Welcome to Headphone News - Jan. 29 2010

Hi All! A new category here: Headphone News.  Normally, news stories will appear as it happens, but since this is the first post we'll need to play catch up with a couple of bigger stories.

Koss Senior Exec Steals Millions, but Looks Good in the Process.

The first reports started coming in the day before Christmas: Sujata "Sue" Sachdeva, V.P. of Finance for Koss Corp. had been arrested Dec. 21 for wire fraud after allegedly embezzling some $4.5 million from the company over the previous three months. By Jan 1, it had became apparent the pilfering may extend back to fiscal 2006 and amount to over $20 million, making this likely the largest case of embezzlement in the U.S. in 2009. Currently, total losses to the alleged fraud are estimated to amount to some $31 million dollars. Evidently Mrs. Sachdeva's six figure salary couldn't quite cover her cloths shopping addiction. She is reported to have many millions of dollars in apparel and jewelry purchases at high-end salons, including more than $1.3 million at Valentina in Mequon, $670,000 at Au Courant in Glendale and $649,000 at Zita in Whitefish Bay, all Wisconsin stores. A short review of some of her purchases can be found here. Apparantly, she would regularly have her assistants at Koss wire company funds to pay down her American Express card. Monthy payments averaged over $400,000! Koss has now fired Grant Thornton LLC, it's independent auditing firm; no surprise there as none of the previous audit reports proffered any adverse opinions. A stunning result considering Koss is a relatively small company reporting net sales of roughly $40/year and the losses due to the alleged crimes running about 10% of net sales and 200% of profits. More info here. Grant Thornton has fired back a response; Baker Tilly Virchow Krause has recently been retain by Koss as their new audit firm. Obviously, this did not bode well for Koss' stock prices. Koss halted trading on the NASDAQ (symbol: KOSS) on Dec. 21 2009 when the stock price was $5.51, and resumed trading on Jan 11, 2010 at $4.19, a 24% devaluation. But worse yet, as the magnitude of the multi-year crime became apparent, and stockholders recalled the ever decreasing stock prices over the last four years (about $14 in 2006, $10 in 2007, $6 in 2008) wallets began to open, and calls to lawyers were placed. Koss shareholder have retained numerous law firms including Brualdi Law Firm, P.C., Goldman Scarlato & Karon, P.C., Holzer Holzer & Fistel, LLC, and Dyer & Berens LLP, to begin a class action suit "on behalf of investors who purchased Koss Corporation securities (NASDAQ: KOSS) between July 12, 2005 and December 21, 2009, inclusive (the "Class Period")." Federal investigators have received their warrants, and have begun to rifle through Sachdeva's properties finding ” statues, paintings, Waterford crystal, luggage from Louis Vuitton and Canyon, chandeliers, crystal vases, glassware, 34 fur coats and 461 pairs of shoes." (More here.) Koss has released preliminary data on the total amounts of "unauthorized transactions, the results were:

FY 2005:        $2,195,477

FY 2006:        $2,227,669

FY 2007:        $3,160,310

FY 2008:        $5,040,968

FY 2009:        $8,485,937

Q1 FY 2010:     $5,326,305

Q2 FY 2010:     $4,917,005

On Jan 21, 2010, Sujata "Sue" Sachdeva was indicted on six counts of wire fraud by a grand jury, and is accused of embezzling $31 million and purchasing millions of dollars in furs, purses, shoes, jewelry and airline tickets. If convicted, Sachdeva could face up to 120 years in prison and $1.5 million in fines and restitution. On a personal note, I find this whole story tragic.  One of the headphone market's most important and long-lived players now finds itself in peril due to one persons gluttonous and habitual crime. I deeply hope Koss can find their way through this mess and can continue to grace us with their affordable headphone products. We can only hope. Obviously I'll be watching this one; more news as it becomes available.

Fashion Over Function

[caption id="attachment_1352" align="alignleft" width="300" caption="Sure, there's plenty of room to make headphones a little more fashionable."][/caption] Another story that seems to be gathering momentum in the headphone world is the ever increasing number of headphones being introduced touting fashion as their major selling point. Call me old school, but for me headphones are an audio transducer, whose sole job is to transfer the artist's music to the inside of my head ... under various use applications (travel, exercise, bed, etc).  But the purchasing public has some other criteria in mind as  evidenced by the success of fashion centric headphones of late.  That's fine as far as I'm concerned, anything that gets consumers spending money on a superior listening experience --- even if it's how you look while you're having it --- will stimulate competition among manufacturers, who will eventually get around to competing with better sound quality. Nothing wrong with that. V-Moda has long been at it in this area, and their current iVibe is very cool looking. Had it not been for the lousy economy of 2009 the ruckus last year raised in the headphone market by Monster would have been a roar; and I think the Jamz may be the first of the "great headphones" of the decade. This year, however, there is a veritable explosion of headphones above cheap price levels being sold on fashion, design, or brand. Here are a few: Urbanears [caption id="attachment_1328" align="alignnone" width="500" caption="Just one of the 14 available colors with Urbanears"][/caption] This Scandanavian collective is introducing three headphones in a rainbow of colors. Their mission statement includes, "Urbanears promotes a deeper connection to color, form and people while providing the freedom to transcend individuality and unify the sound experience."  Not sure I quite understand it, but you'll note they did get around to the sound part. First of the three headphones is the full sized closed Plattan, then the ear-pad sized Tanto, followed up by the ear-clip style Medis, which is a truly unusual looking headphone I'd love to get my hands on. All three available in over a dozen colors, and marketed with their Frequency Response measurements*!? *The Medus measurement indicates it is a "preliminary curve," regardless, color me excited. WESC

[caption id="attachment_1335" align="alignleft" width="176" caption="WESC's PICK-UP looks like a cartoon version of the Koss Porta-Pro."][/caption] Another Scandanavian company, WESC (WeAreTheSuperlativeConspiricy) is a Swedish clothing and fashion company with dozens of stores worldwide trying on headphones for size. Maybe I'm getting old, but their website is one of the single most confusing experiences I've had in a while.  Though I did like their "store locator."

Vestalife A recent article at dexiner.com "Fusing Fashion and Design for Breakout Success"  highlights and RKS Design effort to produce some cool headphons for Vestalife --- currently a maker of nifty spherical iPod docks. I have to admit, these are some of the coolest looking headphones I've ever seen. Click on the article link above for a look. I hope they do produce them, I'd love to have a listen.

Monster [caption id="attachment_1336" align="alignright" width="200" caption="The new Jamz and Lil'Jamz look good, and sound terrific."][/caption] As mentioned previously, Monster has been coming on strong. While I would characterise the sound quality as uneven, the quality of work as a fashion project coming from Noel Lee and his monsters is astonishing. I think the Studio is a dandy headphone, and the Lady Gaga's sound okay. But the shocker for me lately has been the Jamz and Lil' Jamz; these are very good sounding little headphones at a very good price.  Monster is going to sell a boatload of them.

Sennheiser / Adidas [caption id="attachment_1346" align="alignleft" width="300" caption="The PMX 680 Sports has plenty of swoosh in it! "][/caption] Headphone audiophile kvetching was unwarrented this year regarding Sennheiser's big CES announcement launching a line of products co-branded with Adidas. After all, last year gave us the awsome HD 800 --- six months late, but still, maybe the world's best headphone should get them a little grace.  I'll add however that recent refreshes of old product lines has brought us the  PX 100-II and CX 300-II, two unbelievably good headphones in their category, and the likewize stunning new line of wireless headphones, RS 160, RS 170, RS 180.  I think it's great that Sennheiser, a company known for excellence in headphones, and especially for building great sounding headphones, is teaming up with a brand that has the big daddy, mass market punch. This small sampling of new fashion conscious headphone sales is the tipping point for the popularity of after market headphones. We're going to see a LOT of attention on headphones in the future ... get ready for an onslaught of headphones.

Let's stay safe, folks. So here's the truth, I've been getting set-up to do the news for a little while, but it was this little pile-up of stories that pushed me over the edge: Folks, if you're listening with headphones, you will loose situational awareness of what's going on around you unless you consciously compensate.  In other words: BE CAREFULL, YOU'RE NOT HEARING WHAT'S GOING ON AROUND YOU! Police car collides with pedestrian wearing headphones --- Galesburg.com Pedestrian wearing headphones killed while walking dog -- The Kansas City Star Headphones, Pedestrians, and Railroad Tracks Dont Mix --- injuryboard.com Please, be aware of your surroundings, and listen at reasonable levels. Until the nex news, thanks for listening!