Universal Electronics Inc. leaped into the latest supplier
trend last week, agreeing to sell part of itself in exchange for a steep and exclusive
In a deal described by both parties as a memo of
understanding, General Instrument Corp. gave Universal an exclusive nod for several
million hand-held, universal remote controls.
The arrangement gives GI warrants to obtain up to 300,000
Universal shares, at current market value, based on a minimum purchase by GI of 18.5
million remotes over the next five years, said Paul Arling, Universal's outgoing
chief financial officer, who is staying on as a board member.
"It's an arrangement where the value [to GI]
improves as our stock appreciates," Arling explained.
Camille Jayne, recently promoted president and CEO of
Universal, called the GI deal "a big one for us." When finalized, she said, the
exclusive supply agreement could represent as much as 20 percent of the company's
"It really supports our growth and our participation
with the dominant players in the industry," Jayne said, referring to the standing
order for up to 15 million GI set-tops from Tele-Communications Inc. and other MSOs.
Geoff Roman, executive vice president for GI, said last
week that while the company traditionally hasn't involved itself in exclusive supply
arrangements with remote-control vendors, "this gives us the flexibility and
capability that we need to be competitive.
"With the complexities that may be coming down the
road as we move into other marketplaces beyond straight MSO sales, this partnership with
Universal is a valuable one," he added.
That's partly because of Universal's entrenched
relationships with retail houses.
"We have a strong retail presence, which becomes more
important as these digital set-tops head that way," Jayne said. "Anything that
we can do to help our customers -- in this case, GI -- to be more successful is good for
Roman said the deal does not include "dedicated
remotes," or the types that only control set-top devices.
Earlier this year, GI pursued a similar, but decidedly
larger, equity/supply arrangement with nine MSOs. In that deal, GI agreed to issue
warrants representing about 20 percent of its equity in exchange for shipments of up to 15
million of its DCT-5000 advanced-digital set-tops to the cable operators.
Terayon Communication Systems separately followed suit,
selling part of itself to a Brazilian cable operator and to Canadian operator Shaw
Communications Inc. in exchange for cable-modem orders.