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A fuzzy picture for Thomson-again: French parent puts consumer unit in play, but will keep part of 700-person Carmel work force

December 19, 2005

Engineering and research-anddevelopment jobs in Carmel likely will be spared the uncertainty of Thomson's plans to sell outright or to find partners for its consumer products and accessories business.

The French company that owns the RCA brand and employs 700 in Carmel said last week that it will exit the consumer end of the electronics realm in 2006. But Thomson also said it has a number of engineers and related personnel in Carmel that would fit the company's focus on electronic equipment sold to cable and satellite providers and other potential customers.

The equipment includes set-top boxes developed for DirecTV, the satellite TV provider for whom the Indianapolis operation virtually pioneered small-dish satellite systems in the early 1990s.

Thomson used to sell satellite receivers to the consumer market.

"The DirecTV business is the perfect example of where the company wants to go with business-to-business sales," said David Arland, spokesman for Thomson in Carmel.

Thomson also is hoping to win contracts to provide set-top boxes and other gadgets for telephone companies that are beginning to offer video services via fiber-optic phone lines.

It's not clear how many of Thomson's 700 Carmel workers will be affected as the company narrows its focus and casts off the consumer and accessories operation.

"It's more than 350, but it's not 700," Arland said.

The most logical workers for Thomson to retain include electronics and software engineers. The region's economic development leaders covet such workers, in part because they tend to earn higher salaries.

Much of the engineering done in Thomson's consumer electronics and accessories division is performed in Asia. The bulk of Thomson's engineering brain trust in Carmel wound up transferring last year to TTE Corp., a TV-products venture created by Thomson and Chinese electronics giant TCL International.

About 200 people work for TCL at Thomson's Carmel campus, up about 50 jobs since TTE was created in August 2004.

Thomson decided to get out of TV products after its market share fell to around seventh, down from No. 2 at its peak.

Much of the market-share erosion stemmed from China's admission to the World Trade Organization, which helped make way for a flood of inexpensive Chinese TVs sold under such brands as Apex and Haier.

The TCL alliance that absorbed most of Thomson's TV business left Thomson with 700 employees in Carmel, from 1,250 in 2003 and about 1,550 in the late 1990s. The French company has slashed jobs by the thousands in recent years as it repeatedly shifted strategy and battled Asian competitors. Thomson already has closed its Marion picture tube plant and Bloomington TV assembly plant.

What's left of Thomson in Carmel largely consists of its video accessories business-things like remote controls, headphones and audio-video cables.

The local unit also is responsible for consumer products, such as DVD and MP3 players. Many of the jobs involve sales and marketing, and product management.

There are any number of potential buyers or partners for Thomson's consumer electronics and accessories business.

"At this point, it's anybody's guess because most of the manufacturers out there are doing similar things," said Greg Tarr, executive editor of This Week in Consumer Electronics.

Probably most interested will be Chinese companies that are looking for major brand names they can buy to enhance U.S. market share, Tarr figures. That proved to be the case with TCL.

At the International Consumer Electronics Show next month in Las Vegas, "we'll be marketing the company, as well as the products," Arland said.

One danger of Thomson's plan to unload its consumer electronics and accessories business is that a competitor might snap it up and fold it into existing operations elsewhere.

That's one reason a management buyout of Thomson's unwanted units might be preferable, said Todd Saxton, an assistant management professor at Indiana University's Kelley School of Business in Indianapolis.

Saxton has had many conversations over the years with Thomson employees and executives involved in IU's MBA program. Many have expressed frustration perpetually "waiting for marching orders coming over from France."

With the technological and productdevelopment muscle in Carmel in need of unshackling, "This is an ideal candidate for something like a management buyout," he said.

Saxton pointed to Knoll Inc., a Philadelphia-area furniture maker that Westinghouse Electric Corp. sold for $565 million to Warburg Pincus Ventures LP and company management in 1997.

Years earlier, Westinghouse had tried unsuccessfully to sell Knoll for its asking price. So Westinghouse gave Knoll executives broad autonomy to grow the business, eventually boosting its sale price by several million dollars.

Selling Thomson's consumer products and accessories business likely would be more complicated. It has operations in several countries. It's not clear what it's worth, either, though the units had worldwide sales last year of $825 million.

"If this isn't a strategic growth play internally, it's going to be a market share play" by a competitor, who could wind up shuttering Thomson facilities, Saxton added. "It's an operation that has tremendous potential."

In recent years, Thomson has seen more potential outside consumer electronics.

It's been loading up on assets such as Burbank, Calif.-based Technicolor, whose services include film processing, post-production services and cinema advertising.

Thomson also owns Grass Valley, which makes and installs broadcast equipment for networks and TV stations, including WISH-TV Channel 8 in Indianapolis. Thomson is wide-eyed about the potential revenue as stations upgrade their infrastructure to accommodate digital TV.

As Thomson invested money elsewhere, many of its consumer electronics employees in Carmel figured they wouldn't be in Thomson's picture much longer.

Arland noted that RCA-through a succession of owners over the years-has had a presence in Indiana since 1932, developing everything from record players to highdefinition TV sets.

"All this is is another chapter. ... A year from now, it's quite likely we'll have three companies working out of this facility."
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