Giant Roars, Heroine Screams: Unraveling HearUSA Part 17

The HearUSA-AARP contract (posts 15 and 16 of this series) is captured best by the question:  What were they thinking?

Siemens was thinking that it was a “crummy deal” according to one shareholder.   HearUSA’s CEO Steve Hansbrough seems to have been thinking how much smarter HearUSA was than manufacturers like Siemens.  In an interview with audiologyonline, Mr Hansbrough did not portray the manufacturers as the brightest of bulbs, as evidenced by the following quote:{{1}}[[1]] Interview with Stephen Hansbrough, CEO of HearUSA. Topic: HearUSA Partnership with AARP. [[1]]

I get so frustrated looking at the industry and wondering with the aging of the population, the great demographics, why, when you take the VA out of the equation, this industry is not growing. I personally believe that the problem lies predominantly with the manufacturers. They do not do a “Milk, it does the body good,” or “Pork, the other white meat” marketing campaign, that is, an image campaign aimed at the end user. Of course, I guess you cannot blame them because they do not control distribution.

Golly, can’t you just see Siemens reading that and thinking “Hey, Steve’s onto something there.  What if WE control distribution? Then he won’t think we’re such losers!”  Good thinking, Steve, especially when speaking of a manufacturer that loaned HearUSA tons of money and owns about 15% of the company.  It probably also slipped Mr. Hansbrough’s mind that HearUSA had not shared the proceeds of the sale of its Canadian assets with Siemens.  Things went downhill from there:

1.  12/22/2010:  Siemens got mad.  It called in all of HearUSA’s loans, starting with $1.9 million{{2}}[[2]]All such numbers are referred to as “approximate” in the referenced articles—perhaps due to fluctuating exchange and interest rates in the US and Germany from day to day?[[2]] due immediately and another $2.2 million due at the end of January.

 

2.  This was not the Siemens that HearUSA knew and loved.  HearUSA tried what had always worked in the past:  it told Siemens it could not pay and, hard to believe, it actually asked Siemens for a loan.

 

3.  Siemens-the-Softy gave HearUSA a one-month pass for $1 million but demanded a look at the books.{{3}}[[3]]Market capitalization of Hear-USA was about $25 million.[[3]] That must have been fun.

 

4.  1/18/11:  HearUSA didn’t pony up.  Shares fell by more than a third when Hear-USA announced it was “wavering” on making the payment. Siemens threatened to take over the company. The New York Stock Exchange said it might delist HearUSA in that event because Siemens might:

…  do so on terms that do not involve the payment of any material amount of consideration to holders of common stock … since [Hear-USA]…has always operated at a loss.

5.  2/4/11:  HearUSA filed suit against Siemens in the New York Supreme Court, claiming that it was “current in its payments under supply and credit agreements” and calling Siemens actions “troubling.”{{4}}[[4]]HearUSA Sues Siemens Over Loan Dispute.[[4]]

And on that troubling note, HearUSA put its fabled PR machine into high gear, called in all its markers, and turned itself into a heroine in distress:

 

  •  Assuming the position of injured party, HearUSA was shockedshocked — at Siemens bad manners. HearUSA expressed disappointment “… that Siemens has taken this negative and heavy-handed approach” and concern that “the statements made by Siemens… fail to provide all of the facts about our relationship with them and our position.”
  • Arcadia Capital Advisors{{5}}[[5]]One of HearUSA’s top five largest  investors[[5]] accused  Siemens of “a ruse so that they can steal the company at depressed valuations.”{{6}}[[6]]HearUSA Lashes Back at Siemens With a Lawsuit and Gets Support From a Principal Investor.[[6]]
  • And we’ll finish with this one because it really takes the cake:

…As a condition of its backing from Siemens, HearUSA is obligated to stock and sell Siemens Hearing Aids, making the popular retailer a near-captive supplier for Siemens…  By acquiring HearUSA outright, Siemens could capture more value from the channel while profiting from HearUSA’s recent progress in the market, which includes an exclusive referral relationship with the massively powerful AARP senior organization in the U.S.

Heavens to Mercy and fainting spells all around! HearUSA is just a poor little thing tied to the railroad track by the greedy, mustache-twirling Siemens.  Remember back in the day when HearUSA was the swaggering cowboy and Siemens was the staid banker?  Who would have thought it could come to this?

Stay tuned for next week’s thriller when the train whistle blows down the track and the hero–or at least a stalking horse–comes to rescue HearUSA from the evil villain Siemens.

Photo courtesy of tvtropes

 



About Holly Hosford-Dunn

Holly Hosford-Dunn, PhD, graduated with a BA and MA in Communication Disorders from New Mexico State, completed a PhD in Hearing Sciences at Stanford, and did post-docs at Max Planck Institute (Germany) and Eaton-Peabody Auditory Physiology Lab (Boston). Post-education, she directed the Stanford University Audiology Clinic; developed multi-office private practices in Arizona; authored/edited numerous text books, chapters, journals, and articles; and taught Marketing, Practice Management, Hearing Science, Auditory Electrophysiology, and Amplification in a variety of academic settings.

1 Comment

  1. Hello Holly – I am enjoying your series on Hear USA (it is close to my heart!) but would be curious to know what the reaction is from other readers.

    All the best,
    Brian Kinnerk

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