Executive team provides update on Foxconn’s $4 million investment and showcases new digs.
On February 13, The Cannata Report team (Frank, CJ, and Scott) visited Sharp’s new headquarters in Montvale, New Jersey, to meet with Sharp’s President Doug Albregts, COO Mike Marusic, and Senior Vice President of Sales Laura Blackmer for an update on what has happened with the company since our last visit in June 2016. We also toured the company’s new headquarters.
Last June, we were told that Foxconn, Sharp’s new owners, would be investing some significant resources””approximately $400 million””into the company, primarily for product development. Since then, we hadn’t seen any indication of how that money, if it was indeed there, was being spent.
We were told by Doug not to focus on that $400 million figure, who explained that as Foxconn has learned more about Sharp’s market, what it does, and more about the opportunity to build an overall business solution, the investment opportunities from FoxConn will likely be much greater than that original figure.
“The commitment to $400 million was written up in [the original] deal, but as everyone got together, we realized we’re not thinking big here,” added Mike.
Thinking big also means incorporating existing Foxconn products into the Sharp product mix. The company has been evaluating the many products marketed by Foxconn to see what fits and what doesn’t.
“They make everything,” exclaimed Mike. “There are some networking products they’re having us look at””they’re No. 3 in the world brand-wise and No. 1 or 2 in manufacturing for networking systems.”
During our tour of the new facility, we had a brief glimpse of things to come from Sharp, including a four-wheeled security robot that looked like a futuristic descendant of a golf cart, as well as a water cooler made by Foxconn, that runs on electricity and is not attached to a water source. Instead, the water dispensed from the cooler is derived from the humidity in the air. We understand that both products will eventually be available to Sharp dealers. The security robot, which will likely have a price tag in the half-million-dollar range, is still in the beta phase, while the water cooler is expected to launch exclusively into the dealer channel in April.
“The more they learned about our channel, they came in with that water product and said it’s going to be an exclusive to your Sharp dealers because we’re going to model it exactly like a copier with the same type of service arrangement,” explained Doug, who added that it will also leverage Sharp’s MICAS, automated device support application.
Still, patience has been a virtue for the Sharp team since the acquisition closed last fall.
“When you put together a $180 billion company with a $30 billion company, we were optimistic that within 45 days, it would change our world, but that’s not how these things work,” acknowledged Doug, while adding that the timeline for some of these changes and the fruits of Foxconn’s investments is more likely one to three years.
Foxconn is already reaping the rewards of its initial investment, which is a positive development for Sharp. Consider that the acquisition price was $3.6 billion and Sharp shares were at 86 cents a share when the deal closed last September. Share prices are now at $2.80 per share or four times what they were at the time when the deal closed.
According to Doug, Foxconn is looking to replicate its success with Sharp. That could mean additional investments.
“We are working on some mega-acquisitions,” Doug revealed. “There is no amount of money that Foxconn has shied away from, and I’m talking north of a billion dollars. There are several companies we are aggressively pursuing. We have the resources in the background to do those sorts of things, and that’s all I can mention at the moment, but I believe it’s something none of our competitors have the capability to do at this point, except for maybe Samsung.”
Foxconn’s commitment to the home/smart office concept, where Sharp is the “smart office” arm, remains the same as it ever was, and don’t be surprised if that’s a driver for future acquisitions around hardware or software to continue rounding out that smart office initiative and build upon the Sharp brand.
In the near term, much of Foxconn’s original investment has been devoted to new products, which Mike said will be unveiled, along with Sharp’s product roadmap, at its dealer meeting scheduled for the last week in November. There will also be some significant marketing and advertising campaigns, including a major sponsorship that’s not ready for primetime yet.
On the Road Again
A Sharp roadshow is also in the works, although that’s been pushed out two months from the original April time frame because the event-planning company that facilitates these roadshows and dealer meetings for Sharp, as well as other OEM in the industry, has gone out of business.
We’ve consistently stated that Sharp is the most under-distributed brand in the industry, and that’s something Sharp executives realize. At the same time, Laura told us that Sharp remains committed to getting a better understanding of its dealers and growing the channel.
“That’s something we’ve accomplished in the last few years where we know these guys and know their exit plans and what they want to do to get there,” she said. “Our next big move is to expand. We don’t have enough distribution.”
The New Sharp: Not the Same as the Old Sharp
Merging a Japanese company with a Chinese company must bring with it certain cultural challenges, and we were curious as to what’s been the biggest cultural difference for Sharp in reporting to its new Chinese owners, as compared to when they were reporting to Japan.
“It’s far more entrepreneurial with Foxconn,” observed Doug. “And they’re very competitive within the company to drive that growth. They’ve migrated that into the Sharp culture and candidly, that’s been a little bit of culture shock for the Japanese. From our perspective, it’s been great. They’ve challenged us, they’ve given us the ability to do things, they haven’t micromanaged our business, and they only care about results.”
He added that Foxconn has been impressed at how this division within Sharp grew its operating income by more than 300% and revenues by 17% during a time of great financial distress at Sharp Corp. in Japan. Now, Doug says, they’re looking for ways to create even more success.
At the end of our meeting, we asked if the group’s level of enthusiasm was the same or higher since we met last June.
The unanimous response was higher.
“It’s a different optimism,” added Mike. “What we thought was going to be great is good, but all these new things are different, so we have to recalibrate what we want to do. We’ve crested as far as the number of things to look at and now [we have to execute].”