BackBang & Olufsen outsources TV manufacturing to LG
Working with the South Korean company would allow the Danish firm to leverage its economies of scale while remaining a niche, luxury brand
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Copenhagen: Bang & Olufsen, the Danish maker of upmarket sound systems and televisions, said on Friday it had entered a partnership with LG Electronics to outsource its production of televisions.
The struggling Danish firm, which said in November it was in talks with a potential buyer, said the deal “will address Bang & Olufsen’s key challenges related to scale and complexity".
“Bang & Olufsen’s total production is around 30,000 TVs per year... By comparison, LG sells 40 million TVs per year," chief executive Tue Mantoni told AFP.
Working with the South Korean company would allow the Danish firm to leverage its economies of scale while remaining a niche, luxury brand, he said.
“We will work with them on innovation and technology in some of the areas where it’s important to be bigger," he said.
The group, which also makes sleekly designed speakers, soundsystems and headphones, said it would now focus on its core know-how in design and acoustics.
The move would result in annual savings of between 150 and 200 million kroner ($23 million-$30 million, 20-27 million euros), and would bring it closer to a seven percent margin target for earnings before interest and taxes, it said.
The partnership’s first TV using organic light-emitting diode (OLED) displays—screens that deliver a more vivid picture quality and consume less electricity—is expected to be launched next year.
The agreement gives the Danish firm “a good possibility to establish a profitable and competitive production of TVs," Sydbank analyst Morten Imsgard wrote in a note to investors.
“The deal gives Bang & Olufsen far better conditions to survive as an independent company," he said.
In February, LG unveiled its first modular smartphone, the G5, which came with a sound system developed by Bang & Olufsen.
Shares in the Danish company soared in November after it said it was in talks over a potential takeover offer.
On Friday it said that the talks were continuing but that no binding offer had been made.
Founded in 1925, the Copenhagen-based company has posted annual losses over the past three fiscal years as more people listen to music on their mobile devices and after failing to attract younger consumers.
In a bid to attract more young people, it launched the B&O Play brand in 2012 with the aim of selling headphones and portable speakers to “design-conscious urbanites with an active lifestyle."
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