BWA BorgWarner Inc

Harman International Industries Inc. Chief Executive Dinesh Paliwal said he intends to double the company's revenue over the next five years, fueled by a big backlog of orders from auto makers anxious to buy his high-tech multimedia systems.

Mr. Paliwal on Monday was in a northwest suburb of Detroit to open a new office that will employ 1,000 people and serve as the company's largest research and development center aimed at designing new car technologies to support everything from infotainment to hands-free driving. The company is expected to finish its 2016 fiscal year with $7 billion in revenue and a backlog of orders totaling $23 billion.

The company is best known for its audio systems, which take the form of more than a dozen brands, including JBL, Harmon/Kardon, Infinity, Revel and Mark Levinson, among others. But increasingly Harman's focus has been on developing the software that allows digital interfaces inside the car to work. Mr. Paliwal estimates that 80% of the value of Harman's products are software code, and he is already planning to outsource more hardware manufacturing.

Perhaps no company in the auto space has done more in the past year and a half to try to evolve. That has included making $1.5 billion in acquisitions, gobbling up Symphony Teleca, an 8,000-employee software development company in Silicon Valley, and Red Bend, an Israeli software firm that handles over-the-air update capabilities. Its latest purchase came three weeks ago -- a network security company called TowerSec.

Mr. Paliwal said Harman will be able to leverage the purchases into much more revenue. Its sales are forecast to rise to $7 billion for the fiscal year that ends June 30, almost twice the $3.7 billion it booked in 2010.

"My aspiration would be of us to double our revenues again," he said.

Investors initially cheered the investments in Symphony Teleca and Red Bend, sending Harman's shares to record highs. In April the stock hit $146 a share after starting 2015 around $100. It has since plunged to around $78.

Brian Johnson, an automotive analyst with Barclays, said investors may fear that Harman and companies like it, could be pushed aside by the emergence of Alphabet Inc.'s Google Android Auto and Apple Inc.'s CarPlay, as the tech giants invest more into cars. The emergence of these new highflying competitors has put pressure on Harman as well as traditional parts suppliers such as Lear Corp. and BorgWarner Inc. that for decades quietly provided auto makers everything from engine components and brakes to tires and seats.

Some are selling off businesses, but most are making acquisitions to increase their high-tech offerings or refine what they already make.

For example, Delphi Automotive PLC has shed its past of churning out commodity components—such as steering systems—and is now a car tech leader producing the electrical systems in vehicles and the advanced sensors that allow for autonomous driving capability. It made a handful of acquisitions last year, including Pittsburgh-based Ottomatika Inc., an autonomous vehicle control company.

ZF Friedrichshafen AG Chief Executive Stefan Sommer, said earlier this month that suppliers need to buy technology companies if they want to compete. ZF purchased TRW Automotive Holdings Corp. last year.

"The automotive world needs to see the opportunities and the technologies of the digital world," he said.

Write to Mike Ramsey at michael.ramsey@wsj.com and Jeff Bennett at jeff.bennett@wsj.com

(END) Dow Jones Newswires

January 25, 2016 17:25 ET (22:25 GMT)

BorgWarner (NYSE:BWA)
Historical Stock Chart
From Mar 2024 to Apr 2024

BorgWarner (NYSE:BWA)
Historical Stock Chart
From Apr 2023 to Apr 2024