Thomson to sell its consumer electronics unit

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Thomson, the French media services group, on Monday gave up on the consumer electronics market, saying it would seek a buyer for its businesses making MP3 devices, CD players, remote controls and other devices. The unit accounts for €700m ($838m) in annual sales.

Analysts welcomed the decision to cut the group’s final ties with the consumer electronics and accessories market, which as recently as 2003 Thomson had targeted for aggressive growth. “The market has been getting worse and that pushed the management to take this decision,” said one analyst. It shows that things are accelerating.”

However, other analysts suggested the decision to sell its audio-visual and electronic accessories businesses could put pressure on Thomson to accelerate other asset disposals in order to meet cashflow expectations.

For several years the company has been moving away from consumer electronics into image services to the media and communications industries. It has been criticised for including proceeds from disposals in its cashflow.

“They will be selling businesses with €700m in revenue, that will not be generating cashflow for them now. The cashflow target may not be at risk, but it becomes clear that they will need to make more disposals to get there,” said another analyst.

He suggested the group could sell its stake in Videocon, which it acquired last year when it sold its television tubes business to the Indian company.

On Monday the group said the sales and revenue targets for 2006 set as part of its restructuring plan would not be affected. In October, poor trading in systems and equipment forced Thomson to cut its 2005 expectations.

Thomson, which has said it will take a €25m charge to exit the businesses, is expected to give further details at an investors’ day in Paris today. It expects to “extract cash and potentially a gain” from selling the non-core activities and plans to finalise a sale in the first half of 2006. It will keep the patent for its MP3 player as well as its residential telephone business.

Meanwhile, the group is understood to be in talks with Thales, the French defence electronics group, to acquire its broadcast and multimedia unit for more than €100m. The division transmits television images down internet networks, to mobile phones and other hand held devices.Thomson shares, which have underperformed the CAC 40 biggest French companies by almost 24 per cent since the start of the year, closed down 7 cents at E18.16.

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