Philips Plans To Spin Off Its Chip Business

Article Excerpt

PHILIPS ELECTRONICS N.V. $29 (New York symbol PHG; Conservative Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Average) plans to spin off its chip division as a separate company by the end of 2006. Philips will probably sell stock to the public through an initial offering. Philips will retain a minority interest in the new company, but will likely sell its shares over the next few years. The chip division supplies about 15% of Philips’ total revenue. But it’s less profitable than its core medical systems, appliances and lighting businesses. It also requires large investments in new equipment to stay competitive. Spinning off the cyclical chip business will cut Philips’ risk, and unlock some of its value. The stock now trades at around 18 times earnings, and the $0.54 dividend yields 1.9%. Philips is a buy. buy…

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