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Thread: Directed Electronics to Exit Satellite Radio Business

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  1. #1
    Demian is offline
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    Directed Electronics to Exit Satellite Radio Business

    http://biz.yahoo.com/prnews/081105/law528b.html?.v=1

    Press Release Source: DEI Holdings, Inc.

    Directed Electronics to Exit Satellite Radio Business
    Wednesday November 5, 4:15 pm ET

    * Focus to return exclusively to security and entertainment products
    * Company expects exit to result in recovery of working capital, reduction of debt, and increased gross margins

    VISTA, Calif., Nov. 5 /PRNewswire-FirstCall/ -- Directed Electronics, an operating unit of DEI Holdings, Inc. (Nasdaq: DEIX - News), today announced that it has entered into an agreement with SIRIUS XM Radio outlining key terms for winding down their business together by January 31, 2009, the expiration date of the current distribution agreement.

    Jim Minarik, DEI Holdings' President and CEO stated, "We became the primary retail distribution partner for what was then SIRIUS SATELLITE RADIO in 2004, and are proud of the results we have achieved by growing SIRIUS' satellite radio retail share from approximately 20% to over 60% during the past four years. However, based on the large working capital commitment required for this business, as well as a strategic decision on our part to focus on our core security and entertainment businesses, we will not be extending our current agreement with SIRIUS XM when it expires on January 31, 2009. We have enjoyed an excellent partnership with SIRIUS over the past four years and expect to continue working closely with them to ensure the smoothest possible transition to their new distribution partner between now and early 2009."

    The agreement specifies that SIRIUS or its new distribution partner will purchase substantially all remaining satellite radio receiver inventory from Directed in the first quarter of 2009 and assume full responsibility for all product returns and warranty costs after January 31, 2009, regardless of when the product was sold.

    Mike Simmons, President of Directed Electronics said, "While our role as SIRIUS' primary retail partner over the past four years has benefited Directed, it has also diluted our team's focus on our core security and entertainment businesses, sold principally under our Viper, Python, Clifford, and Orion brand names. Going forward, we are excited to be able to once again dedicate 100% of our attention to improving the experience, service, and innovation we deliver to our customers."

    Kevin Duffy, DEI Holdings', CFO commented, "Exiting the satellite radio business will allow us to focus on our core categories and also increase our ability to pay down debt by recovering the $20 to $25 million of working capital we have committed to this business."

  2. #2
    Wheelhouse is offline
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    This tells me (possibly) Sirius may be seeking a new technology in its radios that this supplier can't do...

  3. #3
    Demian is offline
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    Quote Originally Posted by Demian View Post
    "...we will not be extending our current agreement with SIRIUS XM when it expires on January 31, 2009. We have enjoyed an excellent partnership with SIRIUS over the past four years and expect to continue working closely with them to ensure the smoothest possible transition to their new distribution partner between now and early 2009."

    The agreement specifies that SIRIUS or its new distribution partner will purchase substantially all remaining satellite radio receiver inventory from Directed in the first quarter of 2009 and assume full responsibility for all product returns and warranty costs after January 31, 2009, regardless of when the product was sold."
    Was this built into the original agreement with Sirius or is there a new contract in place with a new supplier already?

  4. #4
    SiriusHope is offline
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    could this be because retail sales are so low that they wanted out??? I am sure if sales were brisk they would not want to backout.

  5. #5
    APEXSPORTS is offline
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    PIONEER MAKES STELETO IPOD FOR THEM TOP 10 X-MASS GADGET ALL CARS NOW ARE HAVING BUILT IN SIRIUS XM REC.. SO i BET THAT PIONEER MADE THEM A BETTER OFER AND BETTRE OPTION.. DIRECT STUFF WASNT VERY GOOD ANYWAY.. PEACE

  6. #6
    Demian is offline
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    Maybe SIRI wanted out.....

    Quote Originally Posted by SiriusHope View Post
    could this be because retail sales are so low that they wanted out??? I am sure if sales were brisk they would not want to backout.
    Maybe SIRI didn't want to pay them what they wanted so they decided not to renew their contract with SIRI when it expires in January.

    Maybe SIRI wanted out because they have negotiated a better deal with one of XM's suppliers. XM's manufacturing partners always made a better product anyway. Maybe by combining the Sirius and XM manufacturing contracts they can negotiate a way better deal with someone like Pioneer which makes a better product than Directed ever did anyway.....

  7. #7
    APEXSPORTS is offline
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    SYNERGIES MAN SYNERGIES

  8. #8
    homer985 is offline
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    Quote Originally Posted by Demian View Post
    Maybe SIRI didn't want to pay them what they wanted so they decided not to renew their contract with SIRI when it expires in January.

    Maybe SIRI wanted out because they have negotiated a better deal with one of XM's suppliers. XM's manufacturing partners always made a better product anyway. Maybe by combining the Sirius and XM manufacturing contracts they can negotiate a way better deal with someone like Pioneer which makes a better product than Directed ever did anyway.....
    This is the route I'm leaning here. Sirius is in the middle of re-evalutating everything from their suppliers to their content providers to their law firms to their audit firms... this is where the synergies come from. By combining suppliers between Sirius and XM.

  9. #9
    SiriusHope is offline
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    thanks guys for your explanations of why the contract won't be renewed.

  10. #10
    Siriusowner is offline
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    I am new to this forum but I have been reading it for while. Finally today I have question for you guys. If Sirius is looking for new distributors and working on synergies, why did Direct Electronics make this announcement and not Sirius ?

    It makes it sounds like doing business with Sirius is a bad deal.

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