Philips Puts Down the Pace

Philips severed all ties to the set-top biz after shedding its remaining 17 percent stake in the UK-based tech firm

Jeff Baumgartner, Senior Editor

April 17, 2009

2 Min Read
Philips Puts Down the Pace

Royal Philips Electronics N.V. (NYSE: PHG; Amsterdam: PHI) has severed all ties to the set-top sector after selling off its 17 percent stake in U.K.-based tech firm Pace plc for roughly €76 million (US$99.1 million). (See Philips Sheds Pace Stake.)

Philips, which released 50.7 million shares of Pace common stock, said it expects the deal to result in a non-taxable gain of €48 million ($62.5 million) in the second quarter of 2009. Philips said the sell-off was in line with the Dutch company's ongoing plan "to dispose of non-core shareholdings."

Pace shares rose more than 8.5 percent late Friday morning.

Philips originally agreed to sell the bulk of its set-top and connectivity division to Pace in late 2007 for about $135 million, a "reverse takeover" that propelled Pace to become the world's third-largest maker of set-tops, trailing only Thomson S.A. (NYSE: TMS; Euronext Paris: 18453) and Motorola Inc. (NYSE: MOT). (See Pace Shoots for STB Stardom.) Later, about $10 million was knocked off the sales price. (See Pace Tweaks Philips STB Deal .)

The deal, which overlapped very little with Pace's existing set-top business, expanded Pace's activities in the U.S. with DirecTV Group Inc. (NYSE: DTV). In the Americas, Pace already had agreements with Comcast Corp. (Nasdaq: CMCSA, CMCSK), Bright House Networks , Rogers Communications Inc. (NYSE: RG; Toronto: RCI), Time Warner Cable Inc. (NYSE: TWC), and Vidéotron Telecom Ltd.

Pace hit a record 13.1 million set-top shipments for 2008, a figure that included 6 million units from Pace France (the division that emerged after Pace obtained Philips's set-top unit). Last year, the Pace France division contributed revenues of £292.9 million ($433.5 million). Consolidated Pace revenues for the year reached £745.5 million ($1.1 billion).

Philips did take a crack at a U.S. cable strategy in the earlier part of the decade, gathering a minor set-top deal with MediaOne Group and a more significant one with Tele-Communications Inc. (TCI), which are now both part of Comcast. Philips was on tap to supply 1 million digital boxes to TCI, but backed away after it ran into roadblocks attempting to obtain a license for Motorola's conditional access system. Philips also made a run at the Docsis market in the late 1990s, when cable MSOs began to deploy high-speed Internet services, but eventually scrapped that effort amid a widespread consolidation and shakeout of cable modem vendors.

Although Philips has shed its stake in Pace, its label may continue to adorn digital boxes for a while. As part of the original deal, Pace obtained the rights to use the Philips name for up to three years on some set-top products. At the time, Pace CEO Neil Gaydon told Cable Digital News that the company would possibly use the Philips brand at retail in parts of Europe and Latin America before it would do so in the U.S.

— Jeff Baumgartner, Site Editor, Cable Digital News

About the Author(s)

Jeff Baumgartner

Senior Editor, Light Reading

Jeff Baumgartner is a Senior Editor for Light Reading and is responsible for the day-to-day news coverage and analysis of the cable and video sectors. Follow him on X and LinkedIn.

Baumgartner also served as Site Editor for Light Reading Cable from 2007-2013. In between his two stints at Light Reading, he led tech coverage for Multichannel News and was a regular contributor to Broadcasting + Cable. Baumgartner was named to the 2018 class of the Cable TV Pioneers.

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