Technicolor seeks set-top box partner

Wed Apr 11, 2012 4:36pm BST

Frederic Rose, CEO of Technicolor, speaks during the Reuters Global Media Summit in Paris December 1, 2010. REUTERS/Charles Platiau

Frederic Rose, CEO of Technicolor, speaks during the Reuters Global Media Summit in Paris December 1, 2010.

Credit: Reuters/Charles Platiau

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PARIS (Reuters) - French digital video specialist Technicolor (TCH.PA) hopes to find a partner for its loss-making set-top box business this year and is in talks with several parties, its chief executive told Reuters.

The former TV maker is also seeking by the summer to sell its French set-top box factory, where a planned production shutdown threatens 350 jobs, Frederic Rose said on Wednesday.

"We are in informal discussions with several players today," he said, adding that there was only room for three major companies in the set-top box sector instead of the existing five or six with at least a billion euros ($1.3 billion) in sales.

Asked whether Technicolor would acquire rival companies, Rose said it could not afford to.

As for an outright sale or merger of the unit, he said: "Fifty percent of something successful is better than 100 percent of something small."

Shares in Technicolor gained 9.2 percent after Rose's comments, closing at 1.67 euros and giving it a market value of 373 million euros. The stock's up about two-fifths this year.

The biggest maker of set-top boxes is Motorola Mobility (MMI.N), which is being acquired by Google (GOOG.O), followed by UK-based Pace (PIC.L), Technicolor and Cisco (CSCO.O).

Technicolor's 17,000 staff, including 1,900 in France, face a string of changes as the company, which is grappling with financial difficulties, reshuffles its business.

Last December, the group announced it would axe 600 jobs at its set-top box unit, hit by telecom operators' moves to shift production to cheaper countries such as China or Tunisia and the impact of the European economic crisis on prices.

"Our problem is simple: prices have to come down, our clients stress this. Today, we cannot afford to build set-top boxes in France. This battle is lost, let us concentrate on what we can win," Rose said.

Last year, the company had a net loss of 324 million euros and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of 475 million, down 6 percent.

At its "Connected Home" set-top box business, the EBITDA loss was 43 million euros. This unit should reach breakeven this year, thanks to the shutdown of its Angers factory, Rose said.

Talks with potential buyers for the factory should conclude before the summer, he added.

Ten days before the French elections, the company has found itself in the midst of the "Made in France" debate among presidential candidates after unions expressed fears of an outright dismantling of the company.

"Today, 'Made in France' doesn't mean factories," Rose said. "It is the intellectual ability of the French to generate new ideas and technological solutions," he said, adding that Technicolor would remain focused on value-added services, innovation and software.

In the late nineties, Technicolor failed to keep pace with technology in its core TV and cathode-ray tube-making business and ended up selling it to China's TCL 000100.SZ in 2003.

Since then, it has shifted its focus to services for the cinema and entertainment industry through several restructuring plans and a change of management, though it came close to financial collapse in 2009.

Rose, who became CEO in September 2008, has faced a tough challenge dealing with the former public group's cost structure and high net debt, which reached 1.13 billion euros last year.

After cutting 6,000 staff and changing the group's name from Thomson in 2010, Rose aims to reduce debt by 200-300 million euros and generate 400 million in free cash flow over 2012-15.

"The only thing that will matter is cash generation, debt reduction and what we call fundamentals," Rose said.

($1 = 0.7644 euros)

(Editing by Leila Abboud and James Regan)

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