Audiovox chief rides wave of technological change

Long Island Business News, Jul 9, 2004 by Ken Schachter

In 1965, John Shalam was sitting on 2,000 car radios and he was beginning to sweat. The international trader had imported the radios from Japan for a customer and backed the transaction with a letter of credit. When the customer reneged on the deal, Shalam and his partner suddenly had their combined net worth tied up in car radios whose market demand was far from clear.

A desperate Shalam managed to unload the radios and was so relieved that he celebrated with a short trip to his ski house in Vermont and a Dom Perignon toast.

When he came back to work on Monday, however, the phone started ringing. One of the buyers of the car radios wanted more. Shalam replied that he was out of the car radio business. But by the time he a fourth customer called asking for more car radios, he said, A light bulb went off: This is going to be a business.

That moment of inspiration was the genesis of Audiovox Corp., which was founded the same year.

For Shalam, the road to the founding of Audiovox, which began by selling after-market car radios, and the road to building it into a company with 2003 sales of $1.3 billion was as winding as a drive along the Noyack coast.

Shalam was born in Alexandria, Egypt, to a Jewish family of comfortable means. In 1948, however, the climate for Egyptian Jews changed when war erupted in Palestine and the new state of Israel was born.

Shalam's family emigrated to the United States, where he attended the now-defunct Peekskill Military Academy and at 16 entered the Wharton School at the University of Pennsylvania, where he earned a bachelor's degree in economics in 1954.

His first job was with the Continental Grain Co., but, coming from a line of Middle East merchants, Shalam said he felt out of place in a large corporate environment.

That's when he and a partner began importing goods from Japan, particularly transistor radios, a technological innovation in the 1950s.

In the beginning, financing a growing company was a stretch, said Shalam, who credited his accountant, Herman Tucker, with helping to guide him through the early years.

Tucker would come to the office, check Shalam's checkbook and, if there wasn't enough money to meet the payroll, would write his own check, taking back the funds later. He did this for two or three years, Shalam recalled.

Later, Shalam said, he relied on the advice of bankers from Chase Manhattan, now JP Morgan Chase, and key employees like Chief Financial Officer C. Michael Stoehr, Executive Vice President Philip Christopher and others, who helped move the business from a mom-and- pop shop to a modern corporation with systems to control inventories and track financials.

The most important thing in success is to hire the best people you can find and get out of the way, said Shalam, now chairman and chief executive of Audiovox. As an entrepreneur, you can build a company to maybe $100 million. To get larger, there's no way you can control everything.

Audiovox (Nasdaq: VOXX) passed that $100 million mark more than a quarter century ago and raised $33 million in its initial public offering in 1987, solidifying its financial position.

Once Audiovox was established, Shalam rode the wave of technological change, from four-track to eight-track tapes, to cassettes and then to CDs. In the early 1980s, the company also branched into car security systems and car telephones.

The latter innovation, Shalam said, combined the two greatest loves of American men: cars and communications.

In the early years, Shalam, a resident of Old Westbury, acknowledged his many late nights at the office and business trips to the Far East put a burden on his wife of 35 years, Jane, and their three sons.

More recently, however, Shalam said he has increasingly been able to separate from the day-to-day operations of the company.

Stoehr, who moved from the firm's account officer at Chase Manhattan to join Audiovox as CFO in March 1978, said that Shalam has changed focus from the minutiae of business to the broader issues.

Strategically, he guides us in the direction where we're supposed to go, he said.

One holdover practice from the entrepreneurial days - almost unique in a modern corporation - is that top executives save one have no employment contracts.

I've been here almost 26 years and I don't have a contract, Stoehr said. We're all here on a handshake.

The only exception is Philip Christopher, head of the soon-to-be- divested Audiovox wireless subsidiary. He received a contract in 2002 at the request of Japanese electronics giant Toshiba, which was buying a minority stake in that unit.

In Shalam's spare moments, he serves as chairman of the investment committee of the Consumer Electronics Association, indulging a long- suppressed fantasy of being an investment banker on Wall Street. The boy, who never saw a snowflake until he came to the United States as a teen-ager, also is an avid skier and horseback rider.

While he has cut back his time in the office, Shalam, who owns almost 20 percent of the company, retains an entrepreneurial edge.