D&M Takes Another Bite

The streak of acquisitions for D&M Holdings continues. Last month saw the company pick up its third major consumer electronics brand when McIntosh Laboratory was brought into the fold with Denon and Marantz. Last week, D&M announced that it was successful in a bid to acquire certain assets comprising the digital video recorder and MP3 business units of troubled SONICblue.

D&M Holdings says it will purchase the SONICblue assets, which include the ReplayTV and Rio brands, for $36.2 million. The bidding process occurred last week during an auction of SONICblue's assets in the US Bankruptcy court in San Jose, California. D&M reports that the transaction is expected to close in approximately 10 days.

With the new acquisition, D&M says it is purchasing inventory, receivables, intellectual property, and capital equipment, and will also take over selected contractual relationships and liabilities. D&M intends to keep all ReplayTV customers and says it will continue to design, manufacture, and distribute a line of ReplayTV and Rio products.

The largest part of SONICblue's business was clearly its Rio audio products, which reported revenue of approximately $62 million in the last 12 months. In the same time period, ReplayTV had revenue of approximately $22 million. D&M states that the impact on its earnings in fiscal year 2003 is not fully determined at this time.

Concurrent with the SONICblue purchase, D&M also announced plans to establish a new digital development group by merging the business assets purchased from SONICblue with a new in-house group. The new subsidiary, christened Digital Networks North America (DNNA), is intended to "drive the strategy and develop the core technologies that will enable the brands within D&M to become the leaders in the emerging entertainment-based home networking market."

D&M's Tatsuo Kabumoto explains that his company will try to capitalize on the intellectual property engineering talent from SONICblue "across our D&M brands, while positioning these businesses to be more profitable."

The agreement to purchase assets of ReplayTV and Rio represents D&M's second investment in technology to create entertainment-based digital home networking products. Last year the company made an investment in Mediabolic, a San Francisco–based company that provides an embedded software platform for entertainment devices. D&M says Denon will use the Mediabolic platform in new products that will be launched later this year.

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