Royal Philips Electronics announced Friday that Philips will acquire US-based Digital Lifestyle Outfitters (DLO) subject to receipt of regulatory approval. DLO designs, markets and distributes accessories, including docking stations, FM transmitters, cables and cases for mobile audio-visual devices such as MP3 and video players. The transaction is expected to close in the second quarter of 2007, upon which DLO will become part of the Peripherals & Accessories business unit of Philips' Consumer Electronics division. No financial details on the transaction were disclosed.
Between 2003 and 2006, sales in Philips' Peripherals & Accessories business unit more than doubled, due to a combination of targeted acquisitions and organic growth through innovative products and a strong customer focus. Peripherals and accessories are among the fastest growing and higher-margin product categories in consumer electronics today, with retailers increasingly looking to offer these products as part of a complete consumer electronics portfolio to their customers. Within peripherals and accessories, Philips sees the mobility, audio and PC domains as strategic growth areas.
Through this deal, Philips will become a leading player in peripherals and accessories for the mobility domain, which will further strengthen Philips' contacts to key international retailers - relationships based on solid category management and operational excellence. DLO's position as a leader in the field of MP3 accessories complements Philips' strong position in the headphones category. DLO realized sales of approximately USD 100 million in 2006, mainly in the United States, and is expected - upon closing of the deal - to make a positive contribution to operating margins in Philips' Peripherals & Accessories business unit. In mobility, the global market for accessories around MP3-players exceeded USD 4 billion in 2006, and currently enjoys annual growth of more than 10%.
"Besides building on our acquisition of Power Sentry last year and Gemini in 2004, acquiring Digital Lifestyle Outfitters will strengthen Philips' ability to address emerging trends in this market - such as peripherals and accessories for multi-functional phones - through innovative products that deliver on Philips' brand promise of sense and simplicity," Mr. Rudy Provoost, Chief Executive Officer of Philips Consumer Electronics, said.
DLO is a privately held company and operates from Charleston, South Carolina and Raleigh/Durham, North Carolina. "By teaming up with Philips, DLO will be able to expand outside of the United States, capitalizing on Philips' global distribution network with key retailers," explained Jeff Grady, president and CEO of Digital Lifestyle Outfitters.
Background
The wild success portable audiovisual entertainment devices have enjoyed has created a new, significant market for peripherals and accessories for products such as MP3 players and portable video players. In particular, demand for MP3 accessories has been high, with accessories for the popular I-Pod player clearly the most successful category.
The market in accessories for portable digital audio/video players generates higher turnover than any other accessories category, with the average iPod generating around USD 75 in accessories purchases in North America in 2006.
The global market for accessories around MP3-players exceeded USD 4 billion in 2006, and currently enjoys annual growth of more than 10%.As portable audio/video players advance and functionalities evolve, this market is expected to grow further. Video and other content options are expected to further stimulate demand.
One emerging growth area in the accessories market is accessories for 'smart' mobile phones, which combine a number of functionalities. For example, in 2007 it is expected that over 300 million mobile phones with music-functionality will be sold. The mobile phone of the future will boast a host of other functionalities, such as audio and video playback, with mobile phones increasingly converging into entertainment devices.
Digital Lifestyle Outfitters
(DLO) designs, markets and distributes an entire line of computer and digital music player accessories including docking stations, cables, chargers, cases and clips. The company's portfolio consists of just over 300 products of which roughly 60% are electronic based and 40% non-electronic, like cases and clips. DLO's portfolio consists of 'Hardware & Electronics', 'Cases & Clips' and 'Cables & Connectors':
- Hardware & Electronics
DLO's Hardware & Electronics products are accessories for MP3 players that consumers can use to expand the use of their portable digital audio/video players. Products include home entertainment systems, all-in-one car solutions, boom boxes and speaker sets.
- Cases & Clips
DLO offers a wide variety of different (protective) cases for both MP3 players as well as mobile phones. Products include sport-ready cases with a belt clip and armband, leather cases and clear protective jewel cases.
- Cables & Connectors
These products include power packs, car chargers, cassette adaptors and stereo connection kits for portable audio/video devices.
Source:
Philips Consumer Electronics
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