Philips, Lucent create US$2.5 billion consumer joint venture

Philips Electronics and Lucent Technologies have announced plans to merge their consumer communications products businesses into a new company. The joint venture will create a US$2.5 billion company which will make cellular and analog phones, corded and cordless phones, answering machines, screen phones and pagers.

Philips Electronics and Lucent Technologies have announced plans to merge their consumer communications products businesses into a new company.

"The division between consumer electronics and consumer telephony has become blurred," says John Skalko, a spokesman for New Jersey-based Lucent. "With Philips' strength in consumer electronics and our tradition in consumer telephony we make a very good pair going forward."

The joint venture will create a US$2.5 billion company which will make cellular and analog phones, corded and cordless phones, answering machines, screen phones and pagers, Skalko says.

Both companies are currently already in those markets, but Lucent targets its products at U.S. customers and the Netherlands' Philips is the number-one supplier of answering machines and telephones in Europe, based on market share, he maintained.

"The intent of the joint venture is to spread the Philips name globally with a concentration on the Far East and the U.S.," Skalko says. Lucent, which will own 40% of the new company compared to Philips' 60% share, will benefit from that growth, and the new company will also monitor the burgeoning Latin American market for opportunities, he says.

The 60/40 split "reflects the relative revenue of each company," Skalko says. Philips' consumer products unit is on target to deliver 1997 revenues of $1.4 billion and Lucent's consumer products unit is exepcted to turn in around $1.1 billion this year.

Skalko has declined to comment on what new products might emerge from the joint venture. "I can't discuss the product line going forward ... but it is the intent of the joint venture to provide a full range of communication devices," he says.

The new company will be called Philips Consumer Communications, which is the name of Philips' current consumer communications products division, and will be run by the existing division's current managing director, Michael McTighe. McTighe's background includes executive experience in Motorola's cellular subscriber division and a 10-year stint at General Electric.

Almost all the companies' current communications products employees will become part of the joint venture, including 8,400 people from Lucent and 4,000 people from Philips, Skalko says.

The merger is slated for completion by Oct. 1, and the new company will be headquartered in New Jersey with regional offices overseas in still-to-be-determined locations.

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