Jun 26, 2001 review of its mobile handset business, the Board of Management of
Royal Philips Electronics announced today its decision to refocus its
activities. Philips will cease to be an independent manufacturer of
mobile handsets and will bring part of its research & development and
part of its manufacturing activities into a partnership with China
Electronics Corporation (CEC), while maintaining a focused sales and
marketing activity under the Philips brand. For wireless technologies
in a broader sense, Philips will further strengthen its own activities
in Semiconductors and Components.
Philips currently manufactures mobile handsets in a joint venture in
Shenzhen (China) in which CEC holds a minority stake through its
subsidiary SED. Both companies have agreed that CEC and SED will
increase its share in this joint venture to a controlling stake and
will acquire some additional manufacturing equipment from Philips.
Furthermore CEC will acquire through its mobile phone subsidiary CECW
part of Philips' research & development resources as well as know how
and designs for GSM phones. It is acknowledged by both companies that
the aforementioned transaction is subject to required governmental
and/or regulatory authorizations and approvals.
As part of the plan Philips will have the opportunity to sell through
its own customer sales and distribution channels Philips branded
products from the joint venture, which itself will serve a larger
customer base on an ODM basis (original designer/manufacturer = joint
venture inside, other party adds its brand). The sales and support
organizations will be brought in line with the new setup.
Mr Gerard Kleisterlee, President and CEO of Royal Philips Electronics,
commented:
"Philips is a major provider of innovative wireless technologies to
the mobile handset makers through our Semiconductor and Components
activities. While focusing on our role as a technology provider we
will continue to pursue the opportunity to sell Philips branded
handsets through our sales and distribution channels where this has
added value. We are confident that the arrangement with CEC will allow
us to do so and will give our customers a renewed trust in the
continuity of our business. By reducing the cost base drastically we
will be able to realize market presence with greatly reduced
exposure."
The strategic decision to refocus will involve a major restructuring
of Philips' mobile handset business. In France Philips management is
meeting today with the Central Works Council for the country and with
the works councils of each of its sites to inform them about the
situation.
For this restructuring Philips will take a one-time pre-tax charge of
approximately EUR 300 mn, to be taken in the second or third quarter
of the current fiscal year. This charge will come in addition to other
charges which Philips previously announced to address structurally
underperforming activities, in particular in Components and Consumer
Electronics (EUR 350 mn) and a restructuring in Semiconductors (EUR 90
mn).
For further information:
Philips Corporate Communications
Inge Wallage, tel. +31-20-5977198
Andr� Manning, tel. +31-20-5977199
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