Funai Electric Co to gain under Philips’ brand

Shares of Japan's Funai Electric Co jumped to a 9-week high after Philips Electronics said the firm could use its brand to sell flat TVs in North America, giving Funai access to the premium TV market.

Photo: Funai Electric Co to gain under Philips’ brand

Shares of Funai rose as much as 14.2 percent on the announcement, before trading up 5.5 percent at 3,630 yen by 0535 GMT.

Funai in Japan is engaged in the development, manufacture, marketing, and distribution of information and communication equipment such as Internet access terminals, computer peripherals, audio-visual devices, televisions, VCRs, DVD players, and home electrical appliances. Funai is currently the main supplier of TVs and DVD players to Wal-Mart stores for "Black Friday" sales, the day after Thanksgiving. In fact, sales to Wal-Mart now account for 30% of the company's net income.

Funai manufactures products under the Emerson, Sylvania, and Symphonic brands. Funai also makes a few products for Hitachi, for Walmart under the iLo and SV2000 brands, for Best Buy under the Insignia brand, for Circuit City, Magnavox, Mitsubishi and Sharp. Funai also manufactures most DVD players for Denon, digital cameras for Eastman Kodak, and computer printers for Dell and Lexmark.

Funai plans to reverse shrinking market share with the help of Philips, North America's No. 6 maker of liquid crystal display TVs.

Under the agreement, Philips, which booked an operating loss of 71 million euros on its global TV business on 6.27 billion euros in sales in 2007, would licence its Philips and Magnavox brands to Funai for at least five years in the United States and Canada.

The move marks a departure from Funai's previously proclaimed strategy to strengthen its own brand, and could open the road for Funai to sell big-screen TVs, said Yuji Fujimori, an analyst at Goldman Sachs.

"This is a positive for Funai's television business, and we reiterate our "buy" rating," Fujimori wrote in a note to investors.

Funai, known for its aggressive cost cuts, held a 2.8 percent share of the global LCD TV market in 2007, down from 4.0 percent the previous year, while Philips held 10.8 percent, research firm DisplaySearch data showed.

Philips, founded and headquartered in the Netherlands, saw its share of the LCD TV market fall from 13.1 percent in 2006 on a unit basis.

TV makers in the United States have been fighting brutal price falls, bolstered by low-cost rivals such as Taiwanese Amtran's Vizio brand.