Paul Arling, chief executive of remote control maker Universal Electronics Inc., watched the movie “Click” with amusement.
In it, an overworked family man tries to simplify his life using a suped-up remote control, with cataclysmic results.
“I would say the originators of the movie probably expanded it a little bit further than we have on our tech roadmap,” Arling said.
The movie still was good for the business, he said.
“It described how central the remote is to some people’s lives, that they could build a whole movie around it,” Arling said. “You haven’t seen very many movies written about a toaster.”
Cypress-based Universal Electronics makes remotes for TVs, DVD players, stereos, cable and satellite boxes and a growing list of home entertainment devices.
Sells to Electronics Makers
With each new piece of gear comes another remote control. About three-quarters of Universal’s $230 million in yearly business comes from electronics makers. The company just landed a deal to supply remotes to Sirius Satellite Radio Inc.
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Universal’s Nevo SL: sells for about $1,000 |
Universal also sells remotes,from simple to fancy,on their own. Universal’s Nevo SL sells for about $1,000 and promises to manage everything from a high-definition TV to music stored on a computer and routed through a home stereo.
At next week’s International Consumer Electronics Show in Las Vegas, Universal plans to unveil a slate of products.
Universal just wrapped up what it calls its biggest quarter yet, after upping its guidance in September. Analysts expect sales of $64 million, which would be up 30% from a year earlier. Profits are seen coming in at $4.5 million, up 18%.
The growth is getting Universal noticed on Wall Street. The company’s shares are up about 20% in the past six months after starting to surge in November.
Universal had a recent market value of $300 million.
It’s a far cry from where Universal was a decade ago when Arling, an Illinois native, joined the company, then based in suburban Cleveland, as chief financial officer.
Universal was unprofitable and living off a $15 million line of credit.
Arling was part of the team that shifted the company’s focus in 1997 from making remote controls to contracting out production in favor of research and development.
The shift brought Universal to Orange County, where it had its technology center.
The fourth quarter of 1997 was Universal’s last unprofitable quarter. By late 1998, Arling was appointed president and chief operating officer. He was made chief executive in 2000 and chairman in 2001.
“The success at Universal, Paul is directly responsible for,” said John Bright, a senior research analyst with Nashville, Tenn.-based investment bank Avondale Partners LLC.
Hard numbers on the remote control business aren’t easy to come by. Universal has the biggest piece, according to analysts.
Big competitors include Royal Philips Electronics NV and Thomson SA, maker of RCA products.
One of Universal’s closest rivals is Harrison, N.Y.-based Universal Remote Control Inc., a privately held maker of remotes for Toshiba Corp., Motorola Inc. and others.
Rivals such as Logitech Inc. of Fremont license technology from Universal. Other competitors just aren’t that big. Camarillo-based Interlink Electronics Inc. counts yearly sales of about $30 million and isn’t growing.
Of the nearly 200 million universal remotes shipped each year, Arling estimates Universal makes 25% of them.
TV Boom
Remotes for high-definition TVs drove Universal’s fourth-quarter sales, analyst Bright said.
“I think expectations are low,” he said.
In November, consumer electronics sales were up 5%, driven in part by high-definition flat panel TVs.
One area where Universal is lagging, according to Michael Coady, an analyst at Los Angeles-based brokerage B. Riley & Co.: sales through stores.
The company’s store sales are down from about a third of revenue a year ago to about a quarter now.
“Their consumer business has been down in the last two years,” Coady said. “That’s one of the negatives of the story,maybe not a negative, but a missed positive.”
Coady and others project growth in Universal’s retail sales with new gadgets that allow users to share music and other files between computers and consumer electronics.
“There are a lot of new things coming into the living room that bring great entertainment value,” Arling said. “The thing most people haven’t focused on is that they also bring a level of complexity, a level of confusion to the consumer. What our technology seeks to do is simplify that.”
