Philips returns to lighting roots, drop CE business

Royal Philips Electronics announced Tuesday that it has sold business assets covering multimedia devices and accessories to Japanese firm Funai Electric in a cash and brand licensing deal worth $201.8 million.

Its exit from the consumer electronics scene ends 80 challenging years for the Dutch company wherein it hit innovative milestones but struggled to maintain profitability in the long run.

The Philips Company, as it was known in 1891, started out as a manufacturer of carbon-filament lamps before expanding to other devices such as vacuum tubes in the 1920s and the electric razor in the 1930s. Around the same time it also came out with the "Chapel," a radio with built-in loudspeaker. In 1963, Philips began selling the Compact Audio Cassette tape, initially targeting journalists and stenographers but eventually achieving success in the music industry. Video cassette recorders soon followed and later on laser and compact discs, which evolved into DVD and Blu-ray.

Philips began divesting in 2005 starting with its semiconductor division then a few years later its television manufacturing operations. It did, however, pick up companies involved in medical technologies.

"Our consumer lifestyle business was margin dilutive to the group, so it was time to decide to move away from consumer electronics," said CEO Frans van Houten during the company's earnings presentation.

For the past two years, Van Houten has been focusing on streamlining Philip's operations to highlight profitable divisions such as light-emitting diode (LED) lighting and control systems and hospital scanners.

Philips reported a $482 million fourth-quarter net loss, doubling 2011's $218 million loss, and warned that the company will go through a slow start this year. Philips managed to save $635 million at the close of 2012. Van Houten pledged to target $1.48 billion in savings by 2014, according to the Wall Street Journal.