Philips to cede majority stake in TV business

Hong Kong-based TPV Technology will take control of 70 percent of the operation, as Philips seeks a return to profit for the television operation.

Philips is giving up a major stake in its HDTV business.
Philips is giving up majority control of its HDTV business. Philips

After continuing losses, Royal Philips is giving up a majority stake in its television business.

According to the company, Hong Kong-based TPV Technology will own 70 percent of the television operation, while Philips will own the remaining 30 percent. The joint venture will handle design, manufacturing, distribution, and sales of new Philips sets around the world, except for in China, India, the U.S., Canada, and a few other countries, the companies said. TPV Technology will have no right to the operations in the excluded countries.

"The partnership will help create the scale and focus needed for our Television business to return to profitability and to be successful in the very dynamic television industry," Philips CEO Frans van Houten said in a statement. "This decisive step is the right one for the television business, Consumer Lifestyle and Philips as a whole."

Philips has been struggling in the television market. During the fourth quarter of 2010, the company saw its television revenue decline from over 1 billion euros to 906 million euros year over year. And although it generated a slight, 29 million euro profit in the fourth quarter of 2009, it lost 69 million euros in the fourth quarter last year. All told, its television business lost 130 million euros in 2010.

The company is also facing an increasingly competitive television market. In the U.S., Vizio and Samsung are easily besting the competition . In the fourth quarter of 2010, Vizio shipped nearly 2.9 million televisions and Samsung shipped over 2.5 million sets. The companies control 45 percent of the U.S. television market between them. LG, Sony, and Panasonic rounded out the top five in the fourth quarter with 10.4 percent, 8.8 percent, and 6.6 percent market share, respectively.

Under the terms of the new joint venture, Philips will allow TPV to use its brand for five years. If all goes well, the deal will automatically renew for another five years. Philips will receive the greater of 50 million euros or 2.2 percent of total sales starting in 2013. After six years, Philips can sell its remaining 30 percent share in the TV business.

The deal between Philips and TPV will be signed in the third quarter. The companies expect the deal to close by the end of the year.

 

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