Thomson sees U.S. satellite set-top box weakness

Thursday, October 22nd, 2009 
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PARIS, France — The Board of Directors of Thomson (Euronext Paris: 18453, NYSE: TMS), met on Wednesday October 21, 2009 to review revenues for the quarter ending September 30, 2009 and the status of the balance sheet restructuring process.

Thomson Connect

Following the January 2009 decision to dispose of the Grass Valley activities, the access products activities are regrouped within a new operating segment named Connect, which includes set-top boxes, modems, gateways and Software Service Platform activities. The retail telephony activities are included within the “Other” segment.

Connect KPIs (million units):

            3Q 2008  3Q 2009   Change  9M 2008  9M 2009   Change
            -------  -------  -------  -------  -------  -------
Cable           1.4      1.2  (11.8)%      3.9      3.9   (0.9)%
Satellite       2.4      1.6  (33.0)%      7.5      6.3  (15.2)%
Telecom         2.5      2.4   (4.6)%      7.6      8.3    +8.0%
  Total         6.3      5.2  (17.2)%     19.0     18.5   (3.0)%

The decline in Connect revenues in 3Q 2009 was mainly attributable to:

  • Weakness in the North American market, with low orders for satellite set-top boxes due to higher levels of recovery and refurbishment of previously deployed boxes driven by an increase in end-user churn;
  • A key European customer introducing a second source for a product previously supplied exclusively by Thomson;
  • Market share loss with a large European client resulting from the phase out of an existing product. Connect is currently facing operational and product development issues and has launched a program to overhaul its portfolio management and development processes. This initiative is expected to produce material results over the next nine months to twelve months;
  • The Group’s overall financial situation, which has affected its ability to win major new access product contracts in 2009, except in Latin America where the momentum remained strong in 3Q 2009;
  • Difficult conditions in the voice and video software platform business (SSP) due to uncertainly in market dynamics, particularly in relation to video delivery over IP (IPTV).

Connect was able to offset the impact of lower revenues on operating profitability and cash flow in the third quarter 2009 by leveraging cost optimization actions and improvement in working capital.

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