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To: Rajala who wrote (16731)	10/19/1998 8:02:00 AM
From: Jeff Vayda	Respond to of 152472

All: More on Phillips dropping out of telecon... Philips seen set for major telecoms pruning 06:45 a.m. Oct 16, 1998 Eastern By Philip Blenkinsop AMSTERDAM, Oct 16 (Reuters) - Philips Electronics NV seems set to announce a radical reduction in its telecoms operations next week, tacitly acknowledging that it has bitten off more than it can chew in the mobile phones market. One month ago Philips said it was reviewing ''all options'' with regard to its 60-40 joint venture with Lucent Technologies . At the same time, it said full-year losses at PCC were likely to be about one billion guilders ($550 million). It is due to announce its conclusions along with third quarter results on Thursday. Philips will say nothing until then, but the speculation is in full swing. On Friday, the Wall Street Journal said Philips was preparing to pull-out of the joint venture. Quoting sources close to Philips, it said the electronics giant may abandon its production of mobile handsets to focus on being a components supplier to the cellular industry. Philips declined to comment. Analysts said the article simply indicated one of a number of viable options, but ending the 16-month Lucent link is seen as a logical step -- one also supported by Dutch union De Unie. ''With just one shareholder, it's easier to get a grip on things. At the moment, their decision making is slowed down and aggressive investment plans have to be discussed,'' said Steven Vrolijk, analyst at ING Barings. The two tied the knot in July 1997 forming a joint venture with annual sales of $2.5 billion and 12,400 employees. The aim, said PCC chief Mike McTighe, was to be in the world's top three by 2000, but delays with new products have hampered progress in a fiercely competitive market. In July, Philips said its market share was ''approaching seven percent'' -- although this included PCC's other activities such as pagers, answering machines and cordless phones. In mobile phones, it is still far behind the big three -- Motorola , Nokia and Ericsson. In August, Philips said PCC would not reach break-even this year. At the same time, McTighe resigned. ''They need to do something pretty radical now and have a clear focus... perhaps on just GSM which is the dominant technology,'' said one London-based analyst. Others analysts agree, saying Philips has spread itself too thinly across a range of mobile technologies, while its marketing push has not been hard enough. Either it will end PCC entirely -- although PCC's non-mobile activities appear to be money-making -- or concentrate on a limited field such as GSM. Philips itself has leaked little. In the October edition of its in-house magazine, President Cor Boonstra dismissed suggestions of a tie-up with another manufacturer, saying only the wireless communication technology would remain valuable to the company. ''Wireless technology and sound and display, are the drivers for the electronics industry in the future,'' he said. On Thursday, he will say whether that future includes mobile phones. ($1-1.823 Guilder) Copyright 1998 Reuters Limited. All rights reserved. Republication and redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.