TEAC Corporation

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TEAC Corporation

3-7-3 Naka-cho
Musashino-shi
Tokyo, 180-8550
Japan
Telephone: (81) 422 52 5000
Fax: (81) 422 55 8959
Web site: http://www.teac.co.jp

Public Company
Incorporated: 1953 as Tokyo Television Acoustic Company
Employees: 6,719
Sales: $961 million (2005)
Stock Exchanges: Tokyo
Ticker Symbol: 6803
NAIC: 334310 Audio and Video Equipment Manufacturing; 334111 Electronic Computer Manufacturing; 334112 Computer Storage Device Manufacturing; 334419 Other Electronic Component Manufacturing

TEAC Corporation is one of the world's top names in audio and visual recording equipment, and a leading producer to data storage equipment and related products. The company's operations are divided into three primary categories. Under Peripheral Equipment, TEAC produces computer peripheral devices, including optical (CD, DVD) drives and magnetic drives, and related calibration media, including compact discs, DVDs, cassettes, diskettes, and the like. The company's Professional Audio Products division produces a wide range of audio products for both the professional recording and consumer markets. In addition to the range of TEAC-branded consumer products, the company is a leading producer of professional recording equipment under the Tascam and TEAC names. TEAC's third division is its Information Products division, which produces equipment and systems for in-flight entertainment systems, data storage and measurement products, including recorders for the aviation industry, call monitoring systems and video surveillance equipment, and medical and industrial filing systems. TEAC operates subsidiaries in more than 13 countries, including the United States, United Kingdom, Germany, Australia, Malaysia, Singapore, Mexico, Indonesia, Taiwan, China and Italy. At the end of 2005, the company had also entered negotiations for a possible manufacturing partnership with Japanese rival Pioneer Corporation. The company is listed on the Tokyo Stock Exchange, and posted revenues of more than $960 million in 2005. Yoshiaki Sakai leads the company as president, CEO and chairman of the board.

JAPANESE AUDIO TAPE PIONEER IN 1953

Katsuma Tani began his professional career as an aviation and aeronautics engineer. In the aftermath of World War II, however, Tani's interests turned toward the developments in recording technology. In 1953, Tani founded a new company, the Tokyo Television Acoustic Company in order to develop new magnetic recording technologies for the audiovisual industry. The company's launched its first product, a reel-to-reel tape machine that year. In 1956, Tani, joined by his brother, formed a second company dedicated to the development of audio products, called Tokyo Electro Acoustic Company. In 1964, the two companies were merged into a new company, TEAC, which also became the company's primary brand name.

By the mid-1960s, TEAC had already established itself as a world leader in audio tape technologies. The company also recognized an opportunity for adapting its expertise in magnetic tape to the rapidly evolving computer industry. Before the end of the decade, TEAC had already developed its first tape-based data storage products. That category was to remain a company mainstay into the next century, becoming the major source of group revenues.

The Tani brothers continued seeking new expansion opportunities for its magnetic tape expertise. The booming international music industry in the 1960s, which also a rapid evolution of recording techniques and technologies, provided the company with its next avenue for growth. Toward the end of the decade, the Tani brothers, together with one of TEAC's senior engineers, decided to launch a new research and development unit, called TEAC Audio Systems Corporation, or TASC. That subsidiary was charged with designing a new range of products built on the company's recording technologies and designed for use by professional musicians and recording studios. By the beginning of the 1970s, Tasc had developed the first in a line line of TEAC-branded recorders and mixers. These included the revolutionary 3300 series, which provided simultaneous recording and playback of up to four tracks.

From the start, the Tasc unit targeted the market in the United States, which had already established itself as the center of the international music scene. In 1971, TEAC created a new subsidiary, TASC America, or Tascam. The subsidiary's name was quickly adopted as the brand name for the group's professional recording equipment, and the first Tascam-branded products debuted in 1973. While Tascam produced equipment for the recording industry, its primary target was to develop products for use by musicians in a home studio environment. The relatively low-priced Tascam equipment represented a new revolution in recording—and subsequently in the musical industry itself. As the barrier to high quality recording was lowered, a new generation of 'independent' musicians and labels appeared, challenging the grip on the international music market by the small number of large-scale players.

RECORDING REVOLUTION: 1970–80

Tascam's breakthrough product arrived in 1976, with the launch of the Series 80-8, a highly durable, easy to calibrate" eight-track reel-to-reel recorder. Priced at $3,500—about one-third the cost of its nearest competitor—the 80-8 received strong reviews and support from such bodies as the Recording Industry Artists of America (RIAA). The 80-8 quickly made its mark on the professional music industry, serving as the recording base for such hit groups of the period as Boston and Kansas.

The company's next major innovation came in 1979, when the company launched a new concept in home recording equipment: the Portastudio. Featuring a built-in mixer, the Portastudio distinguished itself as the world's first recorder that provided the ability to record up to four tracks simultaneously on standard cassette tape. The Portastudio was also priced to come within reach of the home recording enthusiast. The Portastudio's portability also made it a popular product among professional musicians as well. Over the next decades, the company sold more than one million Portastudios worldwide.

COMPANY PERSPECTIVES

Since its inception in 1953, the guiding principle of TEAC Corporation has been to enrich our society through our innovative audio products and increase the productivity of our customers through our computer peripheral products by producing filling the demand for high quality recording products. Over the past fifty years, TEAC has been committed to the creation, production and introduction of many innovative products incorporating our advanced research, design and production technologies. By maintaining TEAC's corporate culture, "respect creativity and honesty," we will continue to demonstrate our ability to contribute to the enjoyment and productivity of our millions of customers worldwide. We would like to thank you very much the continuous support you have extended to us.

During the 1970s, TEAC itself had continued to grow strongly. The company achieved strong success on the international market, backed by the development of a network of subsidiaries, particularly in Germany, the United Kingdom, France, Belgium, Australia and elsewhere. In the United States, the company's subsidiary, TEAC Corporation of America (TCA), had helped establish TEAC as one of the fastest-growing home audio brands. In 1973, TCA absorbed Tascam, and the Tascam brand name was transferred under the control of the parent company in Japan. This marked the international rollout of the Tascam line.

TEAC had meanwhile continued to develop its interest in data storage. The development of the first mini computers at the end of the 1970s provided a new product category for the company, which became the world's first producer of 5.25-inch floppy disc drives. In 1983, the company also became one of the first to begin producing the new 3.5-inch disk drives, which rapidly became the standard in the new personal computer market. TEAC's rollout of its 3.5-inch drive quickly met with controversy, however, after the company, along with Sony and Mitsubishi, were charged with patent infringement. TEAC reached an out-of-court settlement which included a lump sum payment and an agreement to pay royalties on further sales of its 3.5-inch disk drives.

DATA STORAGE LEADER IN THE NEW CENTURY

The rapid adoption of computer technology by the corporate market in the 1980s brought an increased demand for TEAC's specialty in tape-based data storage products. The company met the demand by launching new generations of higher-capacity, smaller-format storage products. In 1989, for example, the company introduced a 600 megabyte cassette-based drive, more than tripling the size of the largest drives that had been available. At the same time, the company introduced a line of small-format SCSI-II hard drives, which especially targeted the growing market for portable computers. The rise of the home computer market, and the growth of a small-scale networking market led TEAC to launch a line of data storage products for the retail market in 1990. This line included the company's new high-speed TurboTape backup drives, which boasted the ability to back up as much as 100 megabytes in just 15 minutes.

TEAC also emerged as an important supplier of data storage and other systems for the aviation industry. As such the company's video cassette recording units were adopted by the United States Air Force for its F-16 fighter and other aircraft. TEAC's VCRs were also adapted for use in NASA's space shuttle program. The company's expertise in video recording technology also allowed it to establish itself a major brand name in the home VCR market as well.

TEAC continued to build its hard drive technology through the 1990s, releasing such innovative products as a docking bay, capable of holding two removable, cassette-cased hard-drives, in 1993. The company was also helping to drive development of CD-ROM drives, releasing its 4X-speed drive in 1994. By then, however, the company, facing intense price pressure as the electronics manufacturing market shifted further toward Taiwan, and then to mainland China, saw its profits drop sharply. The company also faced mounting pressure as the industry momentum shifted from tape-based backup systems to highly popular cassette systems, such as Iomega's hugely successful Zip Drive. By 1995, the company had begun to post losses, which reached nearly $69 million in 1993, and nearly $44 million in 1994. TEAC fought back, launching its own high-capacity, high-speed data systems, such as it HiFD large-capacity IDE drive released in 1998.

KEY DATES

1953:: Katsuma Tani founds Tokyo Television Acoustic Company and releases first product, a reel-to-reel tape recorder.
1956:: Tokyo Electronic Audio Corporation is launched.
1964:: Company adopts TEAC name.
1971:: After creating research unit TASC (TEAC Audio Systems Corporation), TEAC launches Tasc America, or Tascam, in order to produce recording equipment for the music industry.
1973:: TEAC America takes over Tascam, which becomes TEAC's international recording equipment brand.
1978:: TEAC debuts world's first 5.25″ floppy drive.
1979:: Tascam Portastudio debuts.
1983:: TEAC launches 3.5″ diskette drive.
1989:: A high-capacity, small-format data drive is launched.
1994:: A 4X speed CD-ROM drive is introduced.
1995:: Tascam launches its first mini-disk-based recorder player.
1998:: Tascam debuts its first hard-disk based digital recording system.
2001:: Tascam acquires NemeSys and its Gigasampler and Gigastudio software.
2005:: Tascam enters talks with Pioneer to develop optical drives.

The company's Tascam unit had also begun to adapt to the times, as new digital recording technologies were rapidly making tape-based recording, at least on the home and small-scale studio level, obsolete. The company debuted its first mini-disk-based recorder player in 1995. Two years later, the company launched a new generation of the Portastudio, which provided the capability of recording and mixing up to eight tracks to mini-disk. The following year, Tascam released its own hard-disk based digital recording system, which was rapidly becoming the industry standard.

TEAC, through Tascam, quickly proved itself a driving force in the digital recording market, launching the US-428 audio and MIDI computer interface in 2000. The following year, the company launched the SX-1 Digital Production Environment, a recording workstation combining hard disk recording, MIDI and audio sequencing and editing, digital mixing and even the ability record to CD. That year, the company also expanded its operations to include a software wing, with the acquisition of Nemesys Music Technologies. Based in Austin, that company had developed the ground-breaking Gigastudio and Gigasampler line.

TEAC had in the meantime continued to expand its international manufacturing network, in part to support its strong entry into the new DVD drive segment. During the 1990s and into the 2000s, the company shifted a growing share of its production to the Southeast Asian region. In support of this, the company added subsidiaries in Malaysia, Indonesia, Singapore, Taiwan and in mainland China. Not all of the group's international subsidiaries were performing well, however. In 2005, for example, the company was forced to rescue its failing Australia operations, taking full control of the joint venture in order to shield it from bankruptcy.

TEAC's own sales dipped somewhat into the mid-2000s. The company nonetheless continued to drive forward. At the end of 2004, the company released a new USB-based television tuner for personal and desktop computers. The company also began eyeing external growth as well, and in December 2005, the company announced that it had entered talks to join with struggling Japanese rival Pioneer in the development of new optical drives. After more than 50 years, TEAC remained a leader in recording the world's data.

PRINCIPAL SUBSIDIARIES

Dongguan Dongfa TEAC Audio Co. Ltd.; Fuji Yoshida TEAC Corporation; Mts Corporation; P.T. TEAC Electronics Indonesia; Selepas; Taiwan TEAC Corporation; Tascam Corporation (United States); TEAC America, Inc.; TEAC Audio (China) Co., Ltd.; TEAC Australia Pty., Ltd.; TEAC Canada Ltd.; TEAC Electronics Sdn. Bhd. (Malaysia); TEAC Esoteric Company; TEAC Europe GmbH; TEAC Instruments Corporation; TEAC Italiana SpA; TEAC Mexico, S.A. de C.V.; TEAC Shanghai Ltd.; TEAC Singapore Pte Ltd.; TEAC Sse Ltd. (United Kingdom); TEAC System Create Corporation; TEAC UK Ltd.

PRINCIPAL COMPETITORS

Thomson Multimedia Inc.; Hitachi Ltd.; Matsushita Electric Industrial Co. Ltd.; Sony Corporation; Samsung Electronics Company Ltd.; NEC Corporation; Fujitsu Ltd.; Toshiba CorpSharp Corporation; LG Electronics Inc.; Philips Electronics North America Corporation; Pioneer Corporation; Alps Electric Company Ltd.