Syntax-Brillian: Too Little, Too Late?

After licensing off their higher margin sales in China to a manufacturer in exchange for a 3% royalty on sales, it appears that Syntax-Brillian (BRLC) will be selling their Olevia branded televisions in lower margin Wal-Mart (WMT) and Sam's Club stores in the U.S. this year instead. This is somewhat contrary to Syntax-Brillian's previous strategy of avoiding these stores, due to the fact that Wal-Mart is known for squeezing every penny they can out of many companies selling in their stores and leaving them with razor thin margins.

Despite the lower margins, the shoppers at Wal-Mart do match the target market of many of Syntax-Brillian's Olevia televisions. Being a lower end value brand, their televisions are targeted towards more budget cautious individuals. Wal-Mart and Sam's Club has helped propel Vizio to become the best selling LCD company in North America for the second quarter of 2007 and in the top two for the third quarter. It seems that Syntax-Brillian is now taking the same route as Vizio and seeing if they can mirror their success.

However, the question is whether this move is too late? Vizio has already established a strong presence in Wal-Mart and many other popular tier-two and tier-three LCD TV brands such as Westinghouse, Polaroid and Emerson, which is made by Funai, is already being sold in Wal-Mart stores. In addition, there also appears to be other players entering the market. One of which is ChangHong a major China television manufacturer that Microsoft tried to purchase a stake in earlier but was denied by the Chinese government. According to the company, ChangHong has been ranked number one in China's television market for 15 consecutive years and ChangHong manufactures one out of every four televisions in China. Later this year, the company plans to enter the US market with their own brand of LCD TVs and be sold in stores such as Target and Wal-Mart. It seems ChangHong would utilize the same strategy as Olevia and Vizio and be priced similarly which might prove to be a formidable competitor.

On the other hand, Syntax-Brillian's Olevia televisions have yet to be on store shelves of Best Buy (BBY), which provides fairly better margins than Wal-Mart. James Li, President and CEO of Syntax-Brillian, previously stated during the fiscal first quarter conference call on November 8, 2007 that Olevia televisions would be in Best Buy stores in time for the Super Bowl and "is not going to be small". With the Super Bowl on February 3rd and the NFL playoffs already started, it also appears that the company might also be too late to take advantage of the Super Bowl television sales in Best Buy.

Disclosure: Author has a short position in BRLC

Comments

[Carson Allen]

Samuel, I am glad to see your bio has been changed to disclose that you are employed as an analyst for a hedge fund and, as you've done in the past, you've disclosed that you have a short position in BRLC.

There still remain questions that should be answered:

1. Your responses to comments on your 12/4/07 article on BRLC revealed that the hedge fund your work for is also short BRLC. Is this still the case?

2. The firm you work for also had a long position in Amtran, a major shareholder and manufacturer for Visio, a major competitor to BRLC. Is this still the case?

3. Will you disclose the name of your employer?

4. Is your employer aware of articles you've posted on Seeking Alpha?

5. Does your employer review or in any sense approve these articles in advance?

We all realize that authors who post articles on Seeking Alpha have a specific point of view, which is as it should be.

Those that read your posts should realize that you are not only biased by your own position in BRLC but it may, in fact, be part of your job to write negative articles about BRLC.

Please take the time to provide more complete disclosure, so the content of your article can be judged fairly.

[Jose]

It is clear that samina is bias and probably ilegally writing about BRLC. The fact that he has done it 3-4 times is worrysome. Worrysome that seeking alpha participates in this naked shorting illegal scheme by continuosly letting the shorts write these articles and not permitting refusals by longs. Shameful.

[RC Martin]

Samuel, or should I say "Edwin", Happy New Year.

After your three ID rants I was concerned you were no longer going to bless us with your drivel. So was it your New Year resolution to stick to just "ONE" id for 2008?

Let's face it Samuel, er, Edwin, credibility is important and no one with decent credibility and an honest message needs to hide behind 3 different pseudonyms.

[retrobeast]

A short ripping on a stock? How dare you beetch. BRLC will be a $10 plus stock by spring.

[RC Martin]

Edwin, The short interest figures continue to rise, to the point where currently it appears the percentage of the float shorted is over 50%.

These are exciting times we live in wouldn't you agree? This stock can be pretty explosive going forward if they ever do something good. I know I know , you don't agree growing 100% is very good but hey, you just never know.

[Steven L.]

Growing 100% is excellent. Me and my fund has covered and gone long. I believe that BRLC would be the biggest percentage gainer in 2008 and in the top 5 for 2009. Everyone that is short should go long and longs should lots lots more BRLC stock.

[Perspective]

BRLC is going down. The 2nd tier market for TVs is a dying industry as more and more mainland Chinese manufacturers crowd the market. Sales may increase but the overall margins will shrink. Only those 1st tier innovative companies will survive. Who the heck will want to pay any kind of serious money for an Olevia tv that weights twice as much a 1st tier tv w/ less than stellar quality??? Seriously TWICE as much, isn't the whole idea of flat panel tvs to go smaller, lighter, and more energy efficient? BRCL will continue to drop.