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Philips will spin off or sell the majority of its volatile semiconductor business by the end of the year, reducing exposure to the unpredictable chip sector, the Dutch electronics group said on Wednesday.

It said it would float or sell privately to financial investors most of Europe’s third-largest semiconductor business, but retain a minority.

However, the move may be a precursor to withdrawal from semiconductor manufacturing by the Dutch company. Philips said it had left open the possibility of reducing its stake post-flotation.

Analysts valued the business at €5bn-€6bn ($6.3bn-$7.6bn). It reported 2005 sales of €4.62bn, a sixth of Philips’ total revenues.

Philips shares gained 3.4 per cent in Amsterdam to €23.55 as investors welcomed what Gerard Kleisterlee, Philips chief executive, called “the decision to speed up the transformation of the semiconductor division into a stand-alone company”.

It underscores a shift by Philips, whose roots are in light-bulb and television manufacturing, into healthcare. Philips has undertaken a clutch of recent healthcare acquisitions, drawn by the sector’s more stable margins.

The semiconductor move mirrors the strategy of Germany’s Siemens, which span off its chip business under a new name, Infineon, in 1999. The Philips unit will also be renamed in the coming months.

The decision comes nine months after Europe’s largest consumer electronics group announced it would legally separate the chip unit as it explored strategic options.

Those included forming a partnership with another company.

It said on Wednesday it had received approaches from interested parties and held discussions but had decided not to proceed, although it did not rule out returning to the idea.

It also considered selling the business in its entirety but said that was “not a preferred option right now”.

“We have crystallised our thinking and would like to take a minority holding by the end of this year,” it said, adding that it was “considering and preparing a dual listing in the US and Amsterdam” to ensure the widest exposure to potential investors.

Mr Kleisterlee first revealed that Philips was reviewing the chip unit’s future in an FT interview in November. He noted then that the division needed to raise margins, which had slipped from 10 per cent in mid-2003 to 2 per cent in early 2005.

Copyright The Financial Times Limited 2019. All rights reserved.

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