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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: slacker711 who wrote (12114)	6/26/2001 6:05:39 PM
From: straight life	Respond to of 196868

Philips Calls on China for Cell Phones By Alexei Oreskovic and IDG biz.yahoo.com UPDATE AMSTERDAM -- Philips Electronics will no longer be an independent maker of mobile phones. All Philips-branded phones will now be manufactured in a joint venture with China Electronic Corp. (CEC), Philips announced Tuesday. CEC will take a controlling stake in the joint venture, which exists today for the manufacturing of mobile phones in Shenzhen, China. Additionally, CEC will buy some manufacturing equipment from Philips and acquire part of Philips' research and development resources, Philips said in a statement that did not give any figures, dates or other specifics. The announcement parallels a move by Swedish wireless equipment vendor Ericsson. As that company fell from its position as the world's third largest handset maker to number four this year, Ericsson announced in January that it would offload the manufacturing of its handsets to Singapore-based Flextronics. The move, says Ericsson spokesperson Michelle French, will allow Ericsson to save costs and benefit from Flextronics' higher-volume manufacturing. Meanwhile, Ericsson will also move its handset design and R & D assets into a joint venture with Sony that was announced in April. The deal includes transfer of Philips' know-how and designs for GSM (Global System for Mobile communications) phones to CEC, Philips said. CEC is a huge government-owned company, closely affiliated to the Chinese Ministry of Information Industry. The CEC-led joint venture will manufacture Philips-branded handsets as well as non-branded phones for other parties to brand. Philips will sell Philips-branded products from the joint venture through its own customer sales and distribution channels, Philips said. Philips President and CEO Gerard Kleisterlee said in the statement that the arrangement with CEC "will give customers renewed trust in the continuity" of its business. The decision will involve a "major restructuring" of Philips' handset business, particularly in France where the company has a manufacturing facility in Le Mans. Philips said it is meeting Tuesday with the council of its employees in France and will provide details later in the day. The company plans to take a one-off pretax charge of about $258 million (300 million euros) for the restructuring. "Due to legal obligations in France we are prohibited from providing any more details at this time," said a spokeswoman for Philips. She did say that about 2,800 people in France work for Philips Consumer Communications (PCC), the division that manufactures mobile phones. If all workers were to be fired it would bring the number of layoffs at Philips this year to almost 10,000. After PCC reported a loss of $101 million (118 million euros) in the first quarter of this year, Philips said it would examine the division's business and decide on its future in the second quarter. The company considered closure, sale, merger, or a combination of the three. According to Philips spokesperson Andre Manning, the company will lay off approximately 1,250 people, or roughly half of its employees, at its manufacturing plant in Le Mans, France. People working in the cell phone division will be let go, while those focused on the company's line of cordless wireline home phones will be spared. In all, the move brings the number of layoffs at Philips this year to almost 9,000. With a worldwide market share of 2.9 percent last year -- in number of phones sold -- Philips was a marginal player in a record year for mobile phones, according to figures from research firm Dataquest Inc., a division of Gartner Inc. In the first quarter of 2001 the market share dropped to 1.8 percent, according to Dataquest. Currently, says Manning, Philips is not even among the top 10 worldwide handset manufacturers. After the restructuring, which should result in the production of handsets in the third or fourth quarter, Philips hopes to break into the top 10. Philips mobile phones are mainly sold in Europe and Asia, because the GSM standard is common in those areas. The European market has always been a problem for Philips, while its products have been well received in Asia. PCC turned a profit in Asia in the first quarter of this year, according to Philips. It is unclear whether Philips will bail out of Europe and retreat into Asia, or continue selling phones in Europe. According to the statement Philips will "continue to pursue the opportunity to sell Philips-branded handsets... where this has added value." One analyst said Philips is doomed in Europe and will have a tough time in Asia. "I expect Philips' position in Europe to become weaker and that its market will eventually be limited to China," said Jaap Barendregt, an analyst with Friesland Bank Securities NV in Amsterdam. Shares in Philips were down almost 3 percent at 29.45 euros in midday trading at the Amsterdam stock exchange.