<February 22, 2012> The final step in a move that has been expected by some for a long time has been completed as China’s TPV Technology Ltd. shareholders approved the acquisition of the money-losing TV division from Philips Electronics. While Philips exited the TV business here in the United States several years ago, the company enjoyed greater sales success – if not profitably – elsewhere in the world. In fact, at one time, Philips was one of the biggest television brands in the world – but no longer.
Some would say it’s the end of an era. Philips is the largest consumer electronics manufacturer in Europe and TV was once a flagship product for them. However, the division became an unprofitable eyesore on the organization chart and the division’s disposal is considered a coup for Philips CEO Frans van Houten who has only been at the helm since April 2011.
For TPV, it’s a chance for the computer monitor maker to grow their consumer TV business and gain greater share of the display business. Also, the company hopes that the greater manufacturing volume will help them enjoy more profit from the division – as they leverage the added shipment volume for lower parts costs and overall cost offset.
Philip will retain a 30% share of the TV business, while TPV will hold the other 70%. Philips must retain this ownership for at least six years before they are free to dispose of it. In the meantime, TPV will pay Philips either a 2.2% royalty on sales or 50 million euros, whichever is higher – starting in year two.
“In the TV sector, obviously our brand is not a consumer electronics name,” Shane Tyau, TPV chief financial officer told reporters. “We need a brand name like Philips, in particular. It already has an established market, and that can allow us to promptly reach out to the market in Europe as well as other of Philip’s existing markets.”
“TV business is a fast-changing business with new models and technologies coming up any time,” he said. “TPVs strength is its speed of innovation. We can achieve this goal if there is a brand for us.”
They’re going to need all the innovation they can muster. According to Reuters, Philips TV division has lost 1 billion euros since 2007. The company has struggled with market share erosions in the brutally competitive business with razor-thin margins.