Philips has sold its audio and video entertainment business to Funai for $202 million (plus licence fees), and has transferred the lucrative product line to the Japanese company, Reuters reported. The deal nearly completes the electronics giant’s exit from the home entertainment business, which leaves it free to focus on the more profitable home appliances and health-care product lines.
The Dutch company is a household name in India thanks to its high-quality television sets, cassette players, music systems, speakers and iPod docks. But the company has lately struggled to compete with Asian manufacturing giants like Samsung and LG, and has had to cut costs and sell assets over the last two years. Philips last year diverted its television business by setting up a JV with Hong Kong-based TPV.
Philips moves out of the home entertainment business
This move takes the rest of the electronic items in its roster, such as home theatre systems, iPod speaker docks and headphones, out of the Philips banner. The company still has a small remote-control business under its aegis, though.
The move raises concerns about Philips’ warranty schemes and after-sales support. We tried to reach the company's India office for an official word on the issue, but did not receive a reply. We will be bringing you all updates regarding this issue.
However, CNET.com reported that there will be no impact on customers as far as after-sales service and warranty schemes are concerned. This applies to existing customers as well as those who have just purchased or will purchase a Philips product. The report also states that this is in keeping with Philips’ support for its TVs. Customers still receive after-sales support from the company.
As music, films and games move from CDs and DVDs to online distribution models, Philips found itself catering to a disappearing audience. The company decided to get out of the home entertainment business despite posting profits last year. “This completes the repositioning away from consumer electronics,” Chief Executive Frans van Houten told Reuters Insider. Van Houten added that the company will now be focusing on grooming appliances such as shavers and electric toothbrushes—two of Philips’ most profitable products—as well as home appliances such as toasters, juicers and coffee makers. The company sold 10 million shavers in China alone last year.
Post the announcement, Philips’ shares rose 2 percent to Euro 22.37, the highest since April 2011, when van Houten became CEO. Earlier this week, Philips reported its third consecutive quarter of profit in 2012, suggesting it has turned the corner and this development has encouraged investors. Analysts also welcomed the Funai deal, which could be a precursor to further divestment in the consumer electronics segment.
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