Royal Philips Electronics NVTuesday said it will sell the entertainment division which contains many of theconsumer products for which it is best known, such as audio and videoequipment, to Funai Electric Co., Ltd., of Japan for €150 million ($202million) plus licensing fees.
Funai will assume responsibility for themanufacturing of the Philips products but license and sell them under thePhilips brand for five years. It has an option to renew.
The disposal is the latest in a series ofmoves by Philips as it gradually shifts its corporate focus away from consumerelectronics manufacturing — while continuing to draw some benefit from thehistorical strength of its brand.
Philips still makes some popular householdproducts such as coffee machines, electric toothbrushes and electric shavers.But its cutting-edge technologies are now mostly concentrated in the lightingsector, where it is the world's largest manufacturer; and in health careequipment, where it competes with General Electric and Siemens in makingmedical imaging equipment.
In addition to the Funai deal, Philips alsoreported fourth quarter earnings Tuesday that were hammered by a €509 millioncartel-forming fine — the largest ever levied by European regulators.
Philips said its underlying business improvedon an operational basis, with its lighting arm, which accounts for a quarter ofthe company's total business, seeing sales rise 43 percent.
Excluding restructuring charges and the fine,earnings were up 50 percent to €875 million, the company said.
"Our operational results improved acrossall sectors, as a result of increased sales, overhead cost reductions, andgross margin expansion," said Chief Executive Frans van Houten.
The fine, levied in December against Philips,LG Electronics, Panasonic and others, came after regulators concluded that thecompanies engaged in price fixing in the television market over two decades.Philips, which is fighting the fine, disposed of its television division toChina's TPV Technology last year in a deal similar to the one announced Tuesdaywith Funai.
Overall, the company's fourth quarter net losswidened to €358 million from €162 million from the same period in 2011, withboth years affected by big charges: in 2011 Philips wrote down the value of itslighting inventory and booked big losses on the now-disposed television arm.Despite its fourth quarter loss, the company made a net profit over 2012 of€226 million, a marked improvement on 2011's €1.3 billion.
In the 2012 period, sales grew 6.7 percent to€7.16 billion, but Philips said that would have been only 3 percent if recentacquisitions and currency effects were stripped out.
Since taking the top job at Philips in 2011,Van Houten has vowed to cut 6,700 jobs, or 5 percent of the company'sworkforce, by 2014, as part of a cost reduction drive.
He said "challenging" conditions inEurope and the U.S. in 2012 hit orders and as a result he expects 2013 sales tostart slowly before picking up in the second half of the year.
Shares were down 0.2 percent in early trading to € 21.90.