Danish Hi Fi company Bang & Olufsen is struggling in the fast moving consumer technology market. This week the company sacked its CEO while also reporting a down turn in profits. The moves are not surprising as the company has failed during the past 24 months to deliver a superior sound system up against several new offerings from European and US Hi Fi companies.
In the TV market the company has been forced to use OEM manufacturers with consumers shying away from paying up to triple the price for a B&O sound system or TV simply because it has been designed by the Danish company. Another problem for the company is that it predominantly sells its product offerings via its own company stores, and to get traffic to these stores is expensive.
Torben Ballegaard Soerensen was sacked last week as the company’s CEO. He became CEO at Bang & Olufsen A/S in 2001 after leaving Lego’s, where he was the business development chief.
Mr Sorensen left the company after it was forced to announce a 37% decline in half-year profits, news that sent its share price tumbling 28% last week.
B&O chairman Jorgen Worning said the firm had not had “the desired growth in turnover” during the past few years. The company has also cut its earning targets for the next six months.
‘Drastic and rash’
Mr Worning said Mr Sorensen had failed to take advantage of the global economic growth seen in recent years. To a large extent it’s the general economic development that has gone against B&O. Analyst Kenneth Winther of Capinordic described the sacking of Mr Sorensen as “drastic and rash”. Mr Winther pointed to signs of weaker global economic growth since a credit squeeze hit back in August.
“To a large extent it’s the general economic development that has gone against B&O, so I don’t think there has been anything strategically wrong in the way the company has been run,” he said.
B&O’s key market sales have been weak over the past six months. While sales in Denmark grew 3%, they were flat in several other Countries Including Australia.Shares of the Danish company known for innovative and expensive stereo and TV systems fell nearly 30% Wednesday following the forecast.
Bang & Olufsen said it expects pretax profit in the current fiscal year to be between $70.9 million and $78.8 million, down from an earlier estimate of 570 million kroner. The company’s fiscal year begins June 1 Net income dropped 61% in the June-November period 2007.
“The recent year’s disappointing development in the group’s overall turnover, and the regrettable downgrading of the company’s result, has contributed to the board’s decision to make changes within the company’s top management,” Bang & Olufsen said in a statement.
It has not yet found a successor for Mr. Ballegaard Soerensen, who was dismissed “with immediate effect.” The board said the company should focus on its core business of upscale audio and TV products. In recent years, the company has broadened its product range to include high-end cellular phones and car stereos.