CSI faces US$15m suit over distribution disagreement

A distribution relationship gone awry could cost a Canadian wireless technology provider US$15 million in damages.

CSI Wireless Inc. Wednesday said its California-based subsidiary was served with a statement of complaint

by Audiovox Communications, alleging breach of contract over an agreement to supply it with CSI’s fixed wireless digital terminals.

CSI announced at its annual general meeting two months ago that it had signed a $50 million distribution deal with a new partner, which ended the $90 million deal it had tentatively signed in November 2000 with Audiovox. CSI has not released the name of the new distributor, but indicated at its AGM that it is a “”household name”” with revenues of more than $1 billion.

In addition to the US$15 million in punitive damages, Audiovox is also seeking a court injunction with respect to an alleged disclosure of confidential and proprietary information, CSI said.

“”You never expect these things, I suppose. It was a fairly large opportunity that we had, and we turned away from Audiovox and went with a different distributor,”” said CSI Wireless president Stephen Verhoeff from his office at the firm’s Calgary headquarters.

“”In our mind, it’s just a sour grapes type of thing,”” he said. “”They were working with us, we were not satisfied with their performance . . . now they think they have been wronged. But we have no agreement with them.””

Spokespeople at Audiovox in Happauge, N.Y. did not return phone calls at press time.

CSI specializes in fixed wireless phones that look like a desktop phone but use a cellular network. These are aimed at rural areas where traditional copper telephone networks are prohibitively expensive like Mexico and South America, Verhoeff said. The company makes most of its revenue right now from its global positioning system (GPS), but Verhoeff sees that ratio changing over time.

“”The opportunities are much bigger in the wireless side of the business than in the GPS side,”” he said. “”Just the fixed wireless alone could catapult the company over the sales that we’re currently doing.””

While CSI continues to focus its sales efforts on developing countries, he acknowledged the wireless network investments made by major carriers this year could bring it some business closer to home.

“”There certainly are some good opportunities here in Canada, certainly on the Cantel/Rogers side,”” he said. “”We’re hoping to do into CDMA (co-division multiple access) technology as well, so maybe we can get onto the Bell/Telus side of the business.””

CSI will vigorously defend the Audiovox action in court and may seek redress for any damages of its own, Verhoeff added.

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