with net income of $73 million versus $35 million in the year-ago quarter, the company said.

Harman’s Lifestyle division revenue -- which grew 43 percent to $468 million -- was driven by “one large order” from a mobile telecommunications customer, the company said in the earnings release. Sprint announced Tuesday the HTC One (M8) Harman Kardon smartphone featuring high-res audio using Harman’s Clari-Fi technology (CED, April 30 p1).

On whether Harman is looking to extend Clari-Fi to other smartphones and tablets, Paliwal said in Q&A that mobile devices offer a new opportunity for the company. Clari-Fi, previously known as Signal Doctor, launched in JBL Authentics speakers earlier this year and will debut on the automotive side in the Mark Levinson Premium Surround Sound Audio System. Its first car win is in the 2015 Lexus NX that will be sold in Europe and Asia (CED April 22 p7). By the end of the fiscal year in June, Harman will have more than a dozen vehicles incorporating Clari-Fi, Paliwal said.

Harman has been approached by other handset makers about incorporating Clari-Fi, which Paliwal said is a “very attractive opportunity as a licensing model.” In the partnership with HTC, Harman had “half a dozen software engineers” work with HTC engineers in Taiwan to perfect the technology, Paliwal said. While the mobile device business “could expand,” the company hasn’t “sized up the opportunity,” Paliwal said. But Harman expects Clari-Fi to grow on the streaming music side as a sound quality solution for compressed music. “In economic terms, it does have value and does have opportunity that we will try to maximize,” he said.

In the Infotainment segment, revenue jumped 29 percent to $736 million in Q3 versus the year-ago quarter, Harman said. During the quarter, Harman secured additional system designs from BMW for its NBT infotainment system and launched programs across several VW Group vehicles, including the Audi TT, the Porsche Macan and 911 Targa, and the Lamborghini Huracan, it said. Scion vehicles in North America will offer Harman’s Gen II infotainment, it said. At the Geneva Motor Show in Munich during the quarter, Harman showed its HTML 5-based scalable infotainment platform that’s built around connected car apps and advanced safety features and designed to protect against cybersecurity threats. Paliwal called the solution “a foundation to support the future of autonomous driving.” Harman has also begun integrating smart apps including Apple CarPlay and Google Automotive Link into its embedded infotainment solutions, he said.

Harman is seeing growth from carmakers extending infotainment solutions from the high-end to mid-range in the luxury car market, Paliwal said. Harman’s NTG5 infotainment solution, once reserved for the Mercedes Benz S class has extended to the C and V classes as well as to Chrysler vehicles, he said. Almost every infotainment system Harman is integrating into the car now includes a built-in camera and software optimization, reinforcing Harman’s integration message that “cameras alone and phones alone cannot give the experience drivers are looking for,” Paliwal said.

The recent ruling by the National Highway Traffic Safety Administration (NHTSA) requiring rear visibility cameras in all new vehicles fewer than 10,000 pounds is a positive for the infotainment industry, Paliwal said. “That will require everybody,” including makers of entry and mid-segment cars, to include infotainment to some degree, which will result in a proliferation of in-vehicle technology for a broader market segment, he said. Harman hasn’t sized the potential market resulting from the NHTSA ruling, which goes into effect in May 2018, “but it’s pretty significant,” he said. Harman shares closed down $1.92 to $107.69.