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Thomson Revamps, Tackles Debts

Ray Le Maistre
1/29/2009

French vendor Thomson S.A. (NYSE: TMS; Euronext Paris: 18453), a major player in the set-top box, home gateway, and IPTV middleware markets, is struggling to balance its books and needs to sell some business units to redress the situation. (See Thomson Updates Outlook .)

The company announced late Wednesday that it's expecting to report that fourth-quarter revenues are down 8.4 percent at €1.47 billion ($1.93 billion) and full-year revenues have dropped nearly 13 percent year-on-year to €4.84 billion ($6.33 billion); that its debt pile grew sharply during the second half of 2008; and that it's looking to sell some assets to help straighten out its books.

It also has external auditors plowing through the books to see if the company needs to write down any goodwill against the decreasing perceived value of its assets.

There had been warning signs that Thomson was struggling to generate positive returns from its extensive portfolio of broadcast, consumer, and network infrastructure. (See Does Thomson Need Help?)

Perhaps not surprisingly the company's share price took a significant hit today, falling 21 percent to €1.03 on the Paris exchange.

CEO Frederic Rose, who took the helm in July last year, has a plan to get the company back on track. (See Thomson Nabs AlcaLu Exec for CEO Role and Rose Shows His Thorns at Thomson.)

It involves the sale of some assets to help focus the company and redress the debt situation: Thomson's gross debt at the end of 2008 stood at about €2.9 billion ($3.8 billion), up by €800 million ($1.05 billion) during the second half of 2008. As the company has cash assets valued at €800 million, its net debt position currently stands at €2.1 billion ($2.75 billion), a level that breaks some agreements with creditors.

So Thomson says it's looking to sell some "non-strategic operations," which include "Grass Valley and PRN." Thomson says the assets for sale "accounted for approximately €1 billion [$1.3 billion] of sales in 2008."

But what's included in these assets? Thomson's portfolio is tricky to pin down, as different parts of the group swap in and out of various units and divisions on a seemingly endless basis.

One thing that is clear is that the company's set-top box, cable modem, and home gateway business is core to Thomson's future, and is being retained. (See Thomson Box Does Docsis , Thomson Tees Up Tru2way Box , Thomson Ships Home Hubs, and Comcast Gives Thomson Nod for DTAs .)

Also quite clear is that the PRN (Premier Retail Network) business isn't related to any service provider activities: It's a sub-division that deals with retail point-of-sale TV advertising displays.

Grass Valley's make-up, though, is less clear. It certainly includes some pure broadcast industry technology, such as cameras and transmitters, and also includes Thomson's head-end encoding equipment. (See KBRO Picks Thomson Headends.)

What's not clear is whether the (deliberately?) vague explanation of which assets are to be sold includes Thomson's VoIP switching and IPTV middleware assets. (See Thomson, Ericsson Bag IPTV Deals, IPTV Is Entering Phase II: Thomson, Thomson Wins Irish IPTV Deal, and Cirpack Hits 6M Lines.)

Thomson's keeping such details close to its chest at the moment, but among the carriers that'll be keen to know the outcome is Orange (NYSE: FTE): Its near 1.75 million IPTV customers around Europe (mostly in France) are hooked up to services delivered by Thomson's SmartVision software.

— Ray Le Maistre, International News Editor, Light Reading

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