Parent Company of Sunfire, Panamax, Speakercraft To File For Chapter 11 Bankruptcy

[chrisy]

Parent Company of Sunfire, Panamax, Speakercraft To File For Chapter 11 Bankruptcy

Nortek, the parent company of brands such as Sunfire, Panamax, Speakercraft, Xantech, Furman, Litetouch, Omnimount, Niles, Elan and other AV marks, announced yesterday at the CEDIA tradeshow in Atlanta that they would be filing for Chapter 11 Bankruptcy protection. The news came via a press release.

Nortek along with the likes of Planar, D&M Holdings and some private equity companies had been snapping up AV companies back before banks started getting stingy. Flush with funny money, buying companies from their founders was easy back in the day. Running them as and serving both the dealer base as well as the customer base has proven to be a whole other issue for AV industry consolidators, especially in these tough economic times.

Nortek is selling the concept that they are flush with cash despite the bankruptcy and that things will remain the same as before. Clearly, that wasn't good enough to become profitable in these difficult times. To survive Nortek will need to invest in new products, new concepts, become a better marketing company that doesn't rely on the lift from PR exclusively for product momentum if they have hopes of coming out of their problems looking and smelling good. What's more likely is Nortek looking to spin off some of the brands they gobbled up to raise even more cash so that they become more of a lean operation. Don't be shocked when more than one of the brands potentially goes on the block at deeply discounted prices. Jeremy Burkardt could buy back Speakercraft or Bob Carver could buy back Sunfire without me falling out of my Aeron chair out of shock.

Stay tuned.

Source: HomeTheaterReview.com

[StereoClarity]

Wow, it's a shame. The economy really has hurt our industry so much.

[graphicguy]

Interesting.....and sad. In addition to the economic malaise, there's been a fundamental shift from the local AV shop, where an enthusiast could sit, watch, listen, chat with knowledgeable representatives, to getting that same information to on-line sources.

Both have their advantages. Both have their pitfalls.

Manufacturers have been trying for years to limit the availability of their products to brick and mortar stores, in defined geographic locales.

Those who know a bit about the technical aspects of AV products, can now surf the WEB, looking only for the best price. However, those that need help, can come to forums such as these and get that advice. What they can't do, is to do a shop, listen, compare, by shopping online.

I do question how long certain brands will be able to hold out by marketing only to brick and mortar stores? For good or for ill, many will forgo getting solid information from these stores, to get the price they want (most times with no warranty) from internet dealers. Then, they'll rely on skimming the internet to get their installation, technology, and warranty issues handled.

I don't see this getting any better from these boutique brands. , even the big box stores are getting into the "deep discount" act, with little offered in the way of support. My much loved 60" KURO plasma display was bought from Costco. Load it up. Take it home. For a price that was roughly 40% less than my local (and now defunct) AV store, I did my research on line. Decided what I wanted. Delivery, unpacking, setting it up, was up to me.

Right or wrong, I traded services for price. Seems that's the way it's going.

Only way around this dilemma is for the boutique brands to offer their wares on-line, at their own WEB stores.

[lcaillo]

graphicguy wrote:

Manufacturers have been trying for years to limit the availability of their products to brick and mortar stores, in defined geographic locales.

Actually, what they have been largely doing is trying to keep the specialists who sell most of their products happy by limiting internet sales. The get lots of flak when they go direct, so they often play games with models and warranties to try to differentiate and give the dealers an advantage.

[tonyvdb]

Makes you wonder if stores like Best Buy were to sell Sunfire or B&W if sales on those products would actually improve, it seems like the little high end stores price themselves out of the market because of the high overhead.

[graphicguy]

lcaillo wrote:

Actually, what they have been largely doing is trying to keep the specialists who sell most of their products happy by limiting internet sales. The get lots of flak when they go direct, so they often play games with models and warranties to try to differentiate and give the dealers an advantage.

No doubt. What I've noticed....oh probably in the last two years, that the dealers have been shutting their doors. I know just in my neck of the woods, 3 have shut down in the last year.

I get to travel a lot. In most if the cities, I'm noticing the same thing, as I always make it a point to seek out AV shops to feed my AV obsession.

With fewer outlets, it's not surprising to me that some of the manufacturers are losing volume (or filing for bankruptcy).

There's a wealth of information one can glean by coming here, or even some of the other AV forum sites. That supports quite a few internet direct only companies like EMOTIVA, OPPO, SVS, EPIK, and others.

In short, you don't have to walk through the doors of a store to find good AV gear.

[tonyvdb]

graphicguy wrote:

In short, you don't have to walk through the doors of a store to find good AV gear.

That is really true, I have a good friend that works in one of our local High end shops and he simply could not come close to the price I payed for my Onkyo 805 his face dropped when he found out the price I payed going internet direct. It was not even close to the price he could get it for me.
And I really wanted to help him out by buying it through him.

[graphicguy]

tonyvdb wrote:

That is really true, I have a good friend that works in one of our local High end shops and he simply could not come close to the price I payed for my Onkyo 805 his face dropped when he found out the price I payed going internet direct. It was not even close to the price he could get it for me.
And I really wanted to help him out by buying it through him.

Yep....much cheaper to ship it out of a warehouse than it is set up a store, pay sales folks, turn on the lights, make the showroom look nice, etc. Plus, the internet AV community is way bigger than any local customer base.

But, you sacrifice actually touching, feeling, hearing any gear. And, you have to rely on forum members (like the ones here) to give their impressions. One bad apple in an internet forum, that doesn't like the equipment or the company in question can be difficult to "weed out the chafe from the wheat".

Still, even established brands have a tough time competing against the performance and value you can get from internet direct companies.

[tonyvdb]

but $400 difference? How can someone stay in buisness with that kind of price difference?

[graphicguy]

tonyvdb wrote:

but $400 difference? How can someone stay in buisness with that kind of price difference?

Two schools of thought........

1) Onkyo makes a bunch.....and I mean a whole bunch of those AVRs. They use the same platform for at least 3 different models. I'd say that out of the big brands (Onkyo, Pioneer, Yamaha, Denon, maybe Harmon Kardon), Onkyo outsells all of them. They're available seemingly everywhere. So, there's that whole economy of scale thing going on.

2) I'm waiting on the day you can buy an Onkyo AVR at your local convenience store (that's a bit of an attempt at humor). But, they are marketed by just about everyone, so it seems. They've got their own refurb store (www.shoponkyo.com). And, they sell their refurbs through another source, too (www.ac4l.com). Clearly, there's margin to be made, if they can still make that kind of money on refurbs.

You put massive manufactured quantities, together with widespread availability, you're going to see some hefty discounts.

[lcaillo]

tonyvdb wrote:

Makes you wonder if stores like Best Buy were to sell Sunfire or B&W if sales on those products would actually improve, it seems like the little high end stores price themselves out of the market because of the high overhead.

I am curious. Just what would you improve about B&W? I have been involved with dealers that have sold their product for nearly 3 decades and can count on my fingers the number of clients who were unhappy with the product or had an actual defect. They are not cheap but they are fantastic products, aside from their subs.

[tonyvdb]

lcaillo wrote:

I am curious. Just what would you improve about B&W? I have been involved with dealers that have sold their product for nearly 3 decades and can count on my fingers the number of clients who were unhappy with the product or had an actual defect. They are not cheap but they are fantastic products, aside from their subs.

Wasn't saying they need improvement (would love to own some myself) however if they sold there product at the big box stores would they not gain alot more sales prompting lower prices.

[nova]

I don't think so. From what I have seen and heard behind the scenes, once you're involved with the big box store you will receive a lot of pressure to lower prices. So while they may gain in sales they will lose in profit. Take a good look at what happened to Rubbemaid and their involvement with Wal-Mart. Maybe not apples to apples but,...

tonyvdb wrote:

Wasn't saying they need improvement (would love to own some myself) however if they sold there product at the big box stores would they not gain alot more sales prompting lower prices.

[lcaillo]

This is the danger with the big chains. Sears and Walmart have ruined many businesses by pressuring them to lower prices. Once they get them in the door and sales increase, they tool up for more production and then the big operator has leverage. They have to keep volume up to pay for the increased production capacity. It forces companies into a dangerous cycle of depending on sales growth to survive, which inevitably results in a lower quality of product and service.

Companies like B&W have carved out a niche in the market, make a very high quality product, and can sustain their business without relying on growth or can even survive when the economy takes a downward turn. Companies that position themselves to be dependent on sales growth to offset lower profit margins and leveraged positions (like in the case of the subject of this thread) simply do not have very good long term prospects, IMO. Nortek is a perfect example. They needed a great deal of growth just when the economy went down. Several of the individual companies would have been fine independently. Some of them, like Sunfire, were just dogs to start with.

[graphicguy]

Without a doubt....the Best Buy's, the Sam's Clubs, the Costcos have indeed changed the landscape of many consumer electronics companies.

However, I do believe many an eye has been opened regarding the markups that used to exist in the CE arena. There are still vertical markets that retain their very large margins, like jewelry retailers. But, those products are closely watched and controlled by relatively few (i.e. DeBeers).

Where we get into danger (OK, where I get into danger) is when I start thinking that just because I spend more money, my AV gear will look and sound better. I've found that, more than any other market, this simply isn't true.

I've heard an awful lot of high value products (especially from Internet Direct companies) that don't cost anywhere near what their comparable speaker, pre-pro, amp, sub, source component, peripheral, etc, that sound as good (or better), is built as good (or better) and looks as good (or better) for a mere fraction of the cost as a similar product would cost at a brick and mortar store.

I know of two companies that have my business for life based on their performance and their value.....monoprice.com and bluejeanscable.com. No difference between esoteric cables, for as much as 1/50th the price.

As a last note, I once had a brilliant professor tell me once...."If you aren't growing, you're dying!"

[lcaillo]

I don't differ much at all with your views, but your professor's suggestion is one of the reasons that many companies get into trouble, and why our economy can be so fragile. One has to be able to persist and survive even in periods of no growth, or even in times of negative growth. Companies that leverage their positions depending on growth are unable to do so for very long at all. We have seen dozens of large retailers operate this way, trading margin for growth, until they can no longer grow fast enough to survive, then they collapse.

There is nothing wrong with profit margins if your products and services are valued relative to the competition in the market that they exist. Many retailers and vendors continue to stubbornly refuse to accept that the competition includes many low margin operations. They simply will not survive if they cannot establish some value in their products and services to differntiate them from these lower margin competitors.

[graphicguy]

Interesting debate. Being in the CE industry, growth (taking the requisite market share) allows for many things. Among them, building a brand, releasing new and better products, etc.

Eventually, if you only plan on your business to hit a certain point, because that's as big as you want it to be, someone, somewhere, will eventually start to chisel away at your core. They'll either do it better, do it cheaper, or do it quicker.....sometimes all 3 at the same time.

I don't care if it's the 99 cent value meal at Mickey Ds, or 200 watt/channel amplifiers.

Personally, I believe you plan for growth, and right size for any eventual downturn. If you don't do the former, you will definitely will be doing a lot of the latter.

I have to believe that a company like EMOTIVA has encroached upon companies like Anthem, Pasasound, etc. Same for OPPO. Matter of fact, I see a lot of high end companies rebranding their products and charging a lot more for them.

It's becoming increasingly difficult to make the leap of "I spent more, so I get more" in the AV world these days. I don't think that's a bad thing, per se.

[lcaillo]

Please understand, I am not arguing against growth. My point is that when companies put themselves in a position that they will not be able to survive without it, they are not planning very well. Growth is very important, but you have to be able to sustain business without it as well. We have seen so many examples in this industry of companies that simply finance operations on growth because they cannot sustain margins that one would think it would sink in...

When you have nothing to offer a customer other than low price, you might as well be nothing but a warehouse. The need to physically see the product can be offset with a liberal return policy for internet sellers. You can offset lots of B&M overhead with the cost of a few returns. Too many companies have made themselves irrelevant by providing nothing more than a strorefront. Circuit City is the most recent example. From the time that they started cutting their most experienced sales staff they never had anything reason for people to buy from them as opposed to online. The expanded too much and when the growth stopped it was a decline that had nothing to stop it. You cannot pay for infrastructure without margin. You cannot sustain margin without providing something that people cannot get otherwise.

[graphicguy]

Leonard....fair points. It all boils down to competition. Boutique stores are struggling right now. There are some who have adapted. Most however, have not.

-Some are expanding their services (like HT design and installation) where there's a lot more margin
-Some are expanding into whole house media integration
-Some are trying to expand their lines into areas that aren't represented well in a given geographic area

What I've observed, the days of doing in-store demos, and selling equipment based on that, are quickly coming to a close, though.

Since you mentioned Circuit City (now reborn as an on-line retailer, only) wasn't merely that their growth killed them. As you pointed out, they offered nothing over and above what could be obtained elsewhere, for less money. You can say the same about Best Buy, but they expanded much quicker, with more product selection, than CC ever could. Best Buy has deeper pockets, with more and better industry/manufacturer clout.

The landscape is indeed changing. A plasma display used to be out of reach for most consumers....even a short two years ago. Now, you walk into Costco, Sam's, Best Buy, etc, and you're assaulted by price points and selection up and down multiple aisles.

Again, adapt (expand products and services) or die. Can't do business the same way they did last year (or even last month) and expect to survive. This all seems to be happening while the equipment becomes much more capable, and the prices for said equipment (regardless of where or who you buy it from) are dropping.

Come to think of it, I don't think I've bought anything at a brick and mortar store in well over a year, maybe two years.

Then again, I do my own support, and tech research, with just the online community's help.

[lcaillo]

Again, please do not confuse my point. Growth does not kill companies. Growth is good. It is a reliance on growth to substitute for sound business models, and using it to provide cashflow for basic operation, not using it to enhance the business that are where companies get into trouble. Companies that buy up others, and depend on growth to finance the positions that they leveraged to do so are simply poor business people. It happens all the time.

I come from the model of the independent stereo shop. In order to survive that type of business has had to provide a level of service that distinguishes it in some way to justify the margins that are required to be successful. This has been the case since the earliest days of the big discount shops and mail order houses, which started to proliferate in the late 1970s. Now, with the internet and completely new ways of gaining expertise in the area, it is even harder for these specialists to survive. I find it ironic that so many of them try to make it without even offering in house repair and service support.

The business is evolving at an ever increasing rate. The one thing that stays constant is the demand for cheap.

[graphicguy]

I think we're violently agreeing......

Even if a boutique store offered superior advice, on good products that they can make some money on, the public now has other avenues to take that advice, and shop on price alone from a wealth of sources (some at discounters, some with internet stores).

The big change is the general public, for good or ill. They won't support the high(er) margins that most of those stores command. When the stores did have exclusives, and there was no other reasonable place to buy those products, the tables were turned.

A quick google search turns up places to buy just about anything you want in the AV world. The competition is now much more heated and cut throat. A KURO at Costco? Never thought I'd see the day, but I did......and jumped on it. And, that's just one example.

[lcaillo]

The remaining specialty shops survive on people who have the money to spend on luxuries, and one of those luxuries is not having to shop around. Most also do a lot of custom installs and integration. It is no different than other luxury niches. There will always be some people who won't bother to shop and learn for themselves and want to be catered to. That part of the market is certainly shrinking, however, as information is easier to find. What many people are discovering is that many of those dealers really don't know as much as many well informed consumers like you find here. In the old days we prided ourselves on product knowledge and selecting the right mix of products for our clients. There were far less options then, and distribution was limited. Things have changed. For the better in some ways, worse in others (mostly service related).

[graphicguy]

lcaillo wrote:

The remaining specialty shops survive on people who have the money to spend on luxuries, and one of those luxuries is not having to shop around. Most also do a lot of custom installs and integration. It is no different than other luxury niches. There will always be some people who won't bother to shop and learn for themselves and want to be catered to. That part of the market is certainly shrinking, however, as information is easier to find. What many people are discovering is that many of those dealers really don't know as much as many well informed consumers like you find here. In the old days we prided ourselves on product knowledge and selecting the right mix of products for our clients. There were far less options then, and distribution was limited. Things have changed. For the better in some ways, worse in others (mostly service related).

Leonard....that's the same way as I see it rolling out. Obviously, we're enthusiasts that enjoy "rolling out own". We enjoy picking, choosing technology that fits what we're looking for. And, we will employ it ourselves.....whether that be set up, running cable, tweaking, extracting all the performance we want.

But, I can see where there would be those who would just like to hand it over to someone, with very little desire to get into the "nitty-gritty", other than to employ something that works to their parameters, and letting someone else do the implementation.

[Txgrizzly]

I also do that, I will go into the specialty store and do the touch and feel test and then if I want to buy it I will shop around for the best deal... In today's world of Internet stores i dont see how some of these store fronts stay open...