TOKYO and SOUTHWICK, MASS.—
Hitachi Kokusai appears eager to become a major player for broadcasting equipment customers worldwide.
Hitachi Kokusai Electric Inc. has announced its purchase of a major stake in U.S.-based Comark Communications, makers of TV transmitters for U.S. TV stations and many other regions of the world. Hitachi Kokusai has previously stated its commitment to capture emerging markets where the over-the-air digital conversion has yet to occur; in markets like South America, where it bought Brazilian transmitter manufacturer Linear Equipamentos Eletrônicos in the fall of 2011.
It's anticipated that Hitachi Kokusai will acquire the remaining shares at a later date, as it appears eager to increase its global market share for broadcasting equipment customers and a major provider of video and wireless network solutions. To do that, it has embarked on a strategy to acquire well-known brands with established customer bases.
"Hitachi Kokusai has concluded a contract to acquire an equity interest of Comark," said Manabu Shinomoto, President and Chief Executive Officer, Hitachi Kokusai Electric Inc., in a statement. "Leveraging this investment and the sales channels of Comark, Hitachi Kokusai is fully entering the U.S. market where demand for replacing or upgrading digital terrestrial transmitters is expected to grow."
The new investment is clearly a shot in the arm for Comark, which, like many of its competitors, has been facing tough times with the digital television transition in the U.S. mostly complete and stations here not expected to need new transmitters until the FCC figures out its repack of spectrum channels prior to the upcoming "incentive" auctions.
"It's been very difficult for most transmitter manufacturers, particularly based in the U.S., over that last four or five years," Richard Fiore, President and CEO of Comark. "The digital rollout ended and the FCC announced the auctions and repacking campaign, causing stations that could to wait for a new transmitter [which the government has said it will help pay for, depending upon how much money is raised ion the auction] to not buy anything.
So, as a result the U.S. market really dried up," he said. "And when I say 'dried up' I mean it just absolutely went away."
The situation caused Comark to first complete a management buyout in the fall of 2012 (because Fiore and his team were "transmitter guys" and his dad co-founded the company with David Smith, now president of Sinclair Broadcast Group, in 1978) and then look outside the U.S. broadcast industry for new customers. Fiore said Comark was barely profitable in 2013, finding limited success with scientific applications (they sold high-powered amplifiers and power supplies to unnamed research laboratories). Servicing existing transmitters among TV stations in the U.S. has also kept revenue coming in the door.
[In fact, Broadcast Engineering Extra caught up with Fiore at the Broadcast Asia Show in Singapore, where he was meeting with broadcasters there that are weary of implementing new high-power transmitters for the very few consumers that would be able to afford new DTV sets. He said the conditions are similar throughout Southeast Asia.
"To move into overseas markets, we know we need to develop a less expensive, competitive, low-power product line (which is still an active market in the U.S.). We've come to recognize that while these emerging countries want to move forward with a digital rollout, shutting off analog service in 2018 [2016-17 in Brazil] is going to alienate millions of viewers.
Fiore said this has meant that many broadcasters in South America, eastern Europe and as well as southeast Asia, are only willing to buy 300-watt transmitters from low-cost suppliers that can be discarded once more consumers have DTV sets.
[Brazil has said it would convert its terrestrial broadcasting system to fully digital by 2016, when the country will host the Summer Games of the XXXI Olympiad.]
"With this new investment from Hitachi Kokusai, it's going to help our situation immensely," he said, adding that the acquisition agreement came as a welcome surprise. "We now have the resources, money and engineering expertise, to develop the type of affordable medium- and high-power, high-efficiency systems that the world is looking for. There's a lot of synergies between our two companies that make us both more competitive."
Hitachi is very interested in the U.S. market—hence the Comark acquisition—and South America, buying Linear (now known as Hitachi Kokusai Linear Equipamentos Eletrônicos S/A), and also set up an overseas subsidiary in Turkey in 2013. Clearly Hitachi/Comark and other transmitter suppliers, like Gates Air and Rohde & Schwarz, are counting on the repack to go successfully, resulting in a flurry of new business from TV stations in the U.S.
"It's been a difficult marketplace," Fiore said. "This year we will be marginally profitable. When you are struggling to stay above water, you can't really invest in R&D the way you'd like, and need to. This investment and show of confidence in Comark by Hitachi Kokusai is good for us and for our customers, who should expect the same service and support they have always enjoyed with us."
Depending upon what happens with the proposed ATSC 3.0 broadcasting standard now being discussed (there are roughly nine system being considered, most based on a DVB-T2 physical layer; although one is 4G LTE based) Fiore said next-generation products could support both fixed and mobile receivers. Comark has participated in those discussions.
Fiore said one year from now Comark will be the same company customers have come to expect, but with a bigger product portfolio and a wider customer base. "We proved ourselves that we could handle the business during the tough times,' He said. "We've now found a company that believes in our strategy and vision for this industry. We've also found a great partner in Hitachi Kokusai."
In a statement, Hitachi Kokusai said it has set a goal of increasing the ratio of overseas sales to consolidated sales to 20 percent or more by FY 2015.