Air travel offers Slab sound deal

By PETER GRIFFIN

The world's largest airlines will soon be building New Zealand technology into their in-flight entertainment systems - all to make long-haul travel more peaceful for passengers.

Slab DSP, an Auckland flat-panel speaker and noise reduction technology developer, is wrapping up its biggest deal yet, with Matsushita Avionics Systems (MAS), a division of Matsushita Electronics, the parent company of electronics brand Panasonic.

MAS, which has around 85 per cent of the world market for in-flight entertainment systems, will build Slab's noise reduction modules into the headphone jacks of thousands of airline passenger seats.

The technology cuts down on ambient cabin noise - the hum of the jet engines, the rustling of paper or the wail of a bad-tempered child.

Slab's head of research and development, Mark Donaldson, said there was the potential to sell 20,000 to 30,000 units by early 2003 as MAS upgraded audio systems for major customers such as Singapore Airlines, Cathay Pacific, Virgin Atlantic and Emirates.

Donaldson said MAS was building into arm rests the technology traditionally housed in the headsets passengers wore while watching in-flight movies or listening to music. That reduced the cost of the headsets to around $2 for economy class models and $7 to $8 for those in business and first class.

Also a player in the headphone space, Slab would now approach MAS' customers to pitch for the contracts to supply their headsets. "The headsets turn over rapidly, the headset jacks, only every four years or so," said Donaldson.

The deal could provide a multimillion-dollar revenue stream for Slab, setting its focus for the next year on the avionics market.

The MAS deal comes at a critical time for Slab. After receiving a venture capital injection last year of $10 million from AMP Henderson, the company needs fresh funding to capitalise on some of the large deals it has secured. Donaldson said Slab was looking to raise $3 million to $5 million locally, to bring on board more engineers and undertake marketing worldwide.

Slab was likely to break even by the end of the year, with revenue for the year of $5 million. Revenue for next year was tipped to increase to around $12 million.

"We are getting enough revenue to survive and keep the status quo, but there's a chance we can gain market dominance with the intellectual property we possess if we get more capital," said Donaldson.

A lack of funding has sidelined Slab's software business as it has pursued lucrative deals in avionics. It is still selling its audio-player software as a plug-in to the popular Winamp player and has so far notched up 250,000 trial downloads. Donaldson said a few thousand people had bought the plug-in, which lets users digitally position speakers in a virtual room to correspond with the direction they wanted sound to come from in their headphones.

Slab has also shipped thousands of its flat-panel speaker units for sale by a major US retailer, but Donaldson will not say which one.

Earlier this year, Slab signed a lucrative product development deal with Eastech, one of the biggest box-speaker makers in the world. Eastech sells its audio systems to big-brand vendors such as Philips, Sony, Panasonic and Pioneer.

Donaldson said Slab was now respected enough to set its own terms with major vendors. "We've a hands-on relationship with our vendors, we margin share, we don't take royalties. That enables us to ensure the design is effective and we get a larger share of the cake."

As well as the relationship with MAS, Slab has partnered with Rockwell, which accounts for the other 15 per cent of the inflight entertainment market. That deal will see Slab's noise reduction technology built into arm rests on airlines such as Lufthansa.

Donaldson said that while the perilous financial position of some of the major US and European airlines was worrying, the Asian airlines had stood up well, meaning the prospects for the MAS deal were good.

But the global terrorism that has shaken the air industry had also hit Slab, he said. "We spent $100,000 on having a presence at a trade show last year. It started on September 11."

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