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Pace and Philips: Partnering for Retail Success

by David Mercer | 12月 20, 2007

Pace's agreement to acquire Philips' set-top box business seems to make sense for both parties. Pace acquires significant market share, and particularly in the IPTV space where it has been absent for some time. Philips meanwhile divests another non-core activity, while acquiring a 22.5% share in Pace. This follows the hint it gave at its recent analyst day that it was "exploring strategic options" for its home networks unit, the code sign that a deal is in the works. Besides bolstering Pace's recent recovery, the deal (which is unlikely to be finally approved until March next year) gives the company access to the Philips brand. This could prove to be the most significant aspect of the new relationship. Pace is known to be examining retail market opportunities, which would be a departure from its core service provider business relationships. But Pace is little known as a consumer brand, so a partnership with Philips makes good sense. Pace will also need to work some magic on the Philips business, which lost €39.3m in 2006 on sales of €357.2m. It reckons it can excise some costs from the operations and there should be some natural efficencies resulting from the creation of a $1bn stb vendor. A key challenge as always will be for Philips and Pace to work together to the benefit of each other's interests. Pace's use of the Philips brand should be watched particularly closely as Philips has made great strides in recent years in improving its brand position. The long-term branding plan remains unclear - the deal covers the first three years, after which presumably it could be extended or Pace will have to push its own brand alone. Both companies will be hoping this is a problem worth serious debate in three years' time as it will demonstrate that Pace's retailing strategy has had some success. Client Reading: Digital Home Entertainment Devices: Quarterly Report Q307 Add to Technorati Favorites
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