netrashetty
Netra Shetty
Harman International Industries (NYSE: HAR) is an international audio and infotainment equipment company. The company designs, manufactures and markets audio and infotainment products for the car, the home, theatres and venues, as well as electronics for audio professionals. Harman International's consumer group makes loudspeakers, CD and DVD players, CD recorders, and amplifiers under several brand names such as Harman Kardon, JBL, and Infinity. Harman's automotive division sells branded audio systems through several car makers, including Mercedes-Benz, Toyota/Lexus, BMW, and General Motors. Its professional unit makes audio equipment, such as studio monitors, amplifiers, microphones, and mixing consoles for recording studios, cinemas, touring performers, and others. The company is headquartered in Stamford, Connecticut, and maintains major operations in the Americas, Europe, and Asia. Harman International includes many consumer and specialty brands targeting specific audio and electronics product categories.
Harman International Industries (HAR) sells audio products such as speakers and amplifiers and car systems that provide GPS and traffic information. The company makes most of its revenue from major auto manufacturers. In 2007, audio and informational devices used in cars accounted for 70% of its net sales, [1] and the company's three largest clients (car makers all), accounted for 43% of net sales.[2]
The company has benefited from growing demand for increasingly sophisticated information and entertainment devices (WiFi, Televisions, MP3 players, and GPS) in cars. This market is still largely in its infancy with penetration rates of less than 20% in Europe and less than 10% in the United States. However, the company's high exposure to auto manufacturers makes it subject to the cyclicality of the auto industry. The company is also faces pricing pressure from portable navigation devices. Portable navigational device prices have declined over the last several years, providing a cheap alternative to in-car navigational systems. As the cost of key components, such as semiconductor chips and LCD displays, drop, Text-to-voice, Bluetooth and other features which were once considered premium in nature are becoming standard. This has led to greater price competition. Adding to this pressure, Garmin (GRMN), the dominant GPS manufacturer in the U.S., entered the European market in the last few years.
Business Financials
Their business is composed of three segments: Automotive, Consumer, and Professional. The Automotive segment is their largest source of sales and focuses on audio, entertainment, and navigational systems used in cars. The Consumer and Professional segments create audio systems and accessories designed for use in the home, studio, or on the go.
Contents
1 Business Financials
2 Key Trends, Risks, and Forces
2.1 Concentration of Sales with Daimler, BMW , and Audi
2.2 Growing Demand for Infotainment Systems
2.3 Margin Pressures from Portable GPS Systems
3 References
In 2007, Harman's Automotive segment generated 70% of total revenue, while its Consumer and Professional segments generated 14% and 16%, respectively.[3] A large portion of Harman's infotainment contracts are with high-end car makers, such as BMW, Porsche, and Audi.
Harman has grown revenue from $2.23 billion to $3.55 billion from 2002-2007. Revenue grew by 9.3% in 2007.
Margins have declined as Harman shifts towards lower-priced infotainment systems.[4] Gross profit margins increased for the Professional segment and declined for both the Automotive and Consumer segments.[5]
Harman 2007 10K[6]
Harman 2007 10K[7]
Harman 2007 10K[8]
Harman 2007 10K[9]
Key Trends, Risks, and Forces
Buckingham Research Group[10]
Concentration of Sales with Daimler, BMW , and Audi
Due to Harman's heavy concentration in the automotive segment, Harman is dependent on the success of automobile makers - specifically Daimler, BMW, and Audi, which make up 43% of total sales.[11] Automotive slowdowns, such as the 12% decline in auto sales in March 2008, dampens demand for Harman's automotive products.[12] In addition, geographically, 63% of total sales are from Europe, compared to only 21% from the U.S.
Growing Demand for Infotainment Systems
Penetration rates of navigation and entertainment systems in the U.S. and Europe remain relatively low at 7% and 15%, respectively.[13] As cars become more sophisticated, the demand for these products will grow each year. As a producer of car systems equipped with voice-activation, hard-drives, GPS navigation, wireless internet access, DVD players, high-quality audio, and traffic information, Harman's growth will be largely dependent on the growing demand for high-tech car products.
Margin Pressures from Portable GPS Systems
Increased competition in the high-end audio market and in portable navigation devices has contributed to the 1% decline in gross margins in 2007. In particular, portable navigational device prices have declined, providing a cheap alternative to in-car navigational systems. This price decline will likely continue as components such as semiconductor chips and lcd displays drop in price. In addition, companies compete more on price since key features (text-to-voice, bluetooth) will become standard in an increasingly commoditized industry. In Harman's case, it also faces increased competition from Garmin (GRMN) the dominant GPS manufacturer in the U.S. The American company has only entered the European market in the last few years, but represents a competitive threat given its size and breadth of products.
Harman's navigational devices are sold as part of a package with luxury-vehicle OEMs. While the following companies sell personal navigation devices, these products compete indirectly with Harman's automotive navigation devices. In addition, Harman began selling personal navigation devices in 2007 through its automotive division. The competitors include:
Garmin - The dominant leader in GPS devices, with an estimated 56% market share in consumer GPS devices and 58% share of corporate GPS devices.[14]
TomTom
Magellan - Second in market share with 12%.
Pioneer
Trimble
Lowrance
Survey by ChangeWave Research in which businesses and consumers were asked which manufacturer developed their latest GPS device.[15]
Meanwhile, Garmin also faces additional pressures from competing cell phones that also provide portal GPS systems. These phones contain the advantage of providing many features in one device, including an MP3 player, calendar, and email access. As the market becomes saturated and more phones with GPS systems are introduced, many analysts have predicted the demise of the stand-alone GPS device. [16] Current examples of cell phones with GPS systems include several Blackberry models as well as the upcoming rumored iPhone in the summer of 2008.
Harman International Industries (HAR) sells audio products such as speakers and amplifiers and car systems that provide GPS and traffic information. The company makes most of its revenue from major auto manufacturers. In 2007, audio and informational devices used in cars accounted for 70% of its net sales, [1] and the company's three largest clients (car makers all), accounted for 43% of net sales.[2]
The company has benefited from growing demand for increasingly sophisticated information and entertainment devices (WiFi, Televisions, MP3 players, and GPS) in cars. This market is still largely in its infancy with penetration rates of less than 20% in Europe and less than 10% in the United States. However, the company's high exposure to auto manufacturers makes it subject to the cyclicality of the auto industry. The company is also faces pricing pressure from portable navigation devices. Portable navigational device prices have declined over the last several years, providing a cheap alternative to in-car navigational systems. As the cost of key components, such as semiconductor chips and LCD displays, drop, Text-to-voice, Bluetooth and other features which were once considered premium in nature are becoming standard. This has led to greater price competition. Adding to this pressure, Garmin (GRMN), the dominant GPS manufacturer in the U.S., entered the European market in the last few years.
Business Financials
Their business is composed of three segments: Automotive, Consumer, and Professional. The Automotive segment is their largest source of sales and focuses on audio, entertainment, and navigational systems used in cars. The Consumer and Professional segments create audio systems and accessories designed for use in the home, studio, or on the go.
Contents
1 Business Financials
2 Key Trends, Risks, and Forces
2.1 Concentration of Sales with Daimler, BMW , and Audi
2.2 Growing Demand for Infotainment Systems
2.3 Margin Pressures from Portable GPS Systems
3 References
In 2007, Harman's Automotive segment generated 70% of total revenue, while its Consumer and Professional segments generated 14% and 16%, respectively.[3] A large portion of Harman's infotainment contracts are with high-end car makers, such as BMW, Porsche, and Audi.
Harman has grown revenue from $2.23 billion to $3.55 billion from 2002-2007. Revenue grew by 9.3% in 2007.
Margins have declined as Harman shifts towards lower-priced infotainment systems.[4] Gross profit margins increased for the Professional segment and declined for both the Automotive and Consumer segments.[5]
Harman 2007 10K[6]
Harman 2007 10K[7]
Harman 2007 10K[8]
Harman 2007 10K[9]
Key Trends, Risks, and Forces
Buckingham Research Group[10]
Concentration of Sales with Daimler, BMW , and Audi
Due to Harman's heavy concentration in the automotive segment, Harman is dependent on the success of automobile makers - specifically Daimler, BMW, and Audi, which make up 43% of total sales.[11] Automotive slowdowns, such as the 12% decline in auto sales in March 2008, dampens demand for Harman's automotive products.[12] In addition, geographically, 63% of total sales are from Europe, compared to only 21% from the U.S.
Growing Demand for Infotainment Systems
Penetration rates of navigation and entertainment systems in the U.S. and Europe remain relatively low at 7% and 15%, respectively.[13] As cars become more sophisticated, the demand for these products will grow each year. As a producer of car systems equipped with voice-activation, hard-drives, GPS navigation, wireless internet access, DVD players, high-quality audio, and traffic information, Harman's growth will be largely dependent on the growing demand for high-tech car products.
Margin Pressures from Portable GPS Systems
Increased competition in the high-end audio market and in portable navigation devices has contributed to the 1% decline in gross margins in 2007. In particular, portable navigational device prices have declined, providing a cheap alternative to in-car navigational systems. This price decline will likely continue as components such as semiconductor chips and lcd displays drop in price. In addition, companies compete more on price since key features (text-to-voice, bluetooth) will become standard in an increasingly commoditized industry. In Harman's case, it also faces increased competition from Garmin (GRMN) the dominant GPS manufacturer in the U.S. The American company has only entered the European market in the last few years, but represents a competitive threat given its size and breadth of products.
Harman's navigational devices are sold as part of a package with luxury-vehicle OEMs. While the following companies sell personal navigation devices, these products compete indirectly with Harman's automotive navigation devices. In addition, Harman began selling personal navigation devices in 2007 through its automotive division. The competitors include:
Garmin - The dominant leader in GPS devices, with an estimated 56% market share in consumer GPS devices and 58% share of corporate GPS devices.[14]
TomTom
Magellan - Second in market share with 12%.
Pioneer
Trimble
Lowrance
Survey by ChangeWave Research in which businesses and consumers were asked which manufacturer developed their latest GPS device.[15]
Meanwhile, Garmin also faces additional pressures from competing cell phones that also provide portal GPS systems. These phones contain the advantage of providing many features in one device, including an MP3 player, calendar, and email access. As the market becomes saturated and more phones with GPS systems are introduced, many analysts have predicted the demise of the stand-alone GPS device. [16] Current examples of cell phones with GPS systems include several Blackberry models as well as the upcoming rumored iPhone in the summer of 2008.