Cell Phone Distributor Plans Initial Public Offering
Finance: InfoSonics Has Reported Profits in Five of Past Six Years
BY MIKE ALLEN
San Diego-based InfoSonics Corp., which claims to be the largest privately held distributor of cell phones in the industry, is banking on something called “handset churn.”
In its filing earlier this month announcing its intention to go public, the 10-year-old company said it expects to pick up lots of new business since every year more than 20 percent of current cell phone owners get new ones.
Based on the numbers in the filing with the Securities and Exchange Commission, InfoSonics is doing well even without churn.
For the nine months ended Sept. 30, it reported sales of $44.5 million and profits of $561,000, compared to sales of $34 million and profits of $525,000 for the same period of 2002.
From 1998 through 2002, InfoSonics’ sales have grown by a compounded rate of 29 percent.
The company intends to sell 2 million shares of common stock for $18.9 million, netting about $12 million in the transaction.
Founder and CEO Joe Ram declined any comment on the proposed sale, citing the often-misunderstood “quiet period” before a stock sale.
InfoSonics distributes cell phones made by all the top handset manufacturers, including Sony-Ericsson, Audiovox, Kyocera, LG, Motorola, Nokia, Panasonic, and Samsung. It has two distribution hubs in San Diego and Miami, the latter serving its Latin American customers.
The firm also operates nine kiosks at local shopping centers through a subsidiary, Access Mobile LLC, but the bulk of sales are to other distributors, resellers and retailers. It has some 600 customers.
The market for cell phones shows no signs of slowing. Last year, global sales exceeded analysts’ predictions and hit about 510 million units. In this country, cell sales reached 97 million units, up 24 percent from 78 million in 2002, according to Strategy Analytics, a Boston research firm.
Locally, Kyocera Wireless Corp., a maker of nine models of phones, had its best year ever, with sales more than doubling from December 2002 to December 2003, said Brad Shewmake, a spokesman for the company that doesn’t provide specific figures.
Chris Ambrosio, an analyst with Strategy Analytics, said the Latin American market has great prospects because the market is so disjointed. Yet for any distributor to succeed, it will have to offer additional services besides the phones to effectively compete with much larger, established distributors.
InfoSonics, which reported profits in five of the past six years, already has 3.2 million shares outstanding before the offering, with Ram holding 76 percent. Gilford Securities and Source Capital Group, both based in New York, are the underwriters for the stock, which is to be traded on the American Stock Exchange.
InfoSonics said it expects to use proceeds from the stock sale to increase its sales and marketing, expand its inventory and warehouse and office space, boost the number of retail wireless service activations, and implement its logistics services business.