Bang & Olufsen's Sorensen Out

Disappointing sales and profits, and a plunge in the stock, led to the CEO's ouster. B&O says it will refocus on its core audio and video products

by Jennifer Fishbein

Bang & Olufsen (BOB.CO) fired CEO Torben Sorensen on Jan. 10, a day after disappointing half-year sales and profits and a lowered full-year profit guidance brought a nearly 30% plunge in the stock price. Shares fell an additional 6% after the company gave Sorensen the boot.

The move leaves "a managerial vacuum in the company," says Klaus Madsen, a Copenhagen-based analyst at Svenska Handelsbanken (SHBA.ST). Madsen says management had been up against forces beyond its control. "The bulk of the downgrade is explained by the macroeconomic environment. It's tough to act much faster than what we've seen Bang & Olufsen do. They revised their guidance and said to the market they'd do anything they could on the cost side."

The company cut its full-year pretax profit guidance to between $70.89 million and $78.77 million from $106.88 million to $112.81 million after posting profits of $29.67 million in the half-year ended on Nov. 30, down 37% year-on-year. With cash-strapped consumers cutting back on indulgences, Bang & Olufsen is hardly the first company to reveal post-Christmas letdowns. Marks & Spencer (MKS.L) shares dropped 20% on Jan. 9 after news of poor holiday sales, dragging other British retailers down with it (BusinessWeek.com, 1/9/08).

Priority Shift

Sorensen, 56, joined Bang & Olufsen as CEO in 2001 from Lego, where he had been chief of business development. He steered the Danish maker of luxury audio and video products—its televisions retail for as much as $35,000, while cell phones can fetch $1,300—toward rising sales for the last three-and-a-half years. Indeed, sales rose 5% overall in the last six months, but the company fared poorly in Bang & Olufsen's largest markets. Sales dropped 6% in Britain, were flat in Germany, and rose just 3% in Denmark, while the third quarter has shown declining sales in Europe and the U.S. in light of the weakening economy.

In a written statement, the company announced a return to its "core business," audio and video products. Company spokesperson Tino Pedersen says the group would continue its other projects, such as a deal with Aston Martin to create technologies for the automotive industry. "The board has an impression that maybe we ended up being a little bit out of focus and our priorities were not right," he says. "What the board wants to emphasize is that the resources that we spend within our organization have to be realistic compared to how important the product is to our business as a whole."

Fishbein is a reporter in BusinessWeek's Paris bureau .