Philips, Lucent to merge sector

Electronic News, June 30, 1997 by Sarah Cohen

Philips Consumer Communications will develop, manufacture and market digital and analog cellular phones, corded and cordless phones, answering machines, screen phones, and pagers. Philips will own 60 percent and Lucent will own 40 percent of the new $2.5 billion company, which will be temporarily headquartered in Parsippany, N.J.

The benefits of this merger to Lucent seem obvious: Not long ago, Lucent could rely upon its parent, AT&T, to market consumer telephony products. Dutch consumer giant Philips may perhaps bring back a consumer sales savvy that Lucent has lacked since the spinoff from AT&T--at a time when consumer telephony seems more and more attractive to the public and to telephone makers.

A spokesman for Lucent referred to the attraction of consumer telephony: "The driving force is the merging of telephony and consumer products as people expect the telephone to carry more than just voice. There's a need for such features as increased memory and storage, an increase range in cordless phones, increased talk time and more functionality like message waiting."

Philips, on the other hand, benefits from Lucent's spot as the claimed number one seller of phones in the U.S. and "the opportunity to promote the Philips brand name in the U.S.," remarked a Philips' spokesman. Philips believes it currently has the number one position in sales of phones in Europe, and the combined entity, said a Lucent spokesman, will be number one in both Europe and the U.S. in sales of corded and cordless phones, as well as answering machines.

Jim Parmelee, telecommunications equipment analyst for Deutsche Morgan Grenfell's technology group, mentioned other benefits of a merged consumer communications business to Lucent and Philips. "It allows Lucent to focus almost exclusively on its core systems business while retaining access to important digital wireless handset technology; it gives Philips a greater global reach and product breadth; and it allows both companies manufacturing efficiencies in their existing product lines."

The Lucent spokesman said that the combined entity will next set its sights on Japan. "Neither company has a consumer presence in Japan, and we consider the initial establishment of a sales and marketing force there to be a tremendous opportunity."

Michael McTighe, 43, managing director of Philips-owned PCC, is slated to become CEO of the new company. Carly Fiorina, currently president of Lucent's Consumer Products division, will serve on the board of directors of the new company.