Dear Reader,
The second quarter was a very eventful quarter for GN as the "sale" of GN ReSound created headlines in the media yet again. I will not elaborate on the latest developments in that process, but leave it to Chairman Mogens Hugo to do so in the article below.
Although the financial results in Headsets were not satisfactory in Q2, there is a large number of good and promising elements. CC&O Headsets in Europe continued its good performance with an organic growth of 8%. Cash flow from operations was DKK 82 million, compared to a negative cash flow in Q2 2006, and the gross margin improved as well. Hello Direct is now well under control since the discontinuation of its unsuccessful try-‘n’-buy campaigns.
We can now confirm that Hello Direct is back on track. On the negative side, Mobile Headsets was impacted by a substantial fall in the number of headsets sold to especially one mobile phone manufacturer following a sharp drop in mobile phone sales.
Reengineering of GN Well on its Way
The first step of GN’s three-step-strategy focuses on reengineering. In 2007, we are creating a single scalable business model, aligning costs and sharpening our processes to match best practices in the electronics industry. We have already come far with this first step. The new, market-oriented organization with four focused business units has been implemented. We have completed the development of two new product platforms for the Mainstream Mobile products, and the products are already on stream for mass production.
The important activity of restructuring GN’s supply chain continues at a strong pace. However, negotiations with the initial partner have been stopped due to a change in ownership status. Negotiations with another potential partner have been reopened and a Letter of Intent has been signed. These actions are expected to result in a supply chain agreement before the end of the third quarter of 2007. The full implementation of the main partner strategy is still expected to be completed by the end of second quarter 2008.
Exciting New Opportunities
GN won a number of new contracts in Q2. In May, we were able to announce that we will be working closely with Microsoft® to integrate our headsets with Microsoft® Office Communicator 2007. These headsets are the first of a range of true wideband solutions from GN that will work seamlessly with Office Communicator. Recently Apple® selected GN as one of their Bluetooth® headset providers to be sold in conjunction with the Apple iPhone through their Apple Stores. Apart from these exciting opportunities, GN also won a number of important OEM programs in Q2.
A lot of great developments are going on at GN now. We will continue to focus on implementing our strategy to make GN fit for the future. I am certain that this will improve our operation and lead to improved results.
Best regards,
Toon Bouten
CEO