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Are Light Bulbs Next Bright Idea for Vizio?

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Irvine’s Vizio Inc., known for low-cost flat TVs that sell at big retailers, has some industry watchers scratching their heads with its latest product: light bulbs.

Lowe: bulbs will come with “Vizio price”

Vizio’s ongoing diversification into digital, mobile and online entertainment is a natural transition, given the company’s strong position in the TV market, according to analyst Paul Gagnon.

The move into light bulbs came “out of left field,” he said.

“I didn’t see that one coming,” said Gagnon, director of North America TV research at Santa Clara’s DisplaySearch, part of Port Washington, N.Y.-based NPD Group Inc. “It’s a bit unusual for a company that started in the TV business not that long ago to branch out in that direction.”

Vizio designs and markets its flat TVs from its headquarters here. It was relatively unknown when it started in 2002 amid the flat-screen boom.

The company now has yearly sales of about $3 billion and has taken large chunks of business away from big-name rivals, including Samsung Group, Sony Corp. and Funai Electric Corp., which sells sets under the Philips brand in the U.S.

Debut

Vizio debuted its line of light-emitting diode, or LED, light bulbs last month at a Consumer Electronics Association show in New York.

The recyclable and mercury-free light bulbs are expected to hit the market later this year at “a Vizio price,” cofounder Ken Lowe told Web magazine edgadget.com, part of AOL Inc.

Vizio is aiming to get a foothold in the LED lighting market as the industry, businesses and consumers replace incandescent bulbs with more energy-efficient ones. Vizio’s bulbs are expected to replace 40- and 60-watt bulbs and floodlights.

Global LED lighting sales were pegged at $3.8 billion in 2010 and are expected to grow to $8.3 billion by 2014, according to a report from Northern California’s Strategies Unlimited.

Lower prices, improved performance, the phase out of incandescent bulbs and government intervention have spurred the market, according to the report.

LED lighting has been successful in architectural and entertainment circles, as well as in the automotive industry and the home and commercial real estate sectors.

Flashlights, bicycles, headlights and automotive lights nearly all use LED light bulbs.

Parking garages and street lights are becoming more popular for conversion to LED as the private sector and government agencies at various levels push for energy efficiency and less power consumption.

Starting in 2012, the Energy Independence and Security Act requires general-purpose bulbs to be at least 25% more efficient than standard incandescent lighting options.

Vizio faces a number of hurdles as it gets ready to enter the market, according to Vrinda Bhandarkar, research director for LED lighting at Strategies Unlimited in Mountain View.

Vizio counts on discount retailers such as Wal-Mart Stores Inc., Target Corp., Costco Wholesale Corp. and others for much of its TV sales. Those retailers have track records with other light bulb suppliers.

• Headquarters: Irvine

• Founded: 2002

• Business: TVs, related products

• Yearly revenue: $3 billion

• Notable: held 29% of LCD TV market in Q1

“They’re already buying from other companies,” Bhandarkar said.

The LED industry has a handful of big competitors, including Philips Lighting, part of the Netherlands’ Royal Philips Electronics NV; Wisconsin’s Beta Lighting Inc.; North Carolina-based Cree Inc. and Lighting Science Group Corp. of Florida.

Home Depot carries a Philips brand and sells its own line of LED light bulbs, the EcoSmart label.

Vizio’s hopes hinge on a strategy to leverage its success in LED-backlit TVs through a partnership with Taiwan’s Epistar Corp. and South Korea’s Seoul Semiconductor Inc., two of the top LED lighting suppliers.

Vizio hasn’t released test data yet on its LED lighting products, which generally are assessed for color, temperatures, power consumption and brightness, among other factors.

The Energy Department has standards for certifying LED products, a seal of approval of sorts that adds another layer of recognition.

“We don’t know how the lamps perform until they get the data out,” Bhandarkar said. “The barrier to entry is the reputation you have.”

Vizio has a strong reputation in the electronics industry and has a history of success in new markets. It claimed the top spot for market share on flat TV sales in North America within eight years.

In the first quarter, it broadened its lead over chief rival Samsung Group by selling nearly 733,000 TVs and taking 29% of the market.

The company is making inroads on TV accessories.

Accessories

Vizio started sales of soundbars last year and now has roughly half the U.S. market, according to data from the Arlington, Va.-based Consumer Electronics Association.

Its Blu-ray DVD business, while still small, is up roughly 400% since it started in 2009, cofounder and Vice President of Marketing Communications Laynie Newsome told the Business Journal last year.

Vizio’s track record on TVs and accessories is an advantage, according to Strategies Unlimited’s Bhandarkar.

“It is a known company,” she said. “It’s not a startup or a fresh company we don’t know about.”

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