OtterBox: Under growth pressure

FORT COLLINS – OtterBox has the lead in the mobile case technology market, but analysts say it faces challenges ahead, including threats from counterfeiters and competitors alike.

The Fort Collins-based company recently reached an apex of sorts: It unveiled its $100 Armor Series cases, which it billed as “the toughest case ever built” and what is certainly its most expensive. The case can survive for 30 minutes submerged in more than six feet of water as well as withstand 10-foot drops and being run over by a truck.

The company also earned the No. 10 spot on Forbes’ America’s Most Promising Companies list.

The company’s potential is as impressive as its track record: OtterBox plays in a market valued at $6.7 billion in 2012. That market is forecast to swell to $15.6 billion by 2017, said Mike Morgan, senior analyst for global devices at tech analyst firm ABI Research.

Of course, Otterbox is far from alone in chasing share.

“It’s a very crowded market,´ said Ben Arnold, director of industry analysis for tech analyst firm NPD. “I think that puts (OtterBox’s) success into perspective because they’ve been able to do so well.”

“But make no mistake, there are a lot of companies that see that opportunity,” Arnold added.

OtterBox CEO Brian Thomas acknowledged that some of the company’s competitors have been able to make advances.

“A lot of the competitors in our space are more mature than they were,” he said. “Our best way of overcoming any competition is to innovate.”

Doing just that allowed OtterBox to post huge gains in its revenue, which jumped to $612 million in 2012, up from $350 million in 2011. It now employs 550 in the United States and about two-dozen in both Ireland and Hong Kong.

OtterBox has done well at what the dozens of other case manufacturers lack: brand recognition, Morgan said.

“(Most) OtterBox customers know they have an OtterBox case,” he said. “That’s a great thing to have when you’re a case manufacturer.”

Future growth is expected to come from the Armor Series, Arnold said, which AT&T is selling exclusively for the first month of sales starting today (Feb. 22). It will later distribute the cases to other buyers, the largest of which are Best Buy, Wal-Mart and RadioShack.

“Making (cases) even more resistant to what can happen out in the field is definitely in line with their strategy,” Arnold said.

Despite its success, Morgan said OtterBox will face challenges as the market shifts from standard protective devices known in the industry as “dumb accessories” to “smart” cases that also make use of software and applications.

One such company, mophie, has released a case that includes a battery pack.

“They came out of nowhere and grabbed a bunch of market share really quick,” Morgan said.

Mophie and other OtterBox competitors, including Lifeproof, Belkin, Speck Products, Hard Candy Cases and Incase, either did not or declined to comment for this article.

Thomas notes that OtterBox introduced its Defender Series with iON intelligence cases, which charges iPhones and comes with an application that allows users to manage battery life. It will release the product this spring for the iPhone 4/4s.

Mophie, however, has just released its battery-pack case for the iPhone 5. It already had sold the case for the iPhone 4/4s.

OtterBox will announce other “appcessories,” or electronic, application-driven cases, in the third and fourth quarters, Thomas said. He declined, however, to provide details.

Meanwhile, other challenges abound, including counterfeiting.

OtterBox won a $10 million judgment last year in the sales of 20,000 counterfeit cases by an eBay seller over 10 months. But that was just one case out of many.

“The bottom line is they caught one: there are 100 others out there,” Morgan said.

Counterfeiting will remain a problem until OtterBox finds a way to engineer cases with digital signatures, he said.

Until that happens, OtterBox has eight full-time employees who work with federal agencies to aggressively thwart counterfeiting, Thomas said. They do everything from monitoring online sales activity to working with foreign governments to seize counterfeit shipments.

“There’s no way, no matter what we do, that we’re going to catch every counterfeiter,” he said. “But we’re also making it very hard for them, probably to an unprecedented level than any other company.”

Counterfeiting is expected to become an even bigger problem as OtterBox, whose core market remains the U.S., expands abroad.

Thomas acknowledged that the company has only a “small percentage” of overseas market share, “but we’re also growing very fast overseas,” including in Hong Kong.

It also expanded in Germany and Hungary this year, markets where rivals and counterfeiters are part of life.

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