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Delphi Goes Beyond Wi-Fi With MyFi

By | November 1, 2004

      Troy, Mich.-based Delphi Corp. [DPH] is a prime example of how satellite-industry opportunities are growth engines for automotive-technology companies.

      Delphi has ridden the surging subscriber gains of XM Satellite Radio [XMSR], and it also has tapped into vehicle-navigation innovations. The niche opportunities may seem to be a departure from Delphi’s traditional automotive trek but they reflect the growing use of satellite services in new vehicles.

      The trend likely will expand as XM and rival Sirius Satellite Radio [SIRI] develop new products and services to widen their scope beyond audio services. Delphi also should be able to take an enlarged role in providing in-vehicle navigation services, following up on recent plans to co-develop and manufacture the next generation of transceiver modems for Dulles, Va.-based Stellar Satellite Communications Ltd.

      Last week, Delphi and XM introduced a technical breakthrough in satellite radio receivers by unveiling a portable unit that offers time-shifting “memory mode” and an integrated, rechargeable battery allow one to listen to the subscription radio service at home, in the car or somewhere else. To add buzz, the companies arranged for award-winning musician Sir Elton John to promote the new equipment in a national TV advertising campaign.

      A pioneer in vehicle entertainment and electronics, Delphi is proving it also is a trend-setting innovator by its unveiling last week the first personal, portable XM2GO satellite radio, called Delphi MyFi.

      The Delphi MyFi is the “next generation” of satellite radio receivers, said Joseph Damato, Delphi’s director of consumer electronics. In the same month as the portable transistor radio was invented 50 years ago, Delphi introduced the handheld MyFi unit that gives users the freedom to take XM Radio’s 130 channels with them wherever they go in both a “live” listening mode and a time-shifting “memory” mode. The live feature enables listeners to hear all of XM’s 68 commercial-free music channels as well as additional channels that offer news, sports, talk, traffic and weather channels. The MyFi memory mode, called My XM, lets users store five hours or more of XM’s content with the press of a button, even when the unit is not in use.

      XM’s CEO Hugh Panero called the new MyFi units “revolutionary” because they would allow consumers to “wear” the satellite radio, making carrying the unit with them as seamless as possible. The product “dramatically” expands XM’s potential customer base just before the beginning of the traditional holiday selling season when consumer electronics products heat up, Panero said. Delphi has supplied the majority of the more than 2.5 million XM satellite radio units now in use.

      “There may be customers sitting on the sidelines that have heard about satellite radio but do not like the choices of hardware,” Damato said during an exclusive interview with Satellite News. “This may be what gets them to jump into the game.”

      The MyFi satellite radio is innovative but it also possibly is the priciest new satellite radio on the market, with a MSRP of $349.99, including all accessories needed to hear XM at home, at work, in a vehicle or on the go. As reportedly the most advanced satellite radio available, the MyFi offers a complete package of components include: a handheld receiver weighing 7.3 ounces, separate home and vehicle accessory kits, the first built-in XM antenna, headphones, remote control, a belt clip, a stand and a carrying case. Features include a stock ticker, sports score ticker, built-in wireless FM transmitter to make any FM radio a XM radio and an embedded alarm clock.

      MyFi also uses no wires, except for when the headphones are used, Damato said. “Market research says people do not want wires,” he explained. “They want to be able to turn products on and have them work.”

      The product’s high price point, compared with Delphi’s existing plug-and-play models: XM Roady, retailing for $129; the SKYFi: priced at $149, including a car kit and FM modulator; and the SKYFi 2, carrying a MSRP of $129 before factoring in a car kit and modulator that boosts the price to $199.

      “We cover a variety of price points,” Damato said.

      MyFi offers a “big opportunity,” not so much this year as in 2005, partly due to its comparatively high price upon its rollout, Damato added. “This is a breakthrough product. We have done a lot of the engineering up front. Delphi and XM typically have only made announcements when we know the technology is right, and it is ready for to be brought to the market. We feel that the engineering that has gone into it is where it needs to be.”

      Production of the MyFi units should be sufficient to meet the projected demand during the holiday selling season. It will be available at major U.S. retailers, including Best Buy, Circuit City, Crutchfield and online sites in early December. “We are going to sell a lot of them,” Damato said. “It will benefit XM and to some extent the entire category of satellite radio.”

      What The Analysts Say

      “Delphi has long been a world leader in automotive electronics,” said D.K. Sachdev, president of the SpaceTel Consultancy in Vienna, Va. “Its expanding partnership with XM represents an excellent example of symbiosis between technical excellence and market responsiveness on behalf of both the companies. In addition, MyFi has overnight extended the rapidly evolving media convergence to music storage and ubiquitous satellite access, all in an attractive portable device.”

      Steve Blum, president of the Marina, Calif.-based Tellus Venture Associates consulting firm, said Delphi is successfully leveraging mobile satellite services to re-position itself from an automotive technology company to a leading-edge consumer and mobile electronics manufacturer.

      “RCA did the same thing with digital satellite television equipment ten years ago,” Blum said. “When there’s a major technological shift in the market place — in both cases enabled by new satellite technology — opportunities open up for companies that want to create a whole new brand image for themselves.

      It ends up being a win-win situation for both the manufacturer and the satellite service provider, in this case, XM.” The satellite company has the benefit of a committed, innovative consumer manufacturing and distribution partner, while the electronics manufacturer has a window of opportunity to position itself completely ahead of its competition, Blum said, adding, “Delphi is doing to Visteon what RCA/Thomson did to Philips: leave the competition trailing behind, both in market share and in consumer perceptions.”

      (Joseph Damato, Delphi Product and Service Solutions; D.K. Sachdev, SpaceTel Consultancy, 703/757-5880; Steve Blum, Tellus Venture Associates, 831/582-0700)

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