Russound Went Off-Track By Trying to Do Too Much With Keypad System, Says Interim Leader

The letter followed an announcement Thursday that Russound brought back consulting company OAC, led by Oscar Ciornei, “to take Russound to the next level” in marketing strategy and product development. It’s OAC’s sixth stint with Russound in more than 20 years, Ciornei told Consumer Electronics Daily. OAC will accelerate new product development, industrial design, public relations and business coaching, he said.

Ciornei, who is a past CEO of Russound, referred to himself as an “interim leader,” while saying Porritt “isn’t going away.” Ciornei’s role is to “coach” Porritt and Baldwin, following some “fundamental mistakes in product development,” he said. The company needs to go back to its roots, Ciornei said, citing the company’s pedigree in distributed audio, where it’s known for “sending signals to a speaker and controlling the speaker from a keypad.” In 90 percent of luxury homes with technology, “that’s all people want,” he said.

Russound got off track, Ciornei said, when the company started to expand into other control areas including temperature, video and lighting. When a keypad performs a “myriad of functions, it takes away from the core distributed audio business,” he said. Russound spent “millions of dollars” designing a multi-function keypad “when people really want simplicity,” he said. Part of his plan is to revitalize the A-BUS audio system with an equalization circuit that will provide improved dynamic range and bass to A-BUS keypads. At CEDIA, the company plans to unveil “an industry first” with a new A-BUS product, he said.

Recent departures from Russound include Michael Stein, senior director of research and technology; Walt Zerbe, product manager; Petro Shimonishi, vice president of sales and marketing for Colorado vNet; Roger Soucy, product manager; and Tom McCarthy, vice president of product development. Mike Anderson, vice president of sales and marketing for Russound, headed a group of custom electronics industry veterans who bought Colorado vNet late last month and plans to re-launch the brand in June.

Regarding the effect those layoffs and reorganizations have had on the Russound reputation, Ciornei said layoffs are inevitable in an industry that’s been as hard hit as the custom electronics business has. Apple and Sonos “have changed the world,” he said, “and companies are suffering because of all the changes that have been made by a couple of up-and-coming companies,” he said. He noted that even Sony and Bose have “cut back dramatically.” Ciornei said Russound has been depicted harshly by the media after layoffs and that maybe the company was “a bit too vocal” about announcing cutbacks.

"We had to cut back on resources and run a company with the expectations of the business climate today,” Ciornei said. Russound’s business “is much smaller than it used to be, but almost everybody else’s is” too, he said. Citing Apple’s billions of dollars and Sonos’ meteoric rise from being a start-up to a $400-$500 million company “virtually overnight,” those companies’ successes have been “a burden on the rest of the industry,” he said. Ciornei believes there’s still room in the custom distributed-audio market despite Sonos’ success and said Russound needs to “go back to its roots” and provide dealers the tools they need to be competitive with “current-day products."

The sale of Colorado vNet was the culmination of a 9-month plan “to refocus on our core strengths to the custom install audio channel,” Porritt and Baldwin said in the letter. The company has launched six SKUs for the channel to “build off our legacy of audio products,” they said. Those include the bookend DMS-3.1 media streamer and an AM/FM tuner, representing opposite ends of the digital-analog spectrum. The six products were focused on adding value to Russound’s C-Series controller introduced in 2009, they said, and over the next year, the company plans to “continue this strategy of extension, taking incremental steps from our base products,” they said.

How Russound achieves “back to basics” in the fast-paced tech world remains to be seen. One industry observer told us the company “couldn’t adapt fast enough or stay ahead,” comparing some Russound product introductions to “dot matrix printers in a laser world.” Russound has the C-Series controllers, the A-BUS technology using a Cat 5 cable network and powered keypads, and Collage, for the retrofit market, a powerline-based whole-home audio system that doesn’t require re-wiring. Late last year, Russound launched a three-zone streaming device along with AirGo, a $399.99 powered outdoor speaker sold at retail that wirelessly streams music from an iPhone with the assistance of a $99 AirPort Express.

If the number of customer reviews at e-tailers Amazon, Best Buy and Crutchfield are any indication, AirGo sales, while positive, are slow. From the four customers that reviewed AirGo Outdoor at Amazon, the product received a five-star rating. The $399.99 amplified speaker was selling for $303.18 at Amazon on Friday, not including the cost of Apple’s Wi-Fi adapter. One customer reviewed the product on Crutchfield, last November, giving the $399.99 speaker a thumbs-up, and one customer reviewed the AirGo at Bestbuy.com.

Russound’s focus will go back to the custom install market, Ciornei said, but the company still wants to “experiment” to take advantage of a “resurgence in brick-and-mortar” retail stores. Russound wants to go back to a core business of “profitability and provide a special line of products for specialty dealers,” he said.

Over the next 6 months, OAC will evaluate the Russound line and get feedback from dealers, distributors and reps about the product line and market conditions. Ciornei believes OAC can turn Russound around despite the market challenges. “We have a good track record with about 150 companies,” he said.