Irvine-based Vizio Holding Corp. may soon figure heavily in the plans for Walmart Inc., the world’s largest retailer.
Walmart is in talks to buy the maker of flat-panel smart TVs, sound bars and other TV-related products, and provider of internet advertising services (NYSE: VZIO), for more than $2 billion, according to the Wall Street Journal, which broke the news.
“The move would give Walmart more places where it can sell ads and pitch shoppers on goods,” the Wall Street Journal said last week, citing sources familiar with the proposed transaction.
“Vizio is historically the largest television brand sold at Walmart by sales.”
The deal would also make Walmart (NYSE: WMT) a larger player in connected TV advertising, where it would compete with Roku, Amazon and YouTube.
If the deal happens, it could mark an exit for Vizio founder and Chairman William Wang, who started, CEO, the firm in 2002 and built it into one of the largest suppliers of televisions for giant retailers Best Buy, Target and Costco as well as Walmart.
Wang, whose wealth the Business Journal estimates to be in the $1 billion range, currently has a roughly 39% stake in the company.
A Vizio spokesperson would only say “no comment” last week when reached about the Wall Street Journal report.
Vizio, with headquarters at the Irvine Spectrum, is scheduled to deliver quarterly and full-year financial results on Feb. 27.
On the day the Wall Street Journal reported its scoop, Vizio shares popped 25% to $9.75. It currently has a $1.9 billion market cap.
The Deal
Vizio’s growth exploded by selling affordably priced televisions, reaching $2 billion in sales in 2020. It has billed itself as the largest U.S.-based flat-panel TV maker, trailing only Samsung Electronics Co. by sales in this country.
In 2016, Chinese conglomerate LeEco sought to buy Vizio—as in the case of Walmart, for about $2 billion—in a deal that eventually collapsed.
Instead, Vizio went public in 2021 at $21 a share and its market cap reached $3.6 billion.
By that time, it had sold more than 80 million televisions.
A few years ago, Wang decided to expand beyond hardware by adding a software component called “Platform+.” It is comprised of SmartCast, a Smart TV operating system that provides access to a variety of streaming services, and Inscape, which tracks the content displayed on the screens.
Vizio says its platform gives content providers more ways to distribute their content and advertisers more tools to connect with the right audience. It reported its SmartCast average revenue per user grew 31% to $28.30 in 2022.
The Platform+ business grew 55% in 2022 to $478 million. In 2018, the unit reported just $36.4 million in sales.
The growth speaks “to the progress we have made increasing awareness of Vizio as a skilled destination for advertisers to reach viewers,” Wang said last May.
“By our measure, we’ll continue to gain share within connected TV, one of the fastest-growing areas of advertising marketplace.”
By contrast, Vizio’s Device unit that sells televisions saw revenue fall 24% to $1.4 billion in 2022. The overall drop in revenue was a drag on the stock, which steadily declined since its all-time high topping $26 a share in 2021.
The Move
Wang’s move into advertising appears to have been the driving factor in Walmart’s interest.
The acquisition would be “a play on data and advertising” rather than a play for market share in TV sales, Morgan Stanley analyst Simeon Gutman wrote investors, according to The Fly website.
Gutman also said it is “not a positive for other electronics retailers.”
It’s also not a positive for Roku, which saw its shares fall 8.8% on the day the WSJ broke the news.
JPMorgan told investors that a Walmart and Vizio tie-up “would certainly be a bad outcome for Roku,” making Vizio a stronger competitor and resulting in Roku losing its position as an operating system on Walmart’s TVs. Vizio’s SmartCast currently has 18 million active accounts versus Roku’s 76 million, JPMorgan said.
The acquisition would give Walmart greater exposure to advertising and multiple avenues for revenue growth, Barrington analyst James Goss told investors. Goss said he expects the final sale to be at least several dollars over the $10 per share that the WSJ highlighted.
WatchFree+ Expansion
Vizio on Feb. 6 announced a significant expansion of its WatchFree+ streaming service, a sizable increase in viewership, and new features to boost “discoverability.”
It boasted of over 300 channels, 15,000 on-demand titles, 10 Vizio-curated channels programmed in-house, and expanded studio partnerships with Warner Bros. Discovery, Electric Entertainment, Sony and Lionsgate.
“WatchFree+ viewing hours have more than doubled over the past 12 months according to internal data,” the company said.
Wang, an immigrant from Taiwan, recalls that “I started Vizio with a handful of employees and the funds from a second mortgage on my home.”
“In our early years, we cultivated supplier and retail partner relationships to create an efficient business model that would allow us to deliver exceptional value to American consumers. Today, this core principle remains at the heart of everything we do,” he said in a 2022 letter to shareholders.
