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=DJ INTERVIEW: Philips Semi CEO To Push Forward Realignment

By Joon Knapen
Of DOW JONES NEWSWIRES

BARCELONA (Dow Jones)--Royal Philips Electronics NV (PHG) will push forward the realignment of its semiconductor arm this year at top speed, a top executive said Tuesday, as it readies the business for a possible sale or listing.
In an interview with Dow Jones Newswires, Frans van Houten, chief executive of Philips Semiconductor, said he is particularly proud of the improvement in earnings seen in the third and fourth quarters. The realignment "is on track ... and will go full-force ahead" in 2006, he said.
Since the 45-year-old Dutch executive took over the CEO position at Philips Semiconductors in November 2004, he has implemented a large overhaul. Under van Houten the unit has slashed costs and realigned the four business units - automotive and identification, mobile and personal, home, and multi-market semiconductors.
In December, Philips announced the next step, unveiling plans to separate the semiconductors division into a new company. The move will give it more flexibility for pursuing other strategic options, including a merger, sale or listing. The separation is scheduled for completion in the third quarter of 2006.
Philips aims for the unit to reach an operating profit margin at the high-end of the 5% and 15% range in 2007, as the industry is expected to grow at a mid-single-digit rate in 2006 and a double-digit pace in 2007.
An increasingly large number of industry analysts say the historic annual growth rates of 12% in the semiconductor industry are in the past. Van Houten agrees, saying that he anticipates the industry will grow "at an average of high single digits annually, with only some segments recording double-digit growth rates."
Van Houten declined to speculate on what strategic direction lies ahead for the unit, but said that Philips aims to be "at the forefront" of possible future European chip industry consolidation.
He confirmed that Philips "has engaged a financial advisor" to explore future options, but declined to identify. People familiar with the matter have told Dow Jones Newswires that U.S. investment bank Morgan Stanley has bagged the advisory job.
Regarding mobile phone businesses, van Houten said that Philips has recently launched its own mobile phone, dubbed UMA, that can also make calls via Voice-over IP through Wireless LAN networks, a so-called converged product.
"We have actually found a customer in the U.S. for this product," van Houten said, without identifying the party.
Finland's Nokia Corp. (NOK) said earlier this week that it foresees growth in these converged products that can roam on the traditional mobile phone networks as well as on other wireless networks such as Wireless LAN.
Philips has also finished its own third-generation mobile phone platform. "That is available from now on," said van Houten, adding that the company "already has found three customers" for it.
A mobile phone platform is the internal system of the mobile phone. U.S. firm Qualcomm Inc. (QCOM) and Telefon AB LM Ericsson (ERICY) of Sweden are among the leading 3G mobile platform makers. Another rival, Germany's Infineon Technologies AG (IFX), announced earlier this week that it has signed on Panasonic as its first customer for its 3G mobile phone platform.
Van Houten, who previously worked at Philips' consumer electronics business before shifting to semiconductors, said in an interview at the 3GSM telecoms industry conference that he enjoyed his first 15 months on the job, and that he liked "the depth and the dynamics of the semiconductor industry."
Van Houten - seen by some Philips analysts as a possible candidate for taking the helm at the Amsterdam-based electronics conglomerate once Chief Executive Gerard Kleisterlee retires - said he "is very committed to semiconductors."

Company Web site: http://www.philips.com

-By Joon Knapen, Dow Jones Newswires; [phone]; [e-mail]

(END) Dow Jones Newswires
02-14-06 1335ET
Copyright (c) 2006 Dow Jones & Company, Inc.