Avid announced that it is selling off its struggling consumer business in a series of separate transactions. Avid also said that it is undertaking a 20 percent workforce reduction, which includes the employees being transferred as part of the sale of its consumer business.
Avid says that these actions will enable it to focus on its media enterprise and post production, and to drive improved operating performance. The company also said it will keep its Pro Tools audio processing product line.
Avid will sell its consumer business through a series of transactions, including the following:
- A group of audio assets will be sold to inMusic, the parent company of Akai Professional, Alesis and Numark, among others for approximately $13.9m, subject to adjustment for closing inventory levels, with approximately $2 million to be held in escrow as security for the representations, warranties, covenants and agreements. The products involved in this transaction include M-Audio brand keyboards, controllers, interfaces, speakers and digital DJ equipment and other product lines.
- A group of video assets will be sold to Corel Corporation for $3m, with $600,000 to be held in escrow as security for the representations, warranties, covenants and agreements. The products involved in this transaction include Avid Studio, Pinnacle Studio, and the Avid Studio App for the Apple iPad®, as well as other legacy video capture products. Avid bought Pinnacle in 2005 for $462m in cash & stock.
The divested product lines contributed approximately $91 million of Avid’s 2011 revenue of $677 million. As part of the transactions, certain employees of Avid will transfer to each acquiring company.
Both asset sales are expected to be consummated on July 2, 2012.
Avid will continue to develop and sell its industry-leading Pro Tools line of software and hardware, as well as associated I/O devices including Mbox and Fast Track.
Avid’s consumer business has been a drag on the company’s performance for some time, even as it improved its standing in professional markets. Historically, the consumer business accounted for approximately 20% of Avid’s overall revenue, but this has been declined to 17% of total revenue in the first quarter of 2012.
For the first quarter of 2012, Avid’s consumer business was down 27% versus the same period a year ago. In the first quarter of 2012, the product mix in the consumer segment was approximately 85% audio and 15% video.
20 Percent Workforce Reduction
Avid also said it will reduce its overall headcount by approximately 20 percent, including the staff transferred through the sales of its audio assets. Avid said it will complete this program during the third quarter of 2012, and expects to incur total expenses relating to termination benefits and facility costs associated with the reduction in force and related actions of approximately $19 million to $23 million, which primarily represent cash expenditures.
In addition to the termination of rank and file employees, two top Avid executives will also be leaving the company as part of this process. Company COO Kirk Arnold, and VP finance Jason Burke will also be leaving the company. The COO position will not be replaced, but the company said it will be appointing a new VP of finance.
Avid says the sale of its consumer assets , combined with the workforce reduction will save it approximately $80m on an annualized basis. The company says these savings will impact both its cost of sales and operating expenses, and will improve its overall gross margins in the second half of 2012 and further improve in 2013.
This is the third set of major layoffs at Avid in the couple of years.
- In October 2011, Avid announced that was reducing its staff by 10%, and closing a facility in Irwindale, CA
- In December of 2010, Avid announced that it planned to restructure its operations during the first half of 2011 by eliminating positions “in lower growth geographies and markets,” while reinvesting in “more strategic areas with greater opportunity for growth.”
“The changes we are announcing today make Avid a more focused and agile company,” said Gary Greenfield, CEO of Avid. “By streamlining and simplifying operations, we expect to deliver improved financial performance and partner more closely with our enterprise and professional customers. Our objective remains to provide these customers with the innovative solutions that allow them to create the most listened to, most watched and most loved media in the world. I’m excited about our future prospects.”
Press release: Avid Divests Consumer Businesses and Streamlines Operations
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