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Thomson Looks For Consumer Biz Partners

Thomson has decided to seek a partner for most of its consumer business — namely the audio/video and accessories activities within its connectivity segment — which could end up as a merger, licensing agreement or an outright sale. Thomson anticipates the deal will be completed in 2006.

The disposition of Thomson’s A/V and accessories business, which accounts for about $830 million in U.S. and European sales annually, is a result of Thomson’s decision to emphasize its business to business orientation in the United States, a Thomson spokesman said. Currently, 80 percent of its customers are other businesses, not retailers or consumers. The company plans to keep its telephony segment, which includes GE-brand phones as well as the home networking products included in its accessories offering.

Among the consumer products expected to be moved under the partnering umbrella are digital audio, CD players, boom boxes, bookshelf speakers, RCA-brand accessories and all the brands inherited from the Recoton deal — mainly Acoustic Research, Advent, Recoton, SpikeMaster, Ambico and Jensen.

“The fact we are looking for a partner ends speculation,” said the spokesman. But, this is “good news,” he said. We are looking for an “interested” partner. At the same time, he said Thomson would still come to International CES next month where it expects to play a major role with its new products, even new announcements. With the right partner, we plan to expand our product offering.

“Thomson is not going away,” said the spokesman. “We will be bigger, more powerful” following the new partnering strategy to sell assets, he said. Asked if profitability is a reason for the search, the spokesman said Thomson’s A/V and accessories business is profitable. However, it is “not a core

activity, not where Thomson wants to go. Retail is not the focus. Business-to-business is.” Company investments today are pointed toward broadcasting, movie studios and network operations.

Globally, 700 Thomson employees are affected by the partner search, with a majority of this number located in its Indianapolis headquarters.

Thomson has received a number of inquiries regarding its connectivity activities, which have strong retailer relationships, strong retail brands and attractive product lines, and has hired financial advisors to assess these inquiries. It gave no new information on its financial numbers in the quarter to date for businesses other than connectivity, which includes its accessories business in the United States, where the company said performance has been weaker than expected.

In connection with its action, Thomson will take a charge of about $29.5 million in 2005. It expects to extract cash and potentially a gain from partnering these activities. Thomson said discussions will start immediately and be finalized during the first half of 2006.

Thomson will focus its connectivity unit on developing home networking activities — including residential telephony — which are strategic to its network operator clients.