Philips said it is transferring its TV business to a 30/70 joint venture with its partner, global monitor maker TPV and will have the option to sell its minority share in the future. No financial details were given.
“Finding a solution for our television business was our top priority and we strongly believe that the intended 30 percent-70 percent joint venture with TPV that was announced today will enable a return to profitability for the television business, and an increased portfolio focus for Philips in health and well-being,” said Chief Executive Frans van Houten.
Van Houten, a restructuring expert who took over as CEO earlier this month, told broadcaster CNBC that the TV business would have a “better future” in the joint venture and allow Philips to provide full continuity to the brand for both consumers and trade partners.
The group, which is also the world’s biggest lighting maker and a top three hospital equipment maker, reported first-quarter earnings on Monday which fell short of expectations, a reflection of weak consumer sentiment.
It competes with General Electric and Siemens in the hospital and lighting markets, and with Samsung and LG Electronics, among others in the TV business.
Van Houten also said Philips faced a “rather uncertain market.”
“We see that many of our Japanese suppliers face some discontinuities and we have a dedicated team to deal with any risk. At the same time we are not sure how big the impact will be during the course of this year,” Van Houten told CNBC.
Philips said TPV will purchase 70 percent of the shares in the joint venture for a deferred purchase price, equating to four times the joint venture’s EBIT over the years 2012 until the year Philips exercises its right to receive the purchase price.
Philips also has an option to sell the remaining 30 percent stake to TPV for the same terms after six years.
Once a global leader, Philips TV business has lost its lustre and cannot compete with lower-cost rivals.
The unit, which makes up less than 10 percent of group sales, has become a thorn in the firm’s side, having notched up losses of almost a billion euros since the beginning of 2007.
Philips currently licenses its TVs to TPV in China as well as Funai in the US and Videocom in India.
Philips announced first-quarter net profit of 138 million euros, down 31 percent from a year ago and below forecasts.
A Reuters poll had forecast quarterly net profit to fall 19.5 percent to 161 million euros.
Philips said in September when it unveiled its Vision 2015 targets that it wants its annual revenue growth to be 2 percentage points higher than global Gross Domestic Product (GDP) growth between 2011 and 2015.
But Philips spokesman Joost Akkermans said Philips still has “work to be done” to meet its topline target.