Lucent and Philips have aborted their joint consumer communications business after only a year in the market.
Ending months of speculation, the two companies have confirmed the death of Philips Consumer Communications (PCC), the venture established by Lucent and Philips on 1 October 1997.
Philips, which owns 60 per cent of the venture, will regain control of its wireless and wired businesses outside north America, plus the paging unit. Lucent will sell off its share of the assets, which includes corded and cordless phones and answer machines in the US, as well as a telephone leasing unit.
Around 5,000 of the venture?s staff will return to Philips, while 8,400 will go to Lucent.
Despite the move, Philips said it would remain in the consumer communications busines, but admitted it will have to ?scale back? its ambitions for the short term, and ?streamline? its product offerings.
Lucent said that it did not expect the move to have any material impact on its future earnings, but Philips warned it would take an unquantified restructuring charge in the fourth quarter.
?Clearly the venture has not worked out as we had hoped, and the answer now is for both partners to move quickly and pursue different strategies,? commented Don Peterson, Lucent?s chief financial officer and a member of the PCC board.
Cornelius Boonstra, Philips chief executive, said: ?It is clear that the performance of the venture is a disappointment for both partners. We intend to stay in this business because of its strategic importance for our consumer electronics business.?
The two companies began merging their respective consumer divisions in June 1997 to create a $2.5 billion company. The work proved overwhelming and led to a first half loss for the unit, including a $124 million deficit in the first quarter.
The venture?s ambition was to grab a sizeable chunk of the consumer phone business, but it has struggled against entrenched giants Motorola and Nokia. The companies hoped the combination of Lucent?s telecomms expertise with Philips consumer clout would make the venture a powerful force, but analysts put the Dutch company?s share of the cellular phone market at barely two per cent.
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