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CONFIDENTIAL
TREATMENT REQUESTED

BY DIRECTED ELECTRONICS, INC.

THIS LETTER AND THE EXHIBIT CONTAIN

CERTAIN CONFIDENTIAL INFORMATION

Brian H. Blaney

Tel. 602.445.8322

Fax. 602.445.8603

BlaneyB@gtlaw.com

November 15, 2005

VIA FEDERAL EXPRESS AND THE EDGAR SYSTEM

Securities and Exchange Commission

Division of Corporation Finance

Mail Stop 3561

100 F Street N.E.

Washington, D.C. 20549

Attention: Sarah Goldberg

    Re:

    Directed Electronics, Inc.

Amendment No. 1 to Registration Statement on Form S-1

Filed October 17, 2005

File No. 333-127823

Ladies and Gentlemen:

     We express our appreciation for your prompt and thorough review of Amendment No. 1 to
Registration Statement on Form S-1 (“Amendment No. 1”) of Directed Electronics, Inc., a Florida
corporation (the “Company”). On behalf of the Company, we are responding to certain comments on
Amendment No. 1 provided by the staff (the “Staff”) of the Securities and Exchange Commission by
letter dated November 2, 2005. Pursuant to our discussions with the Staff, the Company’s responses
to Staff comments Nos. 14 through 19 are indicated below, directly following a restatement of each
comment in bold, italicized type. Please note that the Company’s responses to Staff comments Nos.
1 through 13 will be provided to the Staff in connection with the filing of Amendment No. 2 to
Registration Statement on Form S-1 (“Amendment No. 2”).

Note 1. The Company and Business Activities, page F-7

    14.

    SEC Comment: We have reviewed your response to comment 33 of our
letter dated September 22, 2005. Please explain why you subtracted net income
attributable to participating security holders from net income in applying the
if-converted method to calculate basic earnings per share. Ensure your response is
clear in terms of what “net income attributable to participating security holders”
represents. See paragraphs 26 and 61 of SFAS 128. Also, please revise your disclosures
in note 4 to clarify that both outstanding warrants and employee-owned shares subject
to repurchase rights are treated as outstanding shares of common stock for purposes of
basic earnings per share because the holders of these instruments participate in
earnings with common shareholders.

    Company Response: To clarify for the benefit of the Staff, the Company has
three types of securities that it has considered in the determination of basic and
diluted EPS. Those securities are (1) warrants issued to third parties, (2)
stock-based compensation awards, and (3) convertible notes, including related
paid-in-kind (PIK) interest.

ALBANY
AMSTERDAM

ATLANTA

BOCA RATON

BOSTON

CHICAGO

DALLAS

DELAWARE

DENVER

FORT LAUDERDALE

HOUSTON

LAS VEGAS

LOS ANGELES

MIAMI

NEW JERSEY

NEW YORK

ORANGE COUNTY, CA

ORLANDO

SACRAMENTO

SILICON VALLEY

PHILADELPHIA

PHOENIX

TALLAHASSEE

TOKYO

TYSONS CORNER

WASHINGTON, D.C.

WEST PALM BEACH

ZURICH

www.gtlaw.com

Greenberg Traurig, LLP | Attorneys at Law | 2375 East Camelback Road, Suite 700 | Phoenix, Arizona 85016 | Tel. 602.445.8000 | Fax 602.445.8100

CONFIDENTIAL
TREATMENT REQUESTED

BY DIRECTED ELECTRONICS, INC.

THIS LETTER AND THE EXHIBIT CONTAIN

CERTAIN CONFIDENTIAL INFORMATION

Securities and Exchange Commission

November 15, 2005

Page 2

Relative to the warrants issued to third parties, the relevant terms include a
nominal exercise price and participation in any declared dividends. If treated as
participating securities, the earnings of the Company would be allocated
proportionately to the warrants as though common stock. Conversely, if the warrants
are viewed in substance to be outstanding common shares due to the nominal exercise
price, such warrants would be included in the denominator of basic and diluted EPS
with no corresponding reduction of income available to common shareholders. While
the Company and its independent registered public accounting firm,
PricewaterhouseCoopers LLP, believe that treating the warrants as participating
securities is the correct technical conclusion, the Company understands that the SEC
has objected to this treatment and has required such warrants to be treated as
substantively outstanding common shares. In the Company’s actual fact pattern, the
resulting impact on EPS is the same under either approach, so the Company has
followed its understanding of the SEC’s views and treated the warrants as
substantively outstanding common stock for both basic and diluted purposes.

Relative to the stock-based compensation awards, as further described in the
response to Comment 18 below, the Company has treated these awards differently
depending on the timing of the grant. For all awards granted prior to July 18,
2001, as it relates to EPS for all periods presented in the financial statements
included in the Registration Statement, such awards are viewed as
outstanding common shares for purposes of basic and diluted EPS. For all awards granted after July 18,
2001, due to the guidance in EITF 00-23, Issue 33(a), such awards are not viewed as
outstanding common shares. That said, these awards nevertheless participate equally
with outstanding common shares on any dividends declared by the Company. As a
result, the Company has viewed these awards to be participating securities and has
appropriately reduced the net income available to common shareholders for amounts
that would be paid to the award holders if all earnings of the Company had been
distributed. Similar to the outcome for the third party warrants, whether the
awards are treated as outstanding common shares or as participating securities does
not change the ultimate impact on EPS. It is the stock based compensation awards
issued after July 18, 2001 that are being treated as participating securities in
reconciling net income to net income available to common shareholders on the
Company’s Consolidated Statements of Income.

Lastly, the Company has outstanding convertible notes and related PIK interest. The
Company applies the “if converted” method to all such amounts in determining the
impact on diluted EPS.

The Company has chosen to include basic and diluted EPS figures for common
shareholders, and not for participating security holders. Paragraph 61(d) of SFAS
128 states that “basic and diluted EPS data shall be presented for each class of
common stock.” Additionally, Issue 1 of EITF 03-06 states that “The Task Force
decided to discontinue its discussion on Issue 1(a), noting that although the
presentation of basic and diluted EPS for a participating security other than a
class of common stock may be desirable in some cases, it is not required by
Statement 128.” Since it is not required, and because the EPS impact would be the
same, the Company has determined that the addition of EPS figures for the
participating security holders is not meaningful.

The Company will revise its footnote disclosure in Amendment No. 2 to clarify the
above treatment for each type of security.

Greenberg Traurig, LLP

CONFIDENTIAL
TREATMENT REQUESTED

BY DIRECTED ELECTRONICS, INC.

THIS LETTER AND THE EXHIBIT CONTAIN

CERTAIN CONFIDENTIAL INFORMATION

Securities and Exchange Commission

November 15, 2005

Page 3

Note 3. Summary of Significant Accounting Policies, page F-11

Business Segment Disclosures, page F-15

    15.

    SEC Comment: We have reviewed your response to comment 35 of our
letter dated September 22, 2005. Please tell us in more detail how you determined that
the security and entertainment and satellite radio areas of your business do not
represent separate operating segments under paragraph 10 of SFAS 131. In this regard,
based on your disclosures on page 31 of the Form S-1, it appears that discrete
financial information is tracked for each of these areas, at least down to the
operating margin level. Since such discrete financial information is available, we
presume it is used by your chief operating decision maker to assess performance and
make decisions about resource allocations. If you believe there are specific facts and
circumstances which would overcome this presumption, please advise us in detail as to
the basis for your position. In responding to our comment, it would be helpful if you
provide us a copy of your most recent monthly financial review packages provided to the
chief operating decision maker as well as the board of directors.

    Please also tell us more about why you believe your presentation of only one
reportable segment is consistent with the objectives set forth in paragraph 3 of
SFAS 131. In this regard, we understand based on your disclosures throughout MD&A
that sales of satellite radio related products and services are growing more
significantly than sales of security and entertainment products. We also understand
that sales of satellite related products generate comparatively lower gross margins
than your historical security and entertainment sales. Because satellite radio sales
appear to be a growth engine of your business, we believe it would be beneficial if
readers were informed of the extent to which your gross and operating margins differ
between your security and entertainment sales and your satellite radio sales.

    Company Response: Prior to this initial public offering process, the
Company was not required to report segment information pursuant to SFAS 131. As a
result of, and in preparation for filing, the Form S-1, the Company performed a
detailed review of its management approach to properly implement SFAS 131. That
process and the conclusions reached are contained in an internal memorandum dated
July 20, 2005, which is attached hereto as Exhibit A for your reference. In
applying the standards set forth in SFAS 131, the Company has concluded that it has
one reportable segment.

    The process for making this determination included, among other things, a review of
internal financial reports prepared for the chief operating decision makers
(“CODMs”) and the board of directors, which are used to allocate resources and to
assess the Company’s performance. Certain of these reports are also attached as
exhibits to the above referenced memorandum. All of these reports demonstrate that
the Company maintains discrete financial data for only one operating segment. There
is no discrete financial data on assets, net income, operating income, or EBITDA by
product category. The intent of SFAS 131 does not require a registrant to create
new financial data in order to disclose segment information.

    Additional factors that the Company considered in reaching its conclusion include
the following: the Company’s management is structured along functional lines and not
along
product category lines; the Company’s products are substantially similar, are sold
in the same channels, and are available to the same customers; and, executive bonus
compensation is based on overall results and not based on product lines.

Greenberg Traurig, LLP

CONFIDENTIAL
TREATMENT REQUESTED

BY DIRECTED ELECTRONICS, INC.

THIS LETTER AND THE EXHIBIT CONTAIN

CERTAIN CONFIDENTIAL INFORMATION

Securities and Exchange Commission

November 15, 2005

Page 4

    The Company has made certain disclosures in its MD&A to communicate to readers the
effects of the sales mix on sales and margins. While discrete financial data is not
available at the operating margin level, the Company is able to provide the
disclosures contained on page 33 of Amendment No. 1, as these disclosures are based
on management’s understanding of the business.

    Based upon the foregoing, the Company believes that it is appropriate to disclose
one reportable segment under SFAS 131.

    16.

    SEC Comment: We have reviewed your response to comment 36 of our
letter dated September 22, 2005 and we believe that you should disclose gross sales
information for each of your five main product groups, pursuant to paragraph 37 of SFAS
131. We do not believe the impracticability of providing net sales information by
product group means that you should not report gross revenues from external customers
for each product group. We also find your footnote disclosure of gross sales of
satellite radio products and security and entertainment products to be inconsistent
with your response to our comment where you indicate that you will disclose net sales
information for these two product groups. Please explain this apparent inconsistency.

    Company Response: The Company has reviewed the provisions of Paragraph 37
of SFAS 131, as it relates to the disclosure of sales by product group. The Company
revised its disclosures in Amendment No. 1 to include sales in two product category
groups: Security and Entertainment and Satellite Radio. In addressing the Staff’s
current comment, the Company reviewed its previous response and the authoritative
guidance as well as the discussion below. Based upon all of these factors, the
Company continues to believe that these two product groups remain the proper
categories to be disclosed under this guidance.

    While the Form S-1 contains broad information by five categories, which the Company
believes to be important to readers, the Company has concluded that the sales
information should be aggregated in its financial statement footnote disclosures
into the two product categories of Security and Entertainment and Satellite Radio.
The Company has made this determination using both quantitative and qualitative
factors.

    Quantitatively:

     A. The two product categories of Security and Entertainment and Satellite Radio
comprise approximately 61% and 39%, respectively, of the Company’s forecasted 2005
gross sales. Satellite Radio is expected to grow at a substantially greater rate
than Security and Entertainment and will represent a greater component of overall
gross sales in the future. As such, it seems appropriate to disclose Satellite
Radio gross sales as a discrete amount.

     B. Included in Security and Entertainment is Security and Convenience, Home
Audio, Car Audio, and Mobile Video. Sales of these products are
expected to be [***] respectively, of the forecasted 2005 gross sales. Given the
relatively small projected 2005 sales of the Company’s audio and video products, it
seems reasonable to aggregate these four product categories into a single category
entitled Security and Entertainment.

Greenberg Traurig, LLP

CONFIDENTIAL TREATMENT
REQUESTED

BY DIRECTED ELECTRONICS, INC.

THIS LETTER AND THE EXHIBIT CONTAIN

CERTAIN CONFIDENTIAL INFORMATION

Securities and Exchange Commission

November 15, 2005

Page 5

Qualitatively:

     A. There is substantial similarity in the products and a growing crossover
(i.e., convergence) between product lines. For instance, many of the Company’s new
products, such as its portable hard disk media players, have both video and audio
components. These products are used in both cars and at home and can be easily
categorized in different ways. This “convergence trend” is expected to continue and
will further blur product category boundaries. Clearly, SFAS 131’s intent is to
report each group of “similar” products, which the Company believes that its
reporting classification has accomplished.

     B. The four categories aggregated into Security and Entertainment have very
similar business characteristics including customers, distribution channels, credit,
collections, design processes, and sourcing.

     C. Disclosure of the smaller categories of Home Audio would most assuredly and
Mobile Video could reduce the Company’s bargaining position with certain customers,
specifically [***], who represent a substantial portion of the sales in these
individual categories. Consequently, the Company would likely come under increased
pressure to reduce prices to these customers, resulting in decreased gross margins
and operating income. Such a result would be counterintuitive to the purposes of
SFAS 131 and detrimental to shareholder value.

     D. In implementing the provisions of SF