Directed Electronics to Exit Satellite Radio Business

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11-05-2008, 05:52 PM
Demian

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."
11-05-2008, 06:23 PM
Wheelhouse

This tells me (possibly) Sirius may be seeking a new technology in its radios that this supplier can't do...
11-05-2008, 06:27 PM
Demian

Quote:

Originally Posted by Demian

"...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?
11-05-2008, 06:33 PM
SiriusHope

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.
11-05-2008, 06:41 PM
APEXSPORTS

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
11-05-2008, 06:42 PM
Demian

Maybe SIRI wanted out.....

Quote:

Originally Posted by SiriusHope

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.....
11-05-2008, 06:45 PM
APEXSPORTS

SYNERGIES MAN SYNERGIES :yesnod:
11-05-2008, 09:06 PM
homer985

Quote:

Originally Posted by Demian

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.
11-05-2008, 09:39 PM
SiriusHope

thanks guys for your explanations of why the contract won't be renewed.
11-05-2008, 11:47 PM
deewcom

Switching to XM Supplier

...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.....

I own shares of DEIX so I watch it (tank) closely. It's SP has been keeping pace with SIRI in the nosedive department. I concur with Demian and Homer. There have been indications that XM has the better technology and that in the long run, SIRI will end up using XM satellites and receivers. It would make sense to dump DEIX and go with XM's supplier.

Keep in mind that DEIX is a designer and supplier. Manufacture occurs in Asia. Interestingly, high powered (the second wealthiest next to Jane Harmon of Harmon Kardon) Republican Congressman Darrell Issa owns the lion's share DEIX (Including the real estate it sits on in Vista, CA).

DEIX used to complain about returns and warranty work for SIRIUS products. DEIX claimed that SIRIUS-related warranty business was killing their bottom line. There was much discussion about managing warranty and returns in DEIX company statements. Seems like DEIX wanted to get out from under the SIRIUS warranty commitments.

The Retail end is in many ways a do-over/new endeavor/new beginning. All that being said, the primary motivation IMHO, is that SIRI is gearing itself toward XM technology.
11-06-2008, 12:53 AM
Demian

XM always had the best technology and their chips ran so much cooler.....

DEIX has some good brand names like Polk....too bad the consumer market for home stereo and car alarms etc. is so sucky right now...

DEIX is in the bargain basement right now - just like SIRI....
11-06-2008, 02:40 AM
SiriusHope

Deewcom...

Thanks for your input...it gave me more insight about the differences in equipment and the circumstances.
11-06-2008, 09:35 AM
imromo24

So this is one of those positives that could be spun into a negative?
11-06-2008, 10:54 AM
Siriusowner

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.
11-06-2008, 08:14 PM
Newman

Siriusowner: Welcome to the Forums! Don't lurk, join us!

As far as the announcment, it was not a "material" development, thus it was not required to be announced. It probably (and now definately) was going to be talked about at the conference call on Monday, and thus they were going to wait until then to release any info on it. In addition to that, based on the forecasts that were released today, it sounds like Mel and co. have been busy working on financing. As the release was not required, it got pushed to the back burner.
11-06-2008, 11:42 PM
deewcom

DEIX gains 25 percent, though still in the toilet

DEIX posted a 25 percent gain today closing at 34 cents a share. Investors viewed it as a positive move by DEIX to end its SIRIUS business. DEIX will rake in some money when they pawn off existing junk inventory on the new supplier.