B&O performance
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what is going on with B&O. After some time thought I’d check in to see how their restructuring and new line is doing and am shocked with its stock performance.where are they heading??
As it seems B&O are struggling to get the business to generate increased revenue over time.
Looking at revenue they have been hoovering around 2.6 – 2.7 billion DKK the last couple of years. I just read the book “Breakpoint” that described the makeover of the company that was performed during early parts the 90:ies . During that period the revenue were slightly below that. During the later years of the 90:ies the revenue were up above 3 Billion DKK and the profit was decent.
Since then its been downhill. I guess its a difficult niche B&O have, since they focus now on the richest individuals where they compete with “superbrands” that sell products that are perhaps “easier” to consume and feels more relevant if you want to show your wealth (watches, cars, clothes, bags etc).
B&O are changing their target audience. Moving away from those middle-people who buy mid-tier BeoVisions, and Beolabs repeatedly every 4-5 years and looking instead to the kids to buy headphones and bluetooth devices and the VHNWI’s who will buy 97inch Harmony’s and 7.0.4 surround systems with 6 Beolab90’s coloured in atelier multi-coloured turd-sprinkles for that individual look in the NY and Miami penthouses at “whatever the cost”
The problem is the kids will give Beoplay’s 3 to 4 star ratings and the VHNWI’s will find the flagship gear so full of repetitive software bugs….they will be too dumb to fix, get frustrated and have the landscape gardener throw it all in the trash bin. It will be a tax-deductible (but profitable) loss and an “oh-well, who’s next” thing.
B&O are changing their target audience. Moving away from those middle-people who buy mid-tier BeoVisions, and Beolabs repeatedly every 4-5 years and looking instead to the kids to buy headphones and bluetooth devices and the VHNWI’s who will buy 97inch Harmony’s and 7.0.4 surround systems with 6 Beolab90’s coloured in atelier multi-coloured turd-sprinkles for that individual look in the NY and Miami penthouses at “whatever the cost”
The problem is the kids will give Beoplay’s 3 to 4 star ratings and the VHNWI’s will find the flagship gear so full of repetitive software bugs….they will be too dumb to fix, get frustrated and have the landscape gardener throw it all in the trash bin. It will be a tax-deductible (but profitable) loss and an “oh-well, who’s next” thing.
I read that reply as a tongue-in-cheek jibe. But then I thought about it for a bit and my heart sank. You may be right in one respect – the new target audience my well indeed be less patient and quick to criticise.
Is it true though that all new products are exposed to the same lack of understanding as now so many people expect so much so quickly?
I hope the brand survives its transition and its new audience learns to love it as much as we do.
Is it a good time to buy into B&O?
Julian
My reading is the new direction is going to take time, B&O have not installed “Luxury”/”First Class”/VHNWI product support. So top dollar for the same product. Wealthy people inclined to buy B&O will lose patience very quickly.
I think in general, B&O are making some of the best products ever – BL90, 50, Theatre etc…but I think they have seriously underestimated the design and subsequent complexity of the Mozart software infrastructure. They also seemed not to have invested early enough in software engineering when adopting Mozart and have to scramble to get the bugs out ASAP.
When people spend $15k on a soundbar, $20-135k on loudspeakers, any hint of being a problem and people irrespective of affordability will temper their buying impulses.
I think I seem to have been fortunate in the Software front with the Theatre and BL90s. But many here have not. Many of us are de facto beta testers and have to dial-in for support for problems that should not have ever come to market.
Completely agree that the VHNWI’s will not stand for the current software quality. Heck, my wife (not a VHNWI) gives me crap every time the system hiccups – “when are you going to buy something that just works?”. B&O support? Ha!
Now, my “defense” is that nothing works now days. Every company has crappy software (even Apple has been disappointing lately), but part of me knows I’m stuck with B&O because I have too much invested, and it will be far too expensive for my non-VHNWI household to replace everything with Sonos (for example). If I was VHNWI, I’d probably pitch it, tell my all my friends and buy something else (and if my theory of everybody is bad is true), repeat.
In defense of B&O… As bad as we think their software is… I’m talking about NL beosounds, not the Theater and BL50/90… their competitors seem to be mostly worse. Reading reviews about Kipsch and other competing wireless speakers sound like these are worse. I think B&O has been at this longer so they are a bit more mature, but let’s see if they can keep their head start.
52week low 8.88DKK. Their decision to stop making gear for the middle classes is severely misguided IMHO. It is a decision that they will severely regret. Prophecy of it becoming a headphone and sound dock company is coming to reality. The middle income earners kept them alive when things got tough in decades gone by. There’s a global credit crunch on the way in Q4-2023 to Q1-2024.
I think their long term strategy will be something they regret. However, the current share price is probably a reflection of the current market sentiment in general.
I would expect, B&O is probably taking a lot of orders on their Ferrari range and Beolab8 so cashflow is probably ok in the short term but does not translate to immediate share price.
B&O may not break even on their strategy, but a global credit crunch won’t slow VHNWI’s from buying some little bit of kit. The LVMH’ing of B&O follows a well-trod path. Here in the USA even Disney, the epitome of mass-affluent marketing, is now selling upscale multi-thousand-dollar concierge theme park services. You in the UK are used to a similar USA-HNWI-ism, “concierge M.D.s” just to avoid the National Health waits. It’s a sound strategy per se, but whether it will work for audio gear and whether B&O executes it well, are the questions.
If say 10% of B&Os customers (hypothetically) provide 30% of their revenue, it makes sense to try and pump that segment in profitable or break-even times. That should grow the company.
The problem is when there is a decrease in discretionary spending by the other 90% who contribute the other 70% of B&Os revenue who feel financially pinched, perceive job risk, higher mortgage repayments etc….that segment can collapse very quickly, whereas building-up that 10% takes time even though the cost of purchase is effectively meaningless to them
Their cash flow business model is genius! When you consider how many units of each new model each store is contracted to buy to ensure branding / displays are consistent even before a customer may purchase a unit, the company are shifting a great deal of inventory even their worse &/or overpriced & technically floored products to ensure Head Office is profitable.
My sympathy is for the stores (franchisees) who are holding lots of inventory including the gaudy colour material combos no one seriously will opt for, meaning these units will eventually be discounted at the franchisees’ expense. The stores also need to push quickly before the inevitable price rise, and existing customers know this so it drives demand.
Don’t get me wrong I am a fan and my dealer has repeatedly upsold me to the next model but there comes a time when. Bang Olufsen should learn from other industries ahead of legislation that loyalty trumps new sales, think about in the U.K. laws in the car insurance market where existing policy holders now get as good a renewal price as a new policy customer by law.
It seems to me B&O operate like new homes, they only go up in price despite being older and in worse condition.
Let’s also be honest… we like something shiny and B&O products are a drug for us and we find excuses to buy, even though we know the total price paid is not worth the quality.
In my opinion the company will always succeed even if consumed by a new parent company and run as a halo brand. Whether there are as many stores is doubtful, meaning servicing will take longer and costs increase to do the initial setup and installs.
I don’t think it’s a problem confined to B&O. Whilst I am nowhere near a NHWI, I have noticed that just about everything seems to have bugs, you buy one thing it doesn’t do what it’s meant to do, or there is some fundamental flaw, or technology has changed and it’s outdated.
Take for example Internet Radio, you invest and the BBC expects you to move to their iPlayer app and removes their stations, Dab is replaced with DAB+, DVDs with streaming services. Mobile Phones go out of date too quickly, expensive computers, laptops, tablets etc. etc. etc. It just goes on and on.
It sounds as if the current strategy of moving to NHMWI is inline with car industry, where most are looking at producing less cars but higher value cars.
On the upside I suppose NHWI are immune to a certain extent to the downturn in economies and will continue to buy.
Thank heavens for the ordinary person there is a huge choice of decent vintage gear out there – that works.
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