The surprising strategy is described as "striving to build leading businesses in attractive markets and by this grow with healthy margins and ensure good returns on the invested capital," and the conviction that the group's "strong performance in the Hearing division" will partly off-set "the extraordinary impact from the gradual wind-down."
And this decision seems to be the more surprising as the announcement also reveals that "The re-focusing of the Elite product line towards the premium segment, which was initiated in 2023, has resulted in a stronger profitability level than before. However, the investment required for future innovation and growth in this very competitive space is deemed unjustified in the long-term given associated risks. The Talk product line follows a similar logic and is positioned in the declining mono Bluetooth market. Consequently, following a thorough business review the decision has been taken to gradually wind-down both the Elite and Talk product lines."
"The decision to gradually wind down the Elite and Talk product lines is part of our commitment to focus on attractive markets where we can deliver profitable growth and strong returns," details Peter Karlstromer. "We have demonstrated that we can compete in even the most challenging categories with our leading technology and go-to-market strengths. We did this with our Elite line by delivering multiple worlds-first innovations for consumers, especially in true wireless earbuds, driving global market share gains. The markets, though, have changed over time, and it is today our assessment that we cannot generate a fair return on investment compared to the many other opportunities we have within our Hearing, Enterprise, and Gaming businesses.
"I am very grateful to our retail partners, who have supported us on the Elite and Talk product lines, as well as to the consumers who made us a part of their lives. We remain committed to working closely together to make this a successful wind down, including continuing with the launch of our final Elite products - the second generation of the highly acclaimed Elite 8 Active and Elite 10 - which are the best earbuds we ever made.”
GN says that it will reduce the inventory of the affected products, of which most is expected to be completed by the end of 2024, but continue to service and support customers for several years. "This commitment to retail customers is underlined by the global announcement of two next-generation editions of the popular Elite 8 Active and Elite 10 premium earbuds. The Elite 8 Active Gen 2 and Elite 10 Gen 2, which will be the last two product introductions in this product line, will be announced today and available from later this month."
Detailing the financial logic behind this decision, GN reports a revenue of DKK 1,253 million (approx. US $18M) from the now discontinued Elite, Talk, and BlueParrott product lines in 2023, and assumes a negative impact of DKK -450 million in the revenue going forward "as a consequence of the gradual wind-down including extraordinary promotional activities to reduce inventories."
GN also expects the Hearing division "to partly off-set the negative impact from the gradual wind-down, supported by continued strong uptake of ReSound Nexia," while assuming that its Gaming business and the Enterprise division are not doing so well, impacting the group organic revenue growth guidance to be between "2% to 6%," increasing free cash flow to “more than DKK 900 million” for 2024.
www.jabra.com
www.GN.com
