Philips to sell remaining mobile phone unit to CEC

AMSTERDAM, Oct 12 (Reuters) Philips Electronics said on Thursday it was quitting the mobile phone business entirely, selling its remaining activities to China Electronics Corporation (CEC) after amassing hundreds of millions of euros of losses.

It had entered the handset market in the mid-1990s with the ambition of becoming a top three global player. It joined forces with Lucent's handset business in the late 1990s, but had to unravel that venture after less than two years after mounting losses.

CEC, which was already the handset contract manufacturer for Philips, will take over the responsibility for Philips's Mobile Phones business, which currently has an annual turnover of about 400 million euros (1 million) and 240 employees, mainly in Asia Pacific and eastern Europe, Philips said.

No value was given for the transaction.

In the latest example of a major Chinese electronics maker acquiring assets of European and American companies, CEC will receive a global licence to market and sell mobile phones under the Philips brand for the coming five years.

CEC is state-owned and claims to have a leading position in China in chips, computers, software, telecoms and cellphones. It also claims to have Microsoft, IBM, NEC and CA among its customers and says it had sales of 53.38 billion yuan (.74 billion) in 2005.

Calls to CEC's Beijing office went unanswered on Thursday.

The transaction is expected to be completed by the end of 2006.

Philips shares rose 0.5 percent at 1255 GMT, just outperforming a 0.4 percent higher DJ Stoxx European technology sector index.

Two more mobile handset businesses, BenQ Mobile in Germany and Sagem from France, are still up for grabs in an industry which is proving increasingly harsh for smaller players.

The top five, Nokia, Motorola, Samsung, Sony Ericsson and LG Electronics, are taking more market share every quarter. They had around 80 percent of the market in the second quarter, according to market research group Strategy Analytics.

CEC rival TCL Communication, which acquired the troubled handset business of French telecoms equipment maker Alcatel, is losing money.

REUTERS DKS ND2056