5880 Pacific Center Blvd.
Company Perspectives
Since our founding in 1994, we have grown our business by focusing on the needs of our customers, developing and maintaining close relationships with manufacturers, entering new markets, and sourcing new and innovative products while maintaining close attention to operational efficiencies and costs.
InfoSonics Corporation is a leading distributor of cellular telephone products in North America. The California-based firm sells handsets and accessories from manufacturers including Samsung, VK Mobile, and i-mate to retailers, regional wireless carriers, and through its web site. More than two-thirds of InfoSonics' business comes from Latin America. Founder and CEO Joseph Ram owns a sizable minority stake in the publicly traded firm.
Beginnings
InfoSonics was founded in 1994 in San Diego, California, by Joseph Ram. Born in Israel, Ram had served as an army captain and studied business and economics at Tel Aviv University before taking a job with an importer of telecommunications equipment from the United States and the Far East. He was recruited to run the international business of American client Procom Supply, and he worked there from 1989 to 1993 before leaving to found a company of his own.
InfoSonics began operations in February 1994, initially distributing telephone equipment and PBX systems to third parties. With cellular telephone sales exploding, Ram soon decided to shift his focus to this market, and the company began distributing the products of such manufacturers as Samsung, which it added in 1997.
In 1998 the firm hired Abraham Rosler to serve as executive vice-president. He had previously worked for a company that sold cell phone accessories in Latin America, where Ram, who was fluent in Spanish, was seeking to expand. Rosler also took a minority equity stake in the firm. With sales growth averaging roughly 50 percent each year, by 1999 InfoSonics' revenues had risen above $24 million.
The company's business consisted of buying cellular telephone handsets and accessories from manufacturers, programming the phones to customers' specifications, and packing and shipping orders. The firm's rapid growth was due in part to the nature of the market, which included frequent technology upgrades, surging numbers of new users, and customers' tendency to switch phone companies, which typically required a new phone. These factors conspired to make the market highly unpredictable, with Ram telling the Miami Herald, "This business is like the weather in Miami. If you don't like it, wait 20 minutes."
A critical component of InfoSonics' ability to keep up with industry trends was a web-based data sharing system in which the company offered information about the market while asking customers to tell what they knew about sales and equipment issues. The web site was also used to track shipments of orders and facilitate transmission of essential documents.
Opening of Miami Warehouse: 2000
In the fall of 2000 InfoSonics opened a second warehouse in Miami, where it had earlier used a third party to supply its Latin American accounts. The company was distributing phones and accessories to 400 carriers who resold them to customers, as well as to more than 9,000 retail locations around the United States. Its clients were primarily firms that were independently owned and/or regional players that lacked the clout of an AT&T or Sprint. The average order was worth $14,000, and the company made a profit of 4 to 8 percent on the price of a handset and 10 to 15 percent on accessories. Two-thirds of the products it shipped were phones.
In December 2000 InfoSonics acquired a cell phone retailer called Axcess Mobile for the forgiveness of $57,000 in accounts payable. Axcess owned a small number of retail kiosks in San Diego shopping malls. The firm was also considering an initial public offering at this time, but pulled back due to unfavorable market conditions.
In December 2001 InfoSonics signed an agreement with PC-EPhone, Inc., to distribute that company's handheld device, which combined features of cell phones, personal digital assistants (PDAs), and computers. InfoSonics was also an authorized reseller of products from such manufacturers as Samsung, Motorola, Ericsson, LG, and Audiovox at that time.
The firm was continuing to expand dramatically, and revenues jumped from $34.2 million in 2001 to $65.1 million in 2003. Some 97 million cell phones were sold in the United States alone during the latter year, and while many were bought by new users, an estimated 20 percent of subscribers acquired a new phone annually.
Initial Public Offering in 2004
In January 2004 the firm bought a company called InfoSonics de Mexico from executives Ram and Rosler, and also filed the paperwork to make its long-delayed initial public stock offering. In June the company took in $12 million from investors on the American Stock Exchange, using the funds to boost sales and marketing efforts, expand warehouse and office facilities, increase the number of retail wireless service activations, and start a logistics service business. Prior to the sale founder Ram had held a 76 percent stake, but his total would fall to 48 percent after the offering.
In July InfoSonics signed an agreement to distribute the wireless remote video monitoring and data systems products of Cenuco, Inc., and a few months later the company extended its distribution agreement with Samsung and added that firm's products to its Latin American offerings.
In October InfoSonics closed four of its Axcess Mobile mall kiosks and sold the other six to The Mobile Solution Corporation. The retail unit had contributed only about 5 percent of the company's revenues, and had not been consistently profitable.
In November the firm unveiled an online store where customers could buy new phones and accessories, and shortly afterwards it also began distributing VK Mobile cell phones. InfoSonics would be the sole North American distributor for the Korean manufacturer. At this time the company was deriving 70 percent of its revenues from sales of handsets to regional wireless carriers, 25 percent from sales to dealers, and 5 percent from online sales. For 2004 InfoSonics reported sales of $73.4 million.
The company's mission had evolved as the cell phone market grew and it took on a number of challenges unique to the industry. In addition to simply ordering, warehousing, and shipping phones and accessories, InfoSonics also marketed new products to both carriers and consumers; tested for compatibility and secured approval from regional service providers; customized and loaded software onto phones; and performed field services including training, support, and warranty fulfillment. In the United States the company's carrier customers were primarily smaller regional ones such as Alaska Cellular, Cincinnati Bell, and SunCom, but in Latin America they included both second-tier providers and market leaders Telefonica and America Movil.
Acquisition of Argentine Subsidiary: 2005
In January 2005 InfoSonics bought an Argentina-based company that distributed Samsung cell phones and accessories, which would give the firm its largest presence in Latin America to date. The company had locations in the United States, Mexico, Argentina, Guatemala, El Salvador, and Colombia, and it was reportedly also studying the feasibility of opening an office in Chile.
In November the firm's credit line was boosted to $25 million through new lender Wells Fargo, and the following month InfoSonics began selling Samsung phones and accessories online. Consumers who went to the Samsung web site and wished to purchase equipment would be redirected to an InfoSonics-run site.
After the company's third quarter financial report showed unexpectedly high revenue, investors sought out its stock and drove the price up threefold by year's end. For 2005 revenues nearly doubled to $146 million, with a net profit of $2.7 million reported. Latin American sales had grown by 226 percent, and accounted for 69 percent of the company's total revenues, up from just 12 percent in 2004.
In January 2006 InfoSonics sold 1.1 million shares of common stock to institutional investors for $14.4 million. The company also expanded its distribution of Samsung products to Paraguay and Uruguay and began selling i-mate brand cell phones in North America. In February the firm expanded its exclusive VK Mobile distribution territory to include Canada, giving it full coverage of North America. InfoSonics had succeeded in winning approval of that firm's VK530 phone from a number of carriers.
In March the company requested that its stock cease trading on the Berlin-Bremen Stock Exchange, where it had never been approved for sale. The firm blamed pressure from short sellers for the stock's fall from over $23 per share early in the year to just above $10 in March.
The spring also saw InfoSonics take on Caribbean distribution of Alcatel and TCL brand phones, which were less expensive than the Samsung and VK products it primarily sold. Several new VK models were introduced as well, each of which included an MP3 player and other advanced features.
In April InfoSonics leased a new sales, warehouse, and manufacturing facility in Mexico, which would serve as the company's headquarters in that country. Revenues for the first quarter of 2006 were 125 percent higher than those of a year before, and the firm's stock jumped after the figures were announced, topping $30 by June. The company restated its net earnings for the first quarter early that month, however, and with a stock analyst also downgrading their rating, the price declined by more than 50 percent within a few days. The company subsequently attempted to reassure investors, some of whom had filed lawsuits over the restatement, that the company's business was sound.
In just over a decade InfoSonics Corporation had become one of the leading distributors of cellular telephone handsets and accessories in North America. The company was busily expanding in Latin America, where it earned two-thirds of its revenues, while continuing to supply regional carriers and retailers in the United States. The firm looked forward to ongoing growth in the still young market.
Principal Subsidiaries
InfoSonics Latin America, Inc.; InfoSonics de Mexico S.A. de C.V.; InfoSonics de Guatemala S.A.; InfoSonics El Salvador S.A. de C.V.; InfoSonics S.A. (Uruguay); Axcess Mobile, LLC.
Principal Competitors
Brightpoint Inc.; CellStar Corp.; Brightstar Corp.; SED International Holdings, Inc.; TESSCO Technologies, Inc.
Comment about this article, ask questions, or add new information about this topic: