Philips and Lucent to Merge Phone Groups

Philips Electronics and Lucent Technologies Inc. said Tuesday that they will merge their consumer telecommunications equipment operations, a move that will create the world’s largest supplier of phones, with $2.5 billion in annual sales.

Philips, a Dutch consumer electronics maker, will own 60% of the venture, to be called Philips Consumer Communications, and Lucent will own 40%. No cash is involved in the deal, Lucent spokeswoman Jane Moulton said.

The new venture will give Lucent, the equipment division spun off by AT&T; Corp. last year, the benefit of Philips’ consumer-marketing experience, while providing the Dutch company an entry into the U.S. market, analysts said.

“Consumer products was Lucent’s biggest question mark,” said Barry Sine, an analyst at SBC Warburg Inc. “This is a strategically brilliant move for them to combine with Philips’ marketing expertise.”

The companies’ stocks rose on the news. Lucent shares gained $2.125 to close at $69.75 on the New York Stock Exchange; Philips’ American depositary receipts rose $3 to close at $66.25.

The joint venture will supply analog and digital phones, answering machines, pagers and other wireless equipment to a market estimated at $20 billion and growing at 14% a year, the companies said.

Until it was spun off from AT&T;, Lucent never had to worry about marketing, Sine said, because its products were sold under the AT&T; brand name. AT&T; let Lucent keep the brand temporarily after the spinoff. Lucent now will transfer the products from the AT&T; name to another successful brand--Philips, Sine said.

The deal will give Philips the position AT&T; had before the spinoff as the leading consumer phone equipment provider in the U.S., Sine said.

The definitive agreement on the merger should be completed by Oct. 1, when the two companies will transfer their assets into the joint venture. The company will have its headquarters in New Jersey, with regional offices worldwide.