Syntax-Brillian (fka BRLCQ)

[OldPro]

Is Syntax-Brillian's Wal-Mart Partnership Good for Sales?
posted on: January 13, 2008

By Superbowl Sunday, Syntax-Brillian (BRLC) will be on the shelves at Sam's Club, Wal-Mart (WMT) and Best Buy (BBY) in addition to their long-time customers like Circuit City (CC), Target (TGT), Sears (SHLD), KMart, Costco (COST) and BJ's Wholesale (BJ). In my opinion, getting into Best Buy is a big plus for BRLC as it is the better of the two retail electronic giants, Circuit City being the other. While I like Circuit City, I think Best Buy has simply outperformed them and has a larger and more loyal customer base.

But, really, the big question is whether or not adding Wal-Mart and Sam's Club, as customers, is a good thing for Syntax-Brillian? I am not a big fan of Wal-Mart in general as I think they engage in unsavory practices with their suppliers. Sure, business is business but at what cost to the overall economy? So, that sounds bad for BRLC, right?

Well, not quite. It adds exposure for BRLC in their attempt to become a tier 1 TV supplier. As opposed to what you may have heard elsewhere, Wal-Mart and Sam's Club do not just sell lower-end products from tier 2 and tier 3 suppliers like Westinghouse, Polaroid, Funai, Emerson and Visio. They also sell TVs from tier one suppliers like Sony (SNE), Phillips (PHG), Samsung, Toshiba (TOSBF.PK) and JVC.

Wal-Mart and Sam's Club sell a lot of TVs and, as pointed out in one article published recently, "with their wallets depleted, consumers might choose to buy the sets from discount stores such as Wal-Mart." Selling in Wal-Mart and Sam's Club will put Syntax-Brillian TVs in more homes and make it a "household" name. That, in addition to recently won awards and their marketing strategy with ESPN, will increase demand for Olevia TVs and that, in turn, will allow Syntax-Brillian to charge a price that will allow for margins to remain strong.

Where some companies get hurt is when Wal-Mart becomes a large and/or the only source of demand for their products. Then Wal-Mart uses that as leverage to drive the price down. So long as Syntax-Brillian continues to sell to other U.S. retailers like Target, Circuit City, Best Buy, Kmart and Sears, there is little danger in that happening.

Also, there are still the sales in China through their distributor there as well as sales in Europe through Vivitar. Syntax-Brillian is in a position to use Wal-Mart as a means to an end and the end point is to become tier 1 TV supplier.