Whimsy Pays Off for Designer-Phone Venture
A telephone shaped like a pair of lips?
Sure, it smacks of gimmickry. But that didn’t concern movie producer Frank Hildebrand when he went looking for telephones for a scene in the new film “Once Bitten.”
Hildebrand needed a telephone to fit the atmosphere of the movie’s “Dial-a-Date” pickup bar, where patrons call each other from their tables. So he borrowed a batch of “Hot Lips” phones from TeleQuest, the Burbank company that makes them.
“I picked the phone because it’s funny and it has a sexual, sensual connotation,” Hildebrand said.
TeleQuest will bend over backwards to fill such quirky needs. Another of its 12 telephone models is “Flexxx,” a one-piece phone that a user bends in the middle to get a dial tone or answer calls. “Wall Talk” is a speaker phone for the kitchen wall. Then there’s “Baseball,” in which the earphone is inside a baseball. The baseball sits atop three bats that connect it with the mouthpiece in the base of the phone.
TeleQuest projects that it will sell 570,000 phones this year and will double that next year.
This year’s sales will climb to $17 million, company officials said, and net profits will reach $1.5 million for the privately held firm. That’s nearly triple the $5.8 million in sales and nearly 10 times the $167,000 in profit that it had last year, according to the company.
TeleQuest is a beneficiary of the Federal Communications Commission’s deregulation of the U.S. telephone market in the early 1980s, a move that opened a vast market to telephone equipment manufacturers.
Another key development was the breakup of AT&T; on Jan. 1, 1984, which provided a large market for TeleQuest among the local phone companies that were splintered from Ma Bell.
Three of the company’s major customers are former Bell System phone companies--Pacific Bell, Northwestern Bell and BellSouth--which buy one of the company’s more conventional desk-top telephones and resell them under their own labels. Together, their purchases make up about one-third of TeleQuest’s sales.
Another third of its sales are to telephone equipment makers, such as Northwestern Bell, which have TeleQuest make telephones according to their specifications.
And the remainder are retail sales under TeleQuest’s name.
TeleQuest targets the upscale buyer with what it calls “life style type” telephones that typically retail for $50 to $125. “We’re in the fashion end of it,” said Thomas Eisenstadt, the company’s executive vice president.
The company’s phones are sold at Macy’s, Gimbels, Bloomingdale’s and the Broadway, among other stores. Five models appear in various editions of the Sharper Image, a popular catalogue for the upwardly mobile.
The baseball phone, the company said, is its departure from the designer market and has brought it only limited success. “We wanted to design a telephone for Joe Six-Pack,” Eisenstadt said.
The Dodgers bought about 200 of the phones last year--labeled with the Dodger name--to sell in the Dodger Stadium gift shop and to give away in promotions. “I’ve got one in my den,” said Jim Campbell, the club’s director of merchandising.
Although many companies manufacture phones, most shy away from the trendy accessories kind, contending that because most customers prefer traditional phones, there’s only a limited market for phones like TeleQuest’s.
Joyce Simon, AT&T;’s Southern California manager of phone centers, said non-traditional telephones have limited appeal during most of the year but sell well in November and December, when people are shopping for unusual Christmas gifts.
“Last year, the lips phone was the hot item. But I can’t picture people putting that out on their coffee table,” she said.
But TeleQuest’s success has attracted competitors. Panasonic has introduced a telephone similar to the “Grand Prix,” a high-tech, wedge-shaped phone that is TeleQuest’s best-selling model. Mytel International, a company based in Taiwan, is selling a telephone that TeleQuest claims is a direct copy of the Grand Prix. Last month, TeleQuest was granted a temporary injunction in U.S. District Court in Los Angeles preventing Mytel from making and selling the phone.
Robert Miller, vice president for consumer merchandise for Radio Shack, said that, although TeleQuest’s products may sell in department stores and boutiques, he does not believe they would do well in a nationwide chain such as Radio Shack.
Found Growing Market
“Cuteness doesn’t work so well in the middle of Iowa or Wisconsin,” Miller said.
Nevertheless, TeleQuest executives are convinced that they have found a growing market for their products. “The fact we sell to telephone companies is a good stamp of approval. They aren’t going to buy trash,” said Robert E. Lee, TeleQuest’s president and chief executive.
The company was formed in May, 1983, by Lee, Eisenstadt and Eric Geis, who now is in charge of strategic and financial planning for TeleQuest. The three had worked together as senior executives with American Telecommunications Corp. in El Monte as part of the team that designed the now-classic Mickey Mouse and Snoopy telephones. Working out of borrowed offices in Pasadena, the three raised $2 million in venture capital and went to the June, 1983, Consumer Electronics Show in Chicago to drum up customers.
By October, 1984, the company was profitable, its executives said. It is projecting sales of $25.5 million next year and $67.1 million by 1988. It also anticipates making its first public offering of stock next year.
TeleQuest began with seven employees and now has 40. The company buys the components, but the assembly work is done in Hong Kong and South Korea. Boxes of parts and phones are stacked ceiling high in some spots throughout TeleQuest’s cramped headquarters.
It has one artist to design phones and contracts with several outside designers. TeleQuest officials said about one design in five becomes a phone. Telephones based on the Smurfs cartoon characters, for example, were rejected because TeleQuest executives thought adults might not buy a telephone for a young child, who might tie up the family’s line.
TeleQuest executives don’t believe in doing market research before introducing a telephone. When the Hot Lips was selected, it won out over a heart-shaped design because, Eisenstadt said, it had a “friendlier feel” to it.
“The real research comes when you put the phone on a retailer’s shelf and somebody pays 60 bucks to take it home,” Eisenstadt said. “That tells you more than $20,000 in research does.”
