Bob, Audiovox designed, manufactured and marketed cellular phones for 20 years. Competition drove down margins, so they decided to concentrate on other electronics production, sell the handset asset and redeploy the funds looking toward more profitable acquisitions.
While Voxx was in the handset business they developed a good brand, which is what UTStarcom seems to have bought. Pantech, a manufacturer of handsets and a natural for the
Audiovox handset division , was outbid by UTStarcom which now pays Pantech to produce the handsets they will distribute. The revenues will be there, but profitability for UTStarcom with this commodity product has to be less than for either Voxx or Pantech, unless UTSI can pull some rabbit out from somewhere.
It could be that UTStarcom plans for cost control via very high volume business with manufacturers. Since only 20 million PAS subs will be added this year in China with UTSI's market share fading (and margins halved or worse), they need big global PAS, PAS/GSM and CDMA volume to get those favorable original equipment contracts and the ability to go against the Asian competitors that pushed VOXX into the sale. Tough roe to hoe, on the surface. |
