Philips Electronics NV is closing its business electronics division in a move that reflects both a shift in the market for the Dutch company's electronics equipment and the desire to trim costs.
Sixty per cent of the division's business will be transferred to the vendor's consumer electronics division with the remaining business becoming accountable to the head of the company's semiconductor division, confirmed Philips spokesman Ben Geerts yesterday. "All the activities of the division will continue to exist," he confirmed.
The reorganisation is likely to result in job losses, particularly in the management ranks, confirmed Geerts. "It's too early to say if people will lose jobs, but in the management and support of this division worldwide, we do not exclude the possibility that there will be job losses," he said, adding that he could not give specific numbers. About 14,000 people are currently employed in what was previously the company's business electronics division.
The main reason for last week's decision is that many of Philips' business electronics products are now becoming consumer products, said Geerts.
Using the example of fax machines, he explained that electronics products once sold to businesses are now common consumer goods that need to be sold through consumer channels. However, Philips isn't moving completely out of the business electronics market, Geerts added. "If you sell to consumers, it doesn't mean you don't sell to businesses," he said. "We have our channels in the business-to-business world."
All of the business electronics division's products, except for DVS (digital video communication systems), which include set-top boxes for Internet access, were profitable, said Geerts. The likely upturn in demand for set-top boxes for interactive TV, however, gives Philips reason to be optimistic about DVS equipment. "We think DVS is a very promising area," said Geerts.
The recent departure of Philips Executive Vice President Roel Pieper was irrelevant to the restructuring decision, which was taken after Pieper had left the company, said Geerts. The head of the business electronics division did, however, report to Pieper. http://www.philips.com/