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November 29, 2005

NEC looks to IPC with purchase of 60% of Philips unit

NEC Corp has bought a 60% stake in Royal Philips Electronics NV Business Communications Unit. The operation will be renamed NEC Philips Unified Solutions and will launch a big drive into the IP communications market.

By CBR Staff Writer

NEC declined to say how much it will invest in the new company, but the Japanese paper Nihon Keizai Shimbun reported that NEC would spend up to JPY 3bn ($25.2), including the stock purchase. At this price, it is clearly relieving Philips of a financial headache. Philips BCU, focused on PBX systems, has sales running at 180m euros ($390.8m) and has a 900-strong workforce.

The attraction for NEC is that it offers a channel to market in EMEA for its Univerge IP architecture for multimedia networks at a time when enterprises are switching to IP-based systems that embraces both telephony and datacoms.

The two companies claimed that by combining NEC’s strong technology base and market position in Japan and North America, with Philips’ strong market presence in Europe, the new company will be able to strengthen its position in Europe in view of the fast technology changes in the modern telecoms world.

Philips clearly feels it does not have the resources to develop products to meet rapidly evolving market requirements, and it has been working with NEC since 2003 to jointly develop and deploy IP technology in enterprise communications.

Kazuo Tsuzuki, associate senior vice president of NEC’s Enterprise Solutions Operations said they expect to grow sales of Univerge systems to global customers on top of the continued sales of the Philips portfolio.

The deal is expected to be completed in the second quarter of 2006.

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