Who Cares that Harman Is Acquiring AMX?

This is an opinion piece by guest blogger, Dan Newman. These views are not necessarily those of AVNation or their management.

In the world of mergers and acquisitions, a $365 million deal is a drop in the bucket.

If big companies like IBM, Cisco or Procter & Gamble make this kind of deal — Harman International Industries’ agreement with The Duchossois Group, Inc. and its affiliates to acquire AMX LLC for $365 million — it may get a press release, but no one is going to read it.

We have entered a world where deals that get attention tend to start with a “B,” as in billions. That, of course, doesn’t apply when you are in the commercial integration business. In this business any deal is a big deal, isn’t it?

Just this past week Harman International, the conglomerate audio/video holding company, announced the acquisition of AMX. Best known for its control and switching technology, it seemed a precarious play for a company that really has been audio-centric for the majority of its existence.

What in the world does a company like Harman want with a company that makes control systems?

Perhaps the better question is how relevant is control these days in the AV world, and moreover what is the long-term prognosis for the control business. Was it worth $365 million?

This past week one of my clients told me a story about how his 18-year-old son returned home from college and immediately downloaded an app on his iPhone that allowed him to take control of all of the devices in his home. Within 15 minutes I was told, “The kid came home, took control of the audio and television throughout the house, and was turning the televisions on and off just to drive us crazy.”

So again, where in the world is the control systems market going?

AMX’s Recent Past

Sure, anyone that has been around the industry long enough can remember the original founder of AMX, Scott Miller and his helicopter, and his elaborate parties and the overwhelming feeling of cool that came with AMX.

It was followed by the dark ages – Panja (if you don’t know that story, you’ve got to read this) — and then what seemed to be a new revitalization under the leadership of Bob Carroll. who took the company from public back to private through the acquisition by Duchossois industries.

For a brief moment AMX became new and exciting again, but somewhere around 2008 the music kind of stopped playing.

Having spent a few years working for AMX I have seen it from both sides. The company had a cool culture and was comprised of so many great people, but I saw that the products time and time again weren’t what people wanted. It was as if the company was building the product they thought people would want, but unfortunately it wasn’t what the market wanted.

From my perspective I blame this on a sort of outward desire to reduce the role of the channel for AMX. The problem was AMX was built on a channel, by its channel and for the most part that was why they accomplished what they did. It was a great network of manufacturers reps, and integrators that bled AMX.

But for some reason AMX felt its channel wasn’t doing enough. Perhaps it was too stagnant and not creative enough in selling the new products and ideas that AMX had brought to market. Maybe it was something else, but there became this urgency to have AMX people skip the channel and go right to the customer. If it worked, it never became apparent because in my years following my stint at AMX where I was in the integration channel I almost never heard a customer ask for AMX.

The best parallel I can draw was how Polycom long neglected its channel in the mid 2000’s and let Tandberg come in and eat their lunch, especially in the AV integration channel. Ultimately it wasn’t until they brought over Andy Miller from Tandberg to lead the regime that Polycom found itself back in the good graces of the channel.

All the while, AMX’s biggest competitor, Crestron, stayed extremely focused on the channel and delivering it what it told AMX they needed to meet customer demand. This isn’t my perspective as a fan of Crestron, this was just what continued to happen. It got to the point as an integrator where clients were calling out Crestron like Kleenex and trying to sell them AMX became more work than you could possibly get in return in terms of increased profit or performance.

This I believe became the greatest single factor in a converted channel. Selling Crestron just became easier.

But I digress.

Is $365M a Good Price?

The real question of the day is why did Harman buy them, was it a good buy, and really should we care?

As best as I can tell, AMX seems to be a boutique solution in the control industry. They still have a small but loyal cult following and they still have tremendous name value in the industry. I believe that would have sustained them through a number of years ahead.

Having said that, Duchossois, who is best known for holding their platform companies (which is what they considered AMX), decided to sell them off. In fact, Duchossois pretty much got entirely out of the AV industry as we first saw when it sold Milestone.

Frankly, I just can’t understand what Harman is buying. We have entered an age where I think control and signal switching will largely be done over IP and I just don’t know how much intellectual property AMX holds on the digital side as Autopatch has been a bit of a laggard on the switching side ever since signals went digital.

The only thing I really see for Harman is the entree into the video and control side of the business. Which in the “Integrated World” has value, but is it $365 million in value?
So what are they getting?

[Editor’s note: Through its PR firm Harman declined CI’s requests for comments on the acquisition. Dan Newman is a columnist for Commercial Integrator.]

Is it something we don’t know or is there more value than meets the eye? Perhaps AMX had tremendous triple net profitability and Harman is going to see their ROI over a few years.

But we also know Harman is a company that likes to buy them and break them into profitable pieces, so maybe they see efficiencies that will make the revenue AMX generates that much more profitable.

Personally, I think the future is on your tablet and in your data center. And this, my friends, hardly makes me Nostradamus. Unfortunately, from where I sit I just don’t see the move as a good one for Harman, but to AMX’s credit it was a hell of a move to increase your business value by 50 million over 10 years while shedding your channel and struggling to gain market share.

The best news of all is Harman knows something I probably don’t, and as far as I can tell my opinion will mean nothing in their bigger plans. So kudos to them, AMX and here is to a future of big digital switchers and over priced touch panels.

 

dnewmanphotoDaniel Newman is the founder of BroadSuite Consulting (link digital to www.broadsuite.com), a specialized consulting firm that focuses on helping brands and businesses to be found, seen and heard online. Prior to finding BroadSuite, Newman spent his entire career in various integration industry roles including CEO of United Visual, a 60-plus-year-old commercial integrator. Part-time MBA instructor, he’s also a contributing writer for Huffington Post, SAP and IBM.

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