Philips to divest cellphone business

Dutch electronics giant will soon transfer what's left of its cellphone business to its Chinese joint venture.

Royal Philips Electronics has signed a letter of intent to transfer its remaining mobile phone business to China Electronics Corporation (CEC).

CEC will take over the responsibility for Philips' mobile phones business, which currently has an annual turnover of approximately 400 million euros (US$503 million) and about 240 employees, mainly in the Asia-Pacific region and Eastern Europe.

In 2001, Philips transferred its research and development, as well as manufacturing activities in its cellphone business to its joint venture with CEC. The Dutch company had hoped the move would allow it to maintain a presence in the cellphone market, while cutting costs. Until now, Philips had kept cellphone product creation, marketing and sales in-house.

Under the terms of the letter of intent, CEC will receive a global license to market and sell mobile phones under the Philips brand for the next five years.

The transaction will be conditional on all required shareholder, government and regulatory approvals and consents, and is expected to be completed by the end of 2006.

Earlier last month, Philips spun off its semiconductor division, which gained new life as a separate entity called NXP Semiconductors. However, the electronics giant still holds a roughly 20 percent share in NXP.