Electronics manufacturer Bang & Olufsen today announced a new partnership with LG Electronics. The focus will be on the Danish company’s television division, reports Reuters. The announcement resulted in a 10 percent increase in Bang & Olufsen’s share price in early morning trading.
The tweet links to a press release that describes a review to “identify strategic and structural options to increase scale and further reduce complexity within Bang & Olufsen.” The partnership with LG rose from this new initiative, as the South Korean conglomerate is not only one of the largest producers of televisions in the world, but also a technological innovator.
— Bang & Olufsen (@BangOlufsen) March 18, 2016
Bang & Olufsen plans to combine its experience in design, acoustics, and smart home tech with LG’s foray into OLED TVs.
“This partnership with LG will enable Bang & Olufsen to stay at the forefront of innovation in the TV category, a category which is currently undergoing significant change and which is very important to Bang & Olufsen,” says CEO Tue Mantoni. “The partnership will address Bang & Olufsen’s key challenges related to scale and complexity.”
This is a marriage of development and scale, as Bang & Olufsen can focus on improving design and functionality while also utilizing LG’s massive production, supply, and service capabilities. This should improve gross profit margins while reducing capacity costs. The estimated potential for savings is between $22.7 million and $30.2 million over the next few years, which will contribute to financial targets set up for the next two years.
Bang & Olufsen has not turned a profit in three years. In November, the 90-year-old company revealed the possibility of a takeover. As of today’s announcement, discussions are in progress with a potential buyer, but no commitments have been made.
The first OLED to emerge from the partnership is expected to launch in 2017. The collaboration will also involve licensing and new product bundles.