ZAGG hopes to stand in the way when a little zig threatens to scratch your iPhone or iPad. Short for "Zealous About Great Gadgets," ZAGG designs, makes, and sells protective coverings and other products for electronic devices. Its flagship product, invisibleSHIELD, is a thin, scratch-resistant polyurethane film covering that's custom cut to fit invisibly on the screens and displays of Apple iPhones and other smartphones, tablets, laptops, GPS devices, and watch faces. ZAGG also offers additional accessories, including keyboards, headphones for iPods and MP3 players, and decorative cases for phones. It sells its products through retailers the likes of Best Buy and Wal-Mart, mall kiosks, and its own website.
The company's operations are divided into three segments. The largest, accounting for about three-quarters of total sales, is ZAGG, which designs, makes, and distributes products including protective coverings, keyboards, keyboard cases, earbuds, mobile power devices, and cleaning accessories for mobiles devices under the ZAGG brand. iFrogz accounts for about 25% of sales. It makes cases, Near-Field Audio amplifying speakers, earbuds, and regular and gaming headphones for mobile devices. The company's HzO segment is engaged in the development of water blocking coating technologies for consumer and industrial applications. It had no revenue in 2012.
The US is ZAGG's largest market. accounting for about 85% of its sales. Europe contributes about 5% of sales, with other countries representing the rest. The company's international arm is based in Shannon, Ireland.
Sales and Marketing
ZAGG's biggest customer is consumer electronics chain Best Buy, which accounts for about a third of its total sales. Next is retail-giant Wal-Mart Stores, which accounts for about 10%. Historically, the company has focused on distributing through sales channels like kiosk vendors and through its e-commerce site; however, more recently, it has brought in more and more income through retailers (including Target, RadioShack, and Staples) and wireless carriers (AT&T, Sprint, Verizon). Ultimately, demand for its products has been driven by the growing popularity of iPads, iPhones, and other smartphones. (iPhone accessories are its biggest sellers.) The company sells throughout Europe and other global regions through international distributors.
In 2012 ZAGG's sales exceeded $264 million, a 48% jump versus 2011. Driving the heady increase was the 2011 purchase of iFrogz, which contributed about $68 million in sales in 2012. Strong demand from wholesale customers, the addition of new distribution partners, and continued growth of invisibleSHIELD products, coupled with increased sales of ZAGG's keyboards, audio, and case product lines also pumped up sales. 2012 marked the fourth year of accelerating sales for the company. Indeed, over the past four years sales have increased by more than a factor of 10: from nearly $20 million in 2008 to $264 million in 2012.
After four years of steep increases, net income fell 21% in 2012 compared with 2011. ZAGG attributed the decline to higher operating expenses. Also, marketing, advertising, and promotion expenses rose as the company invested heavily for key product launches, including the invisibleSHIELD HD, invisibleSHIELD EXTREME, and ZAGGkeys PRO, among other new products.
Going forward, ZAGG hopes to keep its growth momentum swinging in an upward direction by expanding its sales channels to include more telecom companies like U.S. Cellular and retailers like Amazon.com. It has also been broadening its range of accessories for the mobile phone market by adding car chargers and power supplies to its product offerings. Other growth strategies include focusing its sales and marketing efforts on cross-selling accessories to customers that purchase its invisibleSHIELD products.
Mergers and Acquisitions
In a move that simultaneously broadened its brand and product portfolio and increases its retail reach, ZAGG in mid-2011 acquired iFrogz, a maker and distributor of protective cases, headphones and earbuds, and other accessories for smartphones, tablets, and other mobile devices under the iFrogz and EarPollution brands. ZAGG paid $50 million in cash, acquired 4.4 million restricted shares of ZAGG common stock, and assumed about $5 million in debt. Utah-based iFrogz, which counts Wal-Mart Stores among its customers, became a wholly-owned subsidiary of ZAGG.