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Comcast to Put $40M Into Supplier in Santa Ana

The largest U.S. cable TV provider plans to invest nearly $40 million in Santa Ana-based remote control maker Universal Electronics Inc. over the next six years.

Comcast Corp., which also claims the top spot on Universal Electronics’ customer list, can acquire about a 5% minority stake in the company if certain spending benchmarks are hit.

“This latest announcement is a solidification of the close partnership we have with these guys,” said Lou Hughes, executive vice president of the Americas for Universal Electronics. “We’re now not just doing things based on home entertainment. We’re going to do much more.”

The added services include safety, security and other aspects of connectivity related to the booming Internet of Things segment as Comcast and other competitors expand offerings in home security and automation.

“I think that will drive the business we do with them,” Hughes said.

Comcast under the agreement can acquire up to 750,000 shares of Universal Electronics common stock over three consecutive two-year periods at $54.55 per share, or roughly $39.5 million, according to regulatory filings with the Securities and Exchange Commission.

It must purchase $1 billion in products and/or services from Universal Electronics over a six-year period that began on Jan. 1 to fully exercise the warrants. The deal would be terminated in any given two-year period if Comcast doesn’t spend at least $260 million over that course of time.

If it spends more than $340 million during the first or second two-year periods, the excess value would carry over as a credit for the following period.

The transaction marks the first time Universal Electronics has struck such a deal in its 30-year history.

Philadelphia-based Comcast was its biggest customer last year, accounting for $129.4 million, or roughly 21.5%, of its $602.8 million in annual revenue. El Segundo-based DirecTV was No. 2, spending $74.8 million, or about 12.4%.

DirecTV, the largest U.S. satellite TV provider, had been Universal Electronics’ largest customer for several years before being overtaken by Comcast.

Universal Electronics is the world’s largest universal remote control maker, supplying nearly every paid cable provider and game console maker. Its All for One brand accounted for 8.1%, or $48.4 million, of its sales last year.

The company employed 150 in Santa Ana and 2,309 globally through 2015, according to its recently released annual report. There are nearly 8,000 workers employed by contractors at factories that produce goods for the company in China, Mexico and Brazil.

Universal Electronics started in Anaheim and soon moved to Cypress, where it was based until relocating in 2012 to Santa Ana.

Its ever-growing base of intellectual property—863,000 individual device functions used in conjunction with products from 6,900 consumer electronics brands—is the foundation of the company’s growth. Proprietary software codes can power virtually every infrared-controlled set-top box, television, audio component, DVD, Blu-Ray and CD player on the market, as well as other home entertainment and automation devices, according to the company.

Universal Electronics in 2012 extended its product lineup to include wired and wireless IP controls found on new HDMI and Internet-connected devices. Infrared technology has largely been replaced in the past few years with radio-frequency technology, so users aren’t required to point controllers directly at detection markers.

Main competitors include Remote Solutions, Home Control Singapore PTE Ltd., SMK and Universal Remote Control.

Universal Electronics has been supplying Comcast with remote controls for two decades. The company more recently has supplied the voice remote as part of Comcast’s X1 Entertainment Operating System that carries advanced features, such as voice commands, and developing technologies, such as motion capture.

“We built that voice remote very cost-effectively,” Hughes said. “They can give it away to millions and millions of people.”

Comcast led the nation with 22.3 million paid cable subscribers last year, according to company reports and New Hampshire-based Leichtman Research Group Inc. DirecTV was No. 2 with 19.7 million subscribers.

Other notable customers of Universal

Electronics include Irvine-based Vizio Inc.;

Samsung, the world’s largest consumer electronics company; Microsoft, the maker of Xbox; and PlayStation developer Sony.

Universal Electronics is aiming to leverage its remote control expertise in the booming sensor market. Its quiet $12.3 million asset acquisition last year of Ecolink Intelligent Technology Inc. provided a boost in the home automation market, which is projected to grow from $5 billion in global sales in 2014 to $21 billion in 2020, according to Zion Research in Florida.

Carlsbad-based Ecolink is one of the biggest equipment suppliers in that market.

Universal Electronics strengthened its position in home automation this month in a deal with Connecticut-based UTC Fire & Security Americas Corp., which will distribute Ecolink products in residential and commercial markets.

“This sensor market is our first big venture outside of control,” Hughes said. “The sensor is really just a remote control without a key pad.”

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