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Digital
Lifestyles Group products include hip-e™, the first digital
lifestyle computer and entertainment platform, catering to today’s youth
Technology
Lifestyle Products:
(DLFG-OTC:BB)
Digital Lifestyles Group, Inc.
1001 S. Capital of Texas Hwy.
Building
I, Suite 200
Austin, TX 78746
Phone: 512-617-8282
Kent A. Savage
Chief Executive Officer
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
April 7, 2005
BIO:
Kent A. Savage - Chairman and Chief Executive Officer
Kent Savage serves as Chairman and Chief Executive Officer of Digital Lifestyles Group.
Mr. Savage has over 20 years of entrepreneurial and public company executive leadership
experience in the consumer electronics, communications and networking industry. Mr. Savage
joins Digital Lifestyles Group from TippingPointTechnologies, a publicly traded network
security company that was recently sold to 3Com, where he served as co-founder and Chief
Marketing and Sales Officer. TippingPoint innovated the award winning UnityOne intrusion
prevention system. Previously, Mr. Savage was the co-founder and the President and Chief
Executive Officer of Netpliance Inc., the predecessor of TippingPoint and the innovator of
the i-opener consumer internet appliance, access and online content. Under Mr. Savage's
leadership, Netpliance achieved first market mover advantage and raised in excess of $235M
of capital, culminating in an IPO at a market cap of $1.2B. Prior to Netpliance, Mr.
Savage served as General Manager, Broadband for Cisco Systems' Service Provider Line of
Business where he lead Cisco's DSL and CMTS product revenue activities for the Telco and
Cable industry and achieved #1 market share. Prior to Cisco, Mr. Savage served as an
officer and Vice President, Sales and Marketing for NetSpeed, Inc. -- a pioneer in
broadband DSL, which culminated in a $265M sale to Cisco Systems. Prior to NetSpeed, Mr.
Savage served in numerous Vice President and Director Capacities for Connectware, Inc.,
Nortel and Wang Laboratories. Mr. Savage is also on the board of directors for publicly
traded Innovo Group. Mr. Savage earned his Bachelors in Business from Oklahoma State University
and earned his MBA from Southern Methodist University.
Company Profile:
Digital Lifestyles Group, Inc. designs, manufactures and markets digital lifestyle
products, including software, personal computers, accessories and entertainment and
communication solutions. Our products include hip-e™, the first digital lifestyle
computer and entertainment system for teens, and the Northgate® line of desktop and
notebook computers for consumer, business and education customers. We sell our products
through our online stores (www.hip-e.com), (www.northgate.com), direct sales force,
third-party resellers and retail stores.
CEOCFOinterviews: Mr. Savage, what attracted you to Digital
Lifestyles?
Mr. Savage: “What attracted me to this opportunity was
doing something very profound in the computer and electronics industry and by serving what
is an enormous opportunity, which is the youth culture, as it relates to their digital
needs and desires by creating the first digital lifestyle computer and entertainment
platform, catering to today’s youth.”
CEOCFOinterviews:
How has the company changed under your direction?
Mr. Savage: “We embarked on a strategic initiative that
spawned a product family and brand, under the name hip-e for entertainment, electronics,
and education. It is all embodied in a hardware product portfolio that has a very unique
and compelling industrial design that caters to the tastes of today’s youth. It also
embodies very robust software applications and a user interface that runs on top of the
Microsoft operating system to deliver a very intuitive, fun, entertaining and simple way
to do the things that kids want to do on the internet or computer. We embarked on that
when I first joined the company in January. At that time, the name of the company was
Northgate and was competing on the commodity end of what the industry refers to as the
opening purchase price arena, alongside companies like e-Machines and Gateway. We embarked
on injecting an entirely new strategy into the company that focuses on higher value by
serving true digital lifestyle needs as opposed to focusing on speeds and feeds. We
renamed the company about half way through the year around the Digital Lifestyles
philosophy, approach and strategy. We then unveiled the first incarnation of a digital
lifestyle solution in the form of hip-e, targeting today’s youth. At Christmas time,
we shipped the first customer orders. As we enter 2005, we are very excited about hip-e
and the potential moving forward.”
CEOCFOinterviews:
Exactly whom are you targeting?
Mr. Savage: “We have had a laser beam focus on the
seventeen year old, which is the most influential teen within the demographic. You could
frame up the market from the thirteen-year-old up to collegiate. By targeting the
seventeen-year-old, you serve the ‘teen’ because that thirteen year old aspires
to be that seventeen year old, and then the seventeen year old goes off to college. That
allows us to serve that first computer purchase for the thirteen year old, who need a
computer to serve their education needs and then at home. Also, when mom and dad purchase
that graduation gift for their son or daughter, they are going to buy the hip-e nodebook
to prepare them for college.”
CEOCFOinterviews:
Given that teenagers tend to be fickle, how do you know what they want and what they are
going to continue to want?
Mr. Savage: “The way we know what they want is that we
took the time to ask them. We spent multiple sessions with initially a core group of
teenagers that crafted the original design and concept and what actually went into the
product. We then went and validated that through focus group research with hundreds of
teenagers across America. We built an entire network comprised of 900 teenagers called
hip-e squad leaders who are in constant dialogue with us, telling us what they want and
how to fine-tune the product offering. A big part of the product enables customization
where the kids can choose how they want to customize their hip-e computer. It might be a
zebra print or graffiti or camouflage. We allow them the freedom to choose what they want.”
CEOCFOinterviews:
How do teenagers know about Digital Lifestyles?
Mr. Savage: “There are two ways. The first is the hip-e
Squad Network where teenagers are spreading the word mouth to mouth because they really
trust each other on determining what is cool. They do not trust television or big
companies trying to say we have a cool product for you. That is organic. The second way is
we have created an ad campaign that gets placed within their own publications that they
trust. It is magazines and catalogues that they already turn to today to decide what they
want to purchase. It is more in the fashion, and extreme sports orientation where we get
the word out about the hip-e node. We are also engaged is a press community as it relates
to ensuring that parents hear about hip-e on their terms as well so that they feel very
comfortable that it is a credible product backed by warranty, and Microsoft and Intel
based. Parents want to ensure that it is a quality product because their kids are asking
them for it.”
CEOCFOinterviews:
The look is one feature; what are you providing in terms of functionality that is not
available elsewhere?
Mr. Savage: “The industrial design is ‘eye candy’
and it draws them to it because it is a cool all-in-one design with nice colors. The
second piece is what the kids really want and that is an all-in-one command central. It is
a digital world in one place, in their room or in their dorm. What that does is converge
not only the productivity elements of a computer, as it relates to being able to do your
homework, but it integrates entertainment, so there is a built in television capability
right under [the nose?]. You can hook your cable or satellite television right into it so
that you can watch MTV. There is a video recorder. We have digital video recorder
functionality built in to record things when you are away, an electronic programming
guide, instant messaging with AOL and hip-e shopping mall where teens get things at
merchants like Abercrombie. We have movie services where you can download movies right to
the hip-e node to watch movies or a DVD. We have a music service with MusicMatch to
download your music and listen to it. We have converged all the things that teens use on a
daily basis, which is very fragmented out there, into an all-in-one, small form factor,
beautiful looking product. The node is accessorized with a music player and data storage
device called the hip-e playme that docks right into the node, and the hip-e reachme,
which is a cell phone that is prepaid so teens will not get into debt. That is what we
mean when we talk about an all-in-one command central and everything you would like in a
computer and more.”
CEOCFOinterviews:
Wouldn’t adults like that as well?
Mr. Savage: “Yes! People see it and say this is so cool,
I want one. We welcome that. You have to know who your customer is and you have to market
to your customer. We are all about serving the youth culture, but this definitely
stretches out because at the end of the day we are all kids at heart and we all value
simplicity, fun and entertainment. The beautiful thing is that you have all the Microsoft
capabilities right there so that you can do all the mundane productivity things that you
can do with today’s computers.”
CEOCFOinterviews:
You have a series of partnerships now, what do you need to add?
Mr. Savage: “We have now released the product and we are
in sales mode so the thing to look for is distribution. We have a direct model today but
we were just at the consumer electronics show where we announced the strategic partnership
with Microsoft in Las Vegas. We were showcased in their consumer exchange pavilion, the
Microsoft Consumer Experience Pavilion. We had phenomenal response from that. Now the
retail community if very interested in the product. That is the next stage of where we are
as a company, broadening the reach and awareness that hip-e node is out there and
available.”
CEOCFOinterviews:
How does your price compare to the typical product and do you need to target the up scale
teenager?
Mr. Savage: “We line up alongside Apple very nicely;
that is our category if you will. We are targeting the broadband connected home that has a
PC, and of course the wired campus. One of the things that is a breakthrough element to
what we do is, right out of the box you get the hardware but you also have this software
that is the always-on connected experience. We can apply new applications and services
downstream at any point in time. We have blended the internet and consumer electronic
product into one lifestyle experience. It is a unique approach. Today, computers are all
stand alone. There is an internet browser and a Microsoft operating system and all those
things operate in very independent fashions. We think of this as an all-in-one and really
focus on the experience for the consumer.”
CEOCFOinterviews:
Do you manufacture your product?
Mr. Savage: “Our competency is in research design,
lifestyle innovation and marketing. We have aligned ourselves with the world’s
largest contract manufacturers. We have a drop ship program direct to the end consumer.
Fulfillment, distribution, and contract manufacturing have been perfected over the years
by the PC community. We are able to draft off that model.”
CEOCFOinterviews:
New products and new developments are always expensive; will you tell us about the
financial side of digital lifestyles?
Mr. Savage: “The nice thing is that we have made the
bulk of the R and D investment over the last twelve months. What we are focusing on right
now is the distribution equation of it. There is a road map related to extending our
product brand and lifestyle beyond the youth culture to other lifestyle segments. That is
not a significant R&D investment; we are able to leverage the investment we made in
this one platform to extend to others.”
CEOCFOinterviews:
Is the Northgate segment on the backburner for now?
Mr. Savage: “We have continued to de-emphasize that
business and look at how we sustain it in a form that is good for our shareholders and
customers. We are focusing on how we migrate not only our business but even some of our
customers that are on the Northgate side towards this lifestyle orientation.”
CEOCFOinterviews:
Why should potential investors be interested and what should they know that perhaps they
do not realize about the company?
Mr. Savage: “The way I think about Digital Lifestyles
and what we are doing with hip-e, is very analogous to what Apple has been able to do with
i-Pod. They have been able to create a category and be known for the music entertainment
component. They have connected a backend of service a la i-Tunes with a device. That is a
narrow cast example with music. What we are doing with the hip-e node is not only
delivering music to a consumer device, but we are delivering television, movies, shopping.
It is a multicast of multimedia to a consumer device that is compelling. We maintain an
ongoing relationship with all of our customers. We make money when we sell the hardware on
the front end but then we also have downstream recurring revenue opportunities from those
customers from whom we never lose the relationship. That is a profound opportunity for us
as it relates to monetizing our customer base and building value.”
CEOCFOinterviews:
Is reaching the potential investor a focus for you?
Mr. Savage: “It is definitely something that we are very
interested in. Our primary focus is building the market and getting the distribution out
with the product and that in itself will put the company into the spotlight. When people
see this product they will say “Wow! Who is building this product”? They will
need to find out more and they will find out it is a public company and there is an
opportunity to participate in our success.”
CEOCFOinterviews:
Is there anything that you would like add?
Mr. Savage: “I would like to thank you for your interest
in Digital Lifestyles. Our ticker is DLFG on the over-the-counter market and our website
is www.dig-life.com, and on the consumer side for hip-e, it is www.hip-e.com. We would
love to have you find out more about us.”
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