Philips Electronics on Thursday announced the intention of the company to reduce its ownership share in its semiconductors division in the course of the second half of 2006 to a minority stake through an initial public offering (IPO) of the company and/or sale of shares to financial investors, while continuing to evaluate industry consolidation opportunities.

The company said in a statement that it had talked to its investors on the matter and decided to abandon the semiconductor business.

“In the course of these last few months hundreds of Philips people have been working long hours on issues relating to the disentanglement of Semiconductors, while a small top team has worked on the pursuit of the different strategic alternatives. Both projects are well on track and in the process we have been able to define more clearly the next steps we will make and the outcome that will result in, both for Philips as well as Semiconductors. This has led us to the decision to speed up the transformation of our Semiconductors division into a standalone company that is separate from Philips and will have a majority third parties ownership,” said Mr. Gerard Kleisterlee, chief executive of Philips.

“The future deconsolidation of semiconductors is a further step for Philips in moving away from a focus on high volume electronics and implementing a strategy to build a Healthcare, Lifestyle and Technology company with a strong market focus around the brand promise of Sense and Simplicity,” the chief executive added.

The new semiconductors company will strongly continue its business renewal strategy as well as consider additional measures to strengthen its portfolio in mobile & personal, home, automotive & identification and multi market semiconductors. Naming for the company will be announced in due course and preparations for a separate stock exchange listing have started.

Philips will engage in consultation with workers councils about the steps that need to be set in order to complete the disentanglement by the end of the third quarter and create an independent semiconductor company with majority third party shareholding before the end of the year 2006.