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Co. Seeks to Boost Its Presence In U.S. Electronics Market

InfoSonics Corp. wants to raise its profile in its own country, and it’s starting by making a profit.

The San Diego-based electronics maker has focused for many years on selling its wireless phones, with its verykool brand name, in Latin America. In 2014, InfoSonics (Nasdaq: IFON) wants to spread that name in the United States and amp up domestic sales.

“We feel that the U.S. is going to be one of our growth stories within this year,” CEO Joseph Ram said on a recent, springlike afternoon at the conference table of his office in the University Towne Center neighborhood. In front of him were the company’s latest value-priced products: a smartphone and a 7-inch tablet.

InfoSonics, which has 110 employees and slightly less than $12 million in quarterly revenue, boosted its stature in investors’ eyes with the March 6 release of its fourth-quarter results.

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While earnings were just a penny a share, the quarter marked the second in a row that InfoSonics was profitable as revenue grew 40 percent to $11.87 million compared with the same quarter a year earlier. Investors responded favorably, sending its stock price 15 percent higher to close at $3.56 on March 6. Some 5.1 million shares traded hands — roughly six times the amount traded on a normal day. Since then, shares have risen as high as $4.48 and have been hovering above $4.

Still, it’s difficult to say whether the company has turned the corner.

Ram said he doubts there will be straight-line growth ahead, instead seeing up and down quarters to come. The wireless game is demanding. Its players must have the right product at the right price at the right time.

“There are a lot of moving parts to this,” he said.

Nevertheless, he likes where the business is going.

“Now we feel like we’re on the right track to grow the business,” Ram said. “We feel that we are finally kind of finding our footing.”

Sales Up, Costs Down

To reach its second quarter of profitability, InfoSonics increased its sales and units sold, and got more efficient with operating expenses, Ram said. Unit shipments during the quarter rose 96 percent compared with the fourth quarter of the prior year, and the company finished 2013 with more than 1.9 million units shipped, its highest total ever. Meanwhile, selling, general and administrative expenses were at $1.63 million, down from $1.81 million.

“We used marketing resources more effectively,” Ram said.

Research-and-development expenses fell from $695,000 to $217,000, though here the accounting is tricky. Ram said a contractor is now handling a lot of the R&D, so the expense is built into the cost of the products.

The company has no debt. It had $2.36 million in cash on the last day of 2013, down from $5.23 million one year before.

Ram declined to say what the company’s U.S. sales were, saying only that they are a small percentage of the total. Mexico, Puerto Rico and Peru were growth markets, the company said in a recent statement.

San Diego Suits InfoSonics

InfoSonics, which celebrated its 20th anniversary in February, has been through several iterations. The business started as a wireline equipment company, dealing in PBX systems, phones and faxes. Soon, however, executives noticed the world was going mobile, and the company went on to distribute wireless equipment. Now it’s a manufacturer that controls the design, intellectual property, brand and marketing of its products. A contract manufacturer in Shenzhen, China, assembles InfoSonics phones and tablets.

InfoSonics has 20 employees in San Diego. The city is a good place to be, Ram said, partially because of its collective wireless expertise. MediaTek Inc., which makes the chips that power InfoSonics products, is opening an engineering office in San Diego. Samsung is also in town. And most prominently, Qualcomm Inc. (Nasdaq: QCOM) is in Sorrento Valley, while Broadcom Corp. (Nasdaq: BRCM) is a short drive away in Orange County.

Ram said he likes the fact that San Diego is relatively close to Asia. The time difference is not as marked as it is on the East Coast, he said. Ram added that he has taken Japan Airlines Corp.’s direct service from Lindbergh Field to Tokyo several times.

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