Philips Packs its Bags and Leaves the US TV Sets' Market

The whole world is going through a rather unpleasant period of economic recession and this fact is becoming increasingly visible, as the major corporations are re-focusing and re-orienting their business plans for optimum profitability. And one such announcement comes from Philips, who has decided to almost completely drop its television business in North America.

However, since the company couldn't afford a complete withdrawal from one of the world's most competitive markets, a compromise solution has been found, in the form of a partnership with Funai. According to this new deal, Funai is supposed to assume responsibility for the sourcing, distribution, marketing and sales of all Philips consumer television activities in the United States and Canada.

The five-year minimum agreement takes effect September 1, 2008 and stipulates Philips will receive royalty payments in exchange for Funai’s right to exclusively use the Philips and Magnavox brand names for its consumer television offerings in North America during this period. Philips has also added that it intends to focus its attention to its strongest markets, namely those from Europe and several key emerging countries, probably those areas where sales figures are better than the ones from the US.

As expected, both parties involved in this deal had a lot of good things to say about each other. For example, Philips President and Chief Executive Officer Gerard Kleisterlee stated that "The agreement with Funai and the other measures to improve profitability we are planning, follow our commitment that we would take decisive steps in addressing the unacceptable profitability levels in our TV business in 2008. We have an 18 year working relationship with Funai and are confident it is an excellent partner to implement this new model for Philips’ television business in North America. This agreement will ensure a presence for Philips television in North America and uninterrupted access to innovative products for consumers."

On his side, Tetsuro Funai, President and CEO of Funai Electric Co, declared that "Philips and Funai have a long history together, and we are proud to be the trusted partner charged with managing this important and high profile product category for Philips. As a premium brand, Philips will add lustre to our existing portfolio and consumers can continue to count on the Philips quality, design and innovation to which they have become accustomed. We look forward to working together to ensure a seamless transition of the business."

Last but not least, Philips has also pointed out the fact that this move is related solely to the company's TV set-related business, with the other Philips consumer business categories in North America not being affected by this agreement and continuing to be manufactured, marketed and sold by Philips. Nevertheless, this is a pretty unexpected decision, and it remains to be seen just in what manner it will affect the HDTV sets' market in the US and Canada.

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