Preparations for a separate stock exchange listing have started
Amsterdam, the Netherlands – Royal Philips Electronics (NYSE:PHG, AEX: PHI) today 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 IPO of the company and/or sale of shares to financial investors, while continuing to evaluate industry consolidation opportunities.

In December 2005 Philips announced that its Semiconductors division would be legally separated in order to generate value to Philips' shareholders and to provide better ability to the division to achieve its business renewal objectives and become a stronger company.

In a letter e-mailed to employees today Philips' President and CEO Mr. Gerard Kleisterlee, wrote: "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."

Mr. Kleisterlee further added: "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 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.

For further information, please contact:
Jayson Otke
Philips Corporate Communications
Tel: +31 20 59 77215
Email: jayson.otke@philips.com