Philips exits shrinking home entertainment business

Thursday, 31 January 2013 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Philips Electronics agreed to sell its audio and video business to Japan’s Funai Electric Company for 150 million Euros, quitting a traditional sector to focus on its more profitable home appliances and healthcare operations.

The Dutch group had already hived off its troubled television business by setting up a joint venture with Hong Kong-based TPV last year, after struggling for years to compete with lower-cost Asian makers of consumer electronics.

With consumers going online for music, films and games rather than buying CDs and DVDs, Philips decided to get out of home entertainment, even though it was profitable last year, Chief Executive Frans van Houten said, adding that the business was shrinking and ‘margin dilutive’.

“This completes the repositioning away from consumer electronics,” van Houten told Reuters Insider.

In future, the consumer division will focus on appliances such as shavers, toasters, juicers and coffee makers.

Philips shares rose 1.4% to 22.2 Euros, trading at the highest level since April 2011. Analysts welcomed the deal as ‘an important divestment’ that could fan hopes of further disposals in the consumer portfolio.

Philips, which will also receive licence fees from Funai, reported a fourth-quarter net loss of 355 million Euros widening from a year-ago loss of 160 million Euros as it cited previously flagged provisions and charges.

The group had already warned last month that it would take a provision of 509 million Euros to cover a European Union fine for cartel practices in its television business, and that restructuring charges would be higher than previously estimated.

Philips reported three consecutive quarters of better-than-expected net profit in 2012, after struggling with weak economic growth, fragile consumer spending and government budget cuts in several markets.

The fourth-quarter results showed that underlying profit improved significantly following job cuts, disposals and a focus on core businesses.

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