Syntax-Brillian CEO Vince Sollitto is a brilliant salesman and a pretty good marketeer. He has positioned his company’s Olevia brand of LCD-TVs between first-tier brands such as Sharp, Sony, Samsung, LG, and Philips and third-tier brands such as Westinghouse Digital and Vizio. His costs are probably not much more than Vizio’s, but he is splitting the difference on price, Patrick Seitz reported in Investor’s Business Daily a couple of days ago.

Ken Werner
Senior Analyst and Editor

"We’ve come in with a (business) model that says that we’re pricing our product 20% below the tier-ones and 20% above the tier-threes," Sollitto said.

This is the same message we have heard for awhile from Sollitto, so this is not new. But a successful implementation of that strategy has been a long time coming. The good news it that it may finally be here.

Syntax-Brillian lost money every year since at least 1998, reported Seitz, but has been profitable for the past two quarters. (The company was formed in late 2005 by a merger between Syntax and Brillian, so Seitz was presumably referring to Brillian’s financial performance before the merger as well as after.) When the company announces its quarterly results next week, that string of good news is expected to continue.

Sollitto says Syntax-Brillian can generate gross margins of 15% to 20% and operating profit margins of 5% to 10%, while tier-one firms have been making 3% to 7% operating profit on 30% to 35% gross margins.

So what’s the problem? Syntax-Brillian’s low-overhead model depends on the ready availability of inexpensive LCD panels, but the panel oversupply to which the industry has become accustomed may be ending. As an example, Chunghwa Picture Tubes (CPT), Taiwan’s Number 3 maker of LCD panels, has made the strategic decision to supply TV panels only to first-tier international brands, according to the Chinese-language Economic Daily News (EDN). Samsung Electronics is becoming the company’s largest customer for TV panels.

CPT will ship 1.6 to1.8M 32- and 37-inch TV panels to Samsung this year, half of its total. The remainder will go to customers such as Royal Philips Electronics, LG Electronics, Toshiba and TCL.

CPT lost money in 2005 and 2006, but company Chairman Wei-Shan Lin said recently that he is confident CPT will generate profits this year, reported DigiTimes yesterday. CPT’s strategic shift is dramatic, but panel prices are firming across the industry. That means panel makers won’t have to look so hard for customers who are interested in buying cheap, and it means that more panels will be sold under long-term contacts rather than on the spot market.

So where does that leave Syntax-Brillian? I’m not sure, but Vince Sollitto is a smart guy. It will be interesting to see which way he cuts next.