Philips-Lucent JV goes horribly pear-shaped
Outfit that was supposed to be profitable from the off drops $403 million, Philips says it was "interesting"
Philips is pulling the plugs on its year-old mobile phone joint venture with Lucent, with company president Cor Boostra describing it as "an interesting and costly venture". More properly, it appears to have been a disaster, but at least he's kept his sense of humour. Philips Consumer Communications, which was 60 per cent Philips-owned and 40 per cent Lucent, was intended to be a 12,000 employee, $2.5 billion mobile and cordless phone giant and, interestingly enough, at its formation last June said Michael McTighe, managing director of Philips' consumer electronics business and the CEO-elect of PCC, said: "This joint venture will be profitable from day one." One might observe that this speaks volumes about the calibre of certain companies' financial controllers. The joint venture has in fact lost $403 million so far this year, and is being split up retrospectively from September 25, with the two companies taking back their assets and employees. Lucent may well kill its operations in the area, while Philips is expected to implement substantial job cuts. Curiously, Philips stock jumped eight per cent on the news, probably on the basis that at least it was going to stop hurting. The company also reported a 37 per cent drop in Q3 profits, to $241.1 million, blaming falls in income in Consumer Products, Components and Semiconductors. Within this however seemiconductor sales grew ten per cent. Boonstra, who may not be of this planet, went on to tell reporters that Philips now intends to be one of the top five players in GSM, and that next year would be "another investment year". As the Lucent JV was a bid to form a top four mobile company, and it was, um, an investment, this may not bode well. ® Click for more stories