Audiovox 1998 Annual Report Download - page 4

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LETTER TO SHAREHOLDERS
Although revenues and profits were down in fiscal ’98 to $616.7 million and $3.0 million, respectively, we ended the
year on a high note. Third and fourth quarter sales were fueled by the introduction of CDMA digital phones, our first
CDMA/PCS phone and two exciting new product lines in our electronics division-Mobile Video and FRS (Family Radio
Service). Sales of these products allowed us to overcome losses posted in the first half of the year as a result of a write-
down on existing analog phone inventories. In addition, sales of our Malaysian operation which were adversely affected
by the Asian economic crisis also showed signs of returning to profitability by year end.
Audiovox Communications Corp. (ACC), our wireless subsidiary was cited by an independent research company as
the fastest growing digital company in the fourth quarter, 1998. Digital phone sales, non-existent in fourth quarter ‘97,
represented 32% of unit sales in the fourth quarter and 18% for the year overall. ACC signed a $100 million contract
with PrimeCo to supply CDMA/PCS phones and shipments against that contract began in the fourth quarter. Additional
digital products to be introduced this year include a GSM phone, which will be sold in Europe and Southeast Asia, and
TDMA technology, for the U.S. and South America.
I expect 1999 to be a strong year particularly for our wireless company. One in which we should achieve our stated
goal of being a major supplier of all the available wireless technologies. With the addition of those new products,
Audiovox for the first time will be positioned to penetrate overseas markets and benefit from the tremendous expan-
sion and demand for wireless product throughout the world.
The 65 million current U.S. subscribers represent only 25% market penetration and industry statistics indicate growth
rates of 20% over the next three years and 110 million subscribers by 2001. Statistics for worldwide growth are even
more staggering with 435 million wireless phone subscribers representing only a 4.33% penetration. Our sophisticated
distribution network combined with our strong carrier relationships should allow us to capitalize on this growth.
Despite losses in Malaysia, the Electronics Division posted strong profits and enjoyed a good year. For the Division,
the expansion of its Mobile Video line and the introduction of FRS further highlighted 1998. Mobile video sales which
in 1997 accounted for $1.5 million, exceeded $10 million in 1998, and we expect to pass that mark early in the second
quarter 1999. Fourth quarter sales of mobile video were driven by the promotion by Nissan Motors to equip their 1999
Quest minivan with an Audiovox mobile video system. This promotion, originally scheduled for fourth quarter was so
successful that it has been extended well into 1999. During 1999, the Electronics Division plans to continue to introduce
products in emerging technologies like GPS, Navigation and portable DVD.
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