Farewell old friend: Philips exits the consumer electronics game

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Philips

One shouldn’t get overly sentimental when it comes to big corporates shutting down certain divisions, but in the case of Philips it’s difficult not to.

The Dutch company — which yesterday announced its exit from the consumer electronics game — made the screens many of us watched our favourite cartoons on. It also made the VHS machines our parents used to record their wildlife documentaries and the sound systems that were blaring when we had our first kiss and… well, you get the idea.

In a statement, the company said it would be selling the remnants of its electronics business to Japanese company Funai Electric. News of the sale comes after Philips’s Q4 produced the latest in a string of disappointing results.

The deal sees Funai taking ownership of Philips’ audio, video, multimedia and accessories activities for the bargain basement price of €150-million (US$201.8-million) in cash and a brand-license fee. That more or less leaves the Dutch company, which has been in operation since 1891, making light-bulbs, specialised medical equipment and smaller pieces of electronic equipment including coffee makers and electric shavers.

Philips’ consumer electronics division has taken a beating in recent years, first from Japanese electronic giants like Sony and then to South Korean companies like Samsung and LG. Faced with similarly declining sales, other European companies like Siemens and France’s Alcatel-Lucent have also exited the market in recent years.

“Our consumer lifestyle business was margin dilutive to the group, so it was time to decide to move away from consumer electronics,” said Philips’s chief executive Frans van Houten.

“Since we have online entertainment, people do not buy Blu-ray and DVD players anymore,” he added.

As the Wall Street Journal notes van Houten has focused on streamlining the way Philips does business in his two years at the head of the company.

Despite his best efforts however, the company posted a €358-million net loss in Q4 of 2012 compared with a €162-million loss in the fourth quarter of 2011.

Things aren’t about to get better any time soon either, with sales expected to be slow in the first part of 2013.

“The challenging economic environment in 2012, notably in Europe and the United States, has impacted our order book, and hence we expect our sales in 2013 to start slow and pick up in the second half of the year,” said van Houten.

Image: Philips

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