Is it Time For Consolidation in the TV Industry?

Includes: BRLC, HAR, SNE
by: Larry Lazer

There has been little in the way of mergers and acquisitions in the audio and video equipment industry but it seems reasonable to assume that the large number of companies in the television industry can't all remain long term. While the demand for digital ready flat panel TVs continues to grow, it won't always be this way. The smart companies will consolidate before they desperately need to. After all, who wants to be the Nortel (NT) or Bookham (BKHM) of the TV world?

So, which deals make sense? One could imagine that some larger, long established, tier 1 TV makers would acquire some of the new, smaller, competitors that are significantly cutting into their market share. For example, perhaps Sony (NYSE:SNE) is getting tired of seeing their market share being eroded by the likes of Vizio. While Vizio is technically an american company, it is well established that most of their operations are really in Taiwan. As it has been pointed out to me, it is unlikely that a Japanese company would attempt to acquire what is essentially a Chinese company.

I understand this logic. So what about a merger of some of these U.S. based companies? One rumor published last week in the Arizona Republic involves Vizio and Syntax-Brillian (BRLC), the makers of the Olevia TV brand. This merger makes a lot of sense from many perspectives. Syntax-Brillian only sells LCD TVs at this time whereas Vizio also offers a line of plasma TVs. In fact, plasma is where Vizio shines. I have never personally been impressed by the image quality of their LCD TVs and they don't have the best ratings. Syntax-Brillian, on the other hand, makes award winning LCD TVs and I have always personally liked their image quality. So, a product offering of Olevia LCD TVs and Vizio plasma TVs would be quite a nice combination. I would have to say that, in the area of design and quality, Syntax-Brillian brings a lot to the table. In the area of sales and marketing, Vizio seems to be stronger. Again, good synergy.

One area where this new company would fall short is with name recognition in North America. While Olevia and Vizio are gaining in popularity, those names still don't carry the weight of Sony or Toshiba. A name most Americans do recognize and respect is Westinghouse. There, again, you have an American company that has most of its operations outside of North America. Westinghouse, the TV maker, has actually purchased the rights to the Westinghouse name as Westinghouse, as we knew it, no longer exists. But, to be honest, like Syntax-Brillian, they make a very nice LCD TV that would make the founders of Westinghouse proud. So, imagine a three way deal between Vizio, Syntax-Brillian and Westinghouse. This could be a powerful combination. Personally, I have purchased two LCD TVs. One is a Westinghouse and the other is an Olevia. Both are impressive in my opinion and both stand up quite nicely to the picture quality of Sony, Samsung and Sharp.

Another intersting thought would be the acquisition of one of these three TV makers by either an audio giant or a computer giant. Harman Industries (NYSE:HAR) has been involved in merger and acquisition discussions for some time and one recently fell through. I could imagine a merger of Harman and Syntax-Brillian, for example, enabling a company to provide home theater packages. Imagine a nice package deal on an Olevia LCD TV with and integrated Harman Kardon surround sound reciever and Infinity speakers, which are sold by Harman. A techno-geek's dream, if you ask me, and I am an admitted techno-geek. On the computer side, one could imagine great synergy between a Syntax-Brillian and a Dell (NASDAQ:DELL) or Hewlett-Packard (NYSE:HPQ). Clearly, Syntax-Brillian could make a nice combination TV/Computer Monitor and Dell and/or HP would diversify into the business of TVs.

2008 will be a big year for LCD TV makers. We are approaching the conversion to all digital and people will need to buy a new TV or, at the very least, a converter box. And as more people bring these beautiful flat panel HDTVs into their homes, their family and friends will be blown away by the picture quality and will want one in their homes. The more efficient these companies can be, the lower they can charge for their TVs and the bigger the piece of this growing pie they will get. As an investment, a take-over or merger target like Syntax-Brillian fits the old saying, if you "snooze" you "lose".

Disclosure: Author is long BRLC and HAR and has no position in HPQ or DELL or any of the other companies mentioned.