Philips Says GoodBye To Consumer Electronics

Philips, which has become primarily a maker of medical equipment and lighting products, has sold the audio, video, multimedia and accessories activities to the Japan’s Funai Electric Co. for the almost token sum of €150 million ($201.8 million) in cash and a brand-license fee.

Philips finally gave up its long history as a consumer electronics company after failing to keep up with the competition given by the likes of Apple, Samsung, Sony, etc. The move brings to an end more than 80 years of often innovative but increasingly lackluster investment in consumer electronics.

Despite steadily reducing its exposure to consumer electronics over the years, exiting the television and mobile-phone segments along the way, Philips has struggled to generate sufficiently larger profits from the business as is evident from their Q4 announcements. Philips said its fourth-quarter net loss was €358 million compared with a €162 million loss in the fourth quarter of 2011 and warned that it expects a slow start to its sales this year.

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

“Since we have online entertainment, people do not buy Blu-ray and DVD players anymore,” Mr. Van Houten said.

Philips is becoming more efficient, Mr. Van Houten said. Philips has introduced new products to market 40% more quickly than in the past.

Philips said it is sticking to its 2013 targets. The group is aiming for revenue growth of 4% to 6% and a 10% to 12% margin for earnings before interest, tax and amortization. Philips said sales from its healthcare division generated 40% of group revenue in the fourth quarter, with consumer lifestyle contributing 26% and lighting, which was loss making before earnings, interest and tax, making up 32%.