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The Digital Skeptic: Making Millions From $1,000 Earphones

NEW YORK ( TheStreet) -- When the man who figured out how to sell $1,000 earbuds offers me business advice, call me crazy, but I listen.

"It's the experience -- you work for a long, long time to get that as reasonably perfect as you can," Axel Grell told me a few months back. "Then, from there, you can begin."

Grell knows a thing or two about perfection. He's the product manager for high-end audio at premium German audio equipment giant Sennheiser. That makes him the brains and guts behind some of the most awesome headphones on the planet.

"If things have a quality, you see that and you can touch it," he explained. "I try to bring the best of what is possible for the money."

Not surprisingly, Grell's latest creation, the red-hot

IE 800 in-ear headphones ($999) flatly crush not only what Apple (AAPL) passes off as earbuds on the iPad, but trendy units from Beats By Dr. Dre, Sony (SNE) and Bose.

Good luck getting your hands on IE 800s. The company confirms that, in spite of building several thousand units since its release late last year, it has added a third shift at its German production plant to keep up with demand.

What makes them worth a cool grand?

"The secret is the transducers -- that's the tiny little speakers," he explained. "It is the five years it took to make them. They are superior to what is made in Asia."

What makes all this audio glory investor-worthy is that even though Sennheiser is a private company -- there is no ticker to trade, unfortunately -- German financial law requires a deep level of fiscal disclosure. That means, for investors tired of watching consumer tech giants such as Samsung, Apple, BlackBerry (RIMM) and LG bumble around figuring out who they are in today's race-to-the-bottom global tech market, Sennheiser has become a refreshing business case study.

The numbers Sennheiser posts are impressive. In spite of facing the worst European economic crisis since World War II, the audio parts company still managed to grow sales 13.5% in 2011, year over year. Headphones -- made mostly by Grell's group -- make up about 30% of that total, with cash flow from operations essentially tripling over the same period.

Be warned. Grell is no Steve Jobs. He can be shy, retiring and gleefully wanders deep into the tech weeds of 40mm ring enclosures and wide-band ring radiators. But let him speak and what you hear is as fascinating a picture of what's sounding good and bad in today's noisy global consumer tech world.

"The quality," is how he sums it up. "You have to have that quality."
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