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Phillips diversifies and cedes control of its 80 year old television unit

Wednesday, April 20th 2011 - 01:15 UTC
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The Dutch company produced its first TV in 1928 and the unit has been loosing money for the last five years The Dutch company produced its first TV in 1928 and the unit has been loosing money for the last five years

Royal Philips Electronics from the Netherlands will cede control of its 80-year-old television unit to an Asian contract manufacturer, joining European conglomerates including Siemens AG scaling back consumer electronics as prices decline.

Philips will bundle its TVs, which the Amsterdam-based company first produced in 1928, into a partnership that will be 70% owned by Hong Kong-based TPV Technology Ltd. Philips will retain the rest and receive royalties of at least 50 million Euros annually starting in 2013, according to a company’s release.

Chief Executive Officer Frans van Houten, who took over at the start of this month, said he started exploring a new strategy for TVs after realizing that a simple “tweak” would not have stemmed years of losses. Philips lost 87 million Euros from televisions in the first quarter, and van Houten said today he’s not yet satisfied with the company’s performance and will step up investments.

The Dutch company reported first-quarter net income of 137 million Euros Tuesday, down from 200 million Euros a year earlier.

Moving TVs into a venture accelerates a transformation of the Dutch company in the past decade from a diversified conglomerate into a manufacturer of lighting, health-care products and consumer electronics including toothbrushes and electric shavers.

Philips sold a semiconductor business in 2006, got out of mobile phones, and sold a personal-computer monitor business to TPV for about 358 million USD in 2004.

Van Houten had made fixing the TV division, which employs 4,000 people, his top priority, after his predecessor struggled to turn it around for a decade. Heading for its fifth consecutive annual loss, the television subsidiary has suffered as Sony Corp. and Panasonic Corp. cut prices to combat local Chinese suppliers.

Philips was among the last remaining mass-market producers of televisions in Europe, a niche now largely occupied by luxury manufacturers including Loewe AG of Germany and Bang & Olufsen AS from Denmark. Siemens and Nokia Oyj, the world’s largest maker of mobile phones, made televisions before giving up production to narrow their focus.

As part of the transaction, Philips has an option to sell the remaining 30 percent shareholding in the joint venture any time after the sixth anniversary of the completion.

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