Battered not bowed, ZAGG pushes ahead with new CEO
Randall Hales is in the job of knowing what consumers want.
Throughout his career, the 45-year-old Draper man has dealt with operations, manufacturing, sales and product development for local companies, such as furniture manufacturer Mity Enterprises and kitchen appliances maker Back to Basics. Now, he takes that experience to mobile accessories company ZAGG Inc. as its president and CEO. Hales had been the interim CEO since August after taking over for Robert G. Pedersen II, who resigned amid a shareholder revolt after he was forced to sell more than $6 million worth of stock in a margin call.
Hales is being counted on to breath new life into products every year from ZAGG, whose current line includes the invisibleSHIELD a screen protector for mobile devices and keyboards, cases and audio products for Apple and Android devices.
"We're very fortunate in that the mobile-computing accessories market this year will be $20 billion, and it will be growing to $60 billion by 2015," Hales said. "We're simply following the market and doing our best to outgrow it.
"I have an emphasis on product management and development. I've built these companies based on bringing innovative new products to market."
Hales' appointment was made permanent earlier this month in the wake of Pedersen's swift, tumultuous exit. The co-founder of the South Salt Lake-based company resigned after he sold 515,000 shares of the company's stock to meet an Aug. 14 margin call.
In practice, an investor would receive a margin call from a broker if one or more of the securities the investor had bought with borrowed money decreased in value past a certain point.
It was not clear if the company forced out Pedersen, but he insisted the decision was mutual and that he left ZAGG to spend more time with his family and to focus on another company, HzO, which is developing a waterproof seal for electronic devices.
Pedersen also acknowledged that ZAGG should move forward with a different CEO in light of its share price dropping 25 percent after guidance for the year failed to meet analysts' expectations.
In terms of sales, product placement and awards, ZAGG has done well this year. Third quarter revenue was up 30 percent, to $59.8 million, compared with the same period last year; Walmart began selling invisibleSHIELD in 900 of its stores; and its ZAGGfolio keyboard accessory was named "Consumer Product of the Year" for the Best in Biz 2012 Awards as determined by an independent panel of 32 judges from business and technology publications and media outlets. On another front, in a vote of confidence about the company's future, ZAGG's board last week authorized a buyback of its outstanding shares worth up to $10 million.
Despite those successes, Hales will have his share of challenges. Chief among them will be ZAGG's stock price, which thanks to the margin call fiasco and Wall Street's ever-increasing expectations, has seen its value fall from a high of $13.03 per share on April 30 to as little as $6.61 on Nov. 23. Its close on Friday was $7.80, down 2 cents. Also, ZAGG is being sued by a Minnesota investor, who in his proposed class-action suit claims the company failed to disclose that Pedersen used half of his shares as collateral for the margin call. That case is pending in U.S. District Court.
Pushing ahead, Hales said he has developed a new business strategy that he has broken down into three parts:
First, keep introducing creative products for mobile device users. Second, ZAGG needs to secure itself as the preferred brand in the mobile accessories industry. Third, expand global distribution. Hales said ZAGG is establishing distribution partnerships in Germany, the United Kingdom and France, and has an office in Shannon, Ireland.
Cheryl Larabee, ZAGG's chairwoman, said the board chose Hales based on that three-pronged strategy, which he developed earlier this year.
"He has the expertise, relationships and experience to execute our plan to build ZAGG into a global leader in mobile-device accessories," she said in a statement.
One of the most difficult parts of that plan might be the goal of continually coming up with innovations for mobile devices such as the iPhone, iPad and Android handsets when manufacturers such as Apple and Samsung don't reveal details about their new phones until the day they are announced. That usually leaves ZAGG to guess what the next version of a device is going to look like before it can immediately start selling screen protectors or cases around the new designs.
But it's not impossible, Hales said. "There are no secrets in China," he said about constant leaks from inside manufacturing plants that produce the new devices. "So we generally have a pretty good idea of what's coming down the line ahead of time."
Also, Hales said a lot of the company's products, such as its headphones and back-up battery solutions for mobile devices, are not bound by what new devices look like.
This year, ZAGG introduced keyboards/cases for the iPad mini computer tablet, as well as a new line of accessories for the iPhone 5. Next month, at the Consumer Electronics Show in Las Vegas, Hales plans to present two products, one that he says will invent an entire new category for electronics.
"When Robert left the business and I took over as interim CEO, I spent most of September with our CFO, meeting with analysts and investors, showing them what our strategic plan was. And they were very comfortable with that plan and where we were going," Hales said. "The path we're on is going to generate the kind of revenue they want to see."
Google+: +Vincent Horiuchi
What it does • Makes screen protectors for mobile devices, as well as keyboards, cases and audio products.
52-week range on its stock • $6.40 to $13.29
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