No Last Minute Save for SONICblue
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SONICblue and Japan's D&M Holdings failed to find common ground on the sale of SONICblue's ReplayTV and Rio MP3 units Monday, relegating the company's consumer electronics assets to bankruptcy court auction.
Santa Clara, Calif.-based SONICblue, best known for its first-of-its-kind Rio MP3 players, filed for Chapter 11 Bankruptcy protection in March, after bleeding cash for more than a year.
The company managed to forge a non-binding agreement for the assets with D&M Holdings, parent of audio equipment makers Denon Ltd. and Marantz Japan. But on Monday the two companies said they were unable to reach a final asset purchase agreement ahead of the deadline set by the United States Bankruptcy Court.
"While we worked very hard with the D&M team over the last few weeks, we were just not able to finalize all of the needed terms before the court set deadline," said Greg Ballard, CEO of SONICblue. "Our relationship with D&M is still strong and we anticipate that they will participate in the court run auction process in April."
For its part, D&M said, "D&M and SONICblue were unable to finalize the terms of a transaction before the deadline expired. D&M remains interested in these businesses and is evaluating the best way to proceed through the court auction process."
The court will hold auctions for both the ReplayTV digital video recorder (DVR) and Rio business units on April 15.
The company had also said that it would sell its GoVideo business line, which produces networked DVD players, to Opta Systems for $12.5 million, pending court approval. However, the court will still require the company to hold an auction for that asset on April 4, allowing for the possibility of a better bid.
In addition to its Rio MP3 players, SONICblue's brands include ProGear information appliances, ReplayTV digital recorders and software and GoVideo DVD+VCRs combos, dual-deck VCRs and digital home theater systems. Digital video recorders let users customize television viewing and record shows on a computer hard drive in a set-top box, allowing viewers to skip commercials.
ReplayTV's customer service center said their service would continue unimpeded -- just provided by the acquiring firm.
Once a darling to Wall Street and consumer device fanatics, SONICblue's safety measure marks another chapter in the decline of the firm, which admitted last January that it was considering putting itself on the auction block.
With bad elements seemingly at every turn in the latter half of 2002, that concession followed a November 2002 filing with the Securities and Exchange Commission, in which the firm said it had a debt of $335.5 million. In September, the firm slashed 25 percent of its work force a month after President and CEO Kenneth Potasher was canned over a loan dispute with the company's board of directors.
That problem and the layoffs sandwiched positive news in the form of a patent suit settlement with digital recorder rival TiVo, but SONCIblue has spent the better part of two years fending off lawsuits, most notably with its ReplayTV brand, which manufactured a dual deck VCR that media giants CBS, NBC, Viacom and Disney said infringed on their copyrights. That suit was also settled.