Philips offloads unit to focus on more profitable businesses
Source: Bloomberg News |
January 30, 2013, Wednesday
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Print Edition
Print Edition
ROYAL Philips Electronics NV, 50 years after unveiling the compact cassette for music mixtapes, agreed to sell its audio and video unit to focus on more profitable cancer scanners and energy-saving light bulbs.
Japan's Funai Electric Co will pay 150 million euros (US$202 million) in cash and a license fee for the Lifestyle Entertainment unit, said Amsterdam-based Philips, which also invented the compact disc with Sony Corp. The deal is part of a revamp that helped quarterly profit beat analysts' estimates.
Philips Chief Executive Officer Frans van Houten is pushing the manufacturer into high-margin areas such as lighting products that save energy and health and wellness offerings to move away from its consumer-electronics past.
The Philips veteran, now almost two years at the helm, is working through a overhaul to save 1.1 billion euros and cut 6,700 jobs.
"Lifestyle Entertainment has been an absolute underperformer in the consumer lifestyle business," said Rabobank analyst Hans Slob, who has a "buy" rating on the stock. "It's definitely positive news van Houten is taking more steps to improve the margins, by divesting this low-margin business."
The deal for the audio unit will probably close in the second half of 2013, while the video business will transfer in 2017 because of intellectual property licensing arrangements, Philips said. Funai Electric's license agreement will last an initial period of five and a half years, with an optional renewal of five years.
Philips' consumer business has shrunk over the years as customers flock to competitors such as Sony or Apple for mobile communications and music devices.
The company last year completed the transfer of its unprofitable television business into a joint venture with TPV Technology Ltd, offloading a business that hurt earnings for years.
Philips' remaining consumer division will focus on health and wellbeing products such as beard stylers and grooming kits, electronic toothbrushes, coffee machines and kitchen appliances.
Fourth-quarter earnings before interest, taxes, amortization and one-time items rose 50 percent to 875 million euros, beating the average estimate by analysts for 866 million euros. Sales gained 6.7 percent to 7.16 billion euros. Health-care revenue rose 7.1 percent, while lighting sales surged 9.2 percent. Philips plans to pay a dividend of 75 euro cents per share.
Japan's Funai Electric Co will pay 150 million euros (US$202 million) in cash and a license fee for the Lifestyle Entertainment unit, said Amsterdam-based Philips, which also invented the compact disc with Sony Corp. The deal is part of a revamp that helped quarterly profit beat analysts' estimates.
Philips Chief Executive Officer Frans van Houten is pushing the manufacturer into high-margin areas such as lighting products that save energy and health and wellness offerings to move away from its consumer-electronics past.
The Philips veteran, now almost two years at the helm, is working through a overhaul to save 1.1 billion euros and cut 6,700 jobs.
"Lifestyle Entertainment has been an absolute underperformer in the consumer lifestyle business," said Rabobank analyst Hans Slob, who has a "buy" rating on the stock. "It's definitely positive news van Houten is taking more steps to improve the margins, by divesting this low-margin business."
The deal for the audio unit will probably close in the second half of 2013, while the video business will transfer in 2017 because of intellectual property licensing arrangements, Philips said. Funai Electric's license agreement will last an initial period of five and a half years, with an optional renewal of five years.
Philips' consumer business has shrunk over the years as customers flock to competitors such as Sony or Apple for mobile communications and music devices.
The company last year completed the transfer of its unprofitable television business into a joint venture with TPV Technology Ltd, offloading a business that hurt earnings for years.
Philips' remaining consumer division will focus on health and wellbeing products such as beard stylers and grooming kits, electronic toothbrushes, coffee machines and kitchen appliances.
Fourth-quarter earnings before interest, taxes, amortization and one-time items rose 50 percent to 875 million euros, beating the average estimate by analysts for 866 million euros. Sales gained 6.7 percent to 7.16 billion euros. Health-care revenue rose 7.1 percent, while lighting sales surged 9.2 percent. Philips plans to pay a dividend of 75 euro cents per share.
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