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TMM/Alcatel To Impact Telcom Market

The joint venture between Thomson Multimedia (TMM), the Paris-based partially state-owned electronics giant, and Alcatel, a French producer of next-generation communications products, is certain to have a major impact on the U.S. market for both conventional and high-tech consumer phone equipment.

The formation of the venture, which will take over the U.S. communications business of Thomson Consumer Electronics (RCA and GE brands), has been followed by a major executive realignment of TCE and TMM executives in the U.S.

The new company is anticipated to have annual sales of 25 million units and $800 million and is seeking the number one market position in home telephony worldwide. That was same goal stated by Philips Consumer Communications when it was launched, as a venture with Lucent Technology, in the fall of 1997 with annual worldwide sales of $2.5 billion.

But PCC was seemingly unable to meld its individual units into a functioning whole, and it was dissolved after little more than a year, with the partners taking back their contributed assets. Lucent, which holds consumer product rights to the AT&T brand, has had its consumer phone business up for sale since last fall.

The impact of the new venture is expected to reverberate through the U.S. telephone market. The company will combine a mass-market success, TCE's GE line (which holds a 16% share of the U.S consumer phone market, and ranks second behind AT&T), with Alcatel's expertise in such new areas as screen phones and Internet telephony. In the U.S., the venture is expected to use the RCA brand on advanced phone products.

Although headquartered in Paris, the new company will operate out of the U.S. in TCE's offices in Indianapolis. Al Arras, TMM executive VP for audio and communications products is now also chairman of the venture. He retains his audio post and adds responsibility for worldwide coordination of the marketing of Internet devices. Bob Giordano, head of TCE's telecommunications group, has been named COO of the new venture. The new CEO, Bruno Fabre, will be located in Paris.

One of the adjustments already in the works is the Alcatel Internet phone announced earlier this year at a suggested retail price of $349. This will now be sold here under the GE or RCA brand.

"The new company is a logical extension of the investment Alcatel made in TMM last year," a company spokesman said. "It spins off Alcatel's consumer operations and TMM's consumer telecommunications into a company focusing on home telephone products that will be sold through retail channels," he added.

Alcatel is one of four companies that own 7.5% of Thomson. The other TMM strategic partners, also with 7.5% stakes, are DirecTv, Microsoft and NEC.

In the executive revamp at TCE's headquarters in Indianapolis, James Meyer has been advanced at TMM from executive VP to senior executive VP, sales and marketing. Meyer also will head TCE's New Media Services business unit, newly formed to develop Internet- and digital- TV related services.

Mike O'Hara, former TMM VP for multimedia products and services, has been promoted to senior VP, Americas, responsible for TV, VCR and related video product sales. His former duties have been assumed by Enrique Rodriguez, now VP of TMM Multimedia Products.

Guy Johnson is stepping down as TCE senior sales VP at his own request. He will continue with TCE for the next year as an adviser on e-commerce and executive recruiting and as a strategic consultant to TMM chairman Thierry Breton.

Separately, John Neville, former head of TCE's picture tube operations and more recently responsible for TMM worldwide manufacturing operations, has been named to head the new intellectual property operation -- which is responsible for administering the pool of former RCA patents turned over to TMM by GE at the start of this year. Last year the patents generated $250 million in royalty income for GE.