Philips agrees to sell Set-Top Boxes and Connectivity Solutions businesses to Pace Micro Technology of the UK

Amsterdam, The Netherlands - Royal Philips Electronics (AEX: PHI, NYSE: PHG) today announced it has reached an agreement in principle to sell its Set-Top Boxes (STB) and Connectivity Solutions (CS) businesses, currently part of its Home Networks business unit within the Consumer Electronics division, to U.K.-based technology provider Pace Micro Technology (FTSE: PIC). Philips agreed in principle to divest the STB and CS businesses to Pace in exchange for 70 million Pace shares. The proposed transaction is subject to approvals from Pace shareholders, the relevant regulatory authorities and Philips’ workers council. After its successful completion, Philips will become a 23% shareholder in the combined business, representing a market value of around EUR 90 million calculated with the closing price of Pace shares on December 18. The transaction is expected to close in the first quarter of 2008.



The outcome of the transaction will result in a combination of strengths of two leading players in the industry, creating one of the largest set-top-box players in the world at a time when the shift from analog to digital TV is rapidly increasing. Commenting on the sale, Philippe Alcaras, Business Unit leader Philips Home Networks said: “We feel that the rapidly changing dynamics of the markets in which the STB and CS businesses operate will inevitably culminate in further industry consolidation. By striking a deal with Pace now, we gain the first-mover advantage and it shows Philips’ determination to secure a leading role for our businesses, and make them even more relevant to our customers and technology partners.”



Generating estimated revenues of EUR 425 million in 2007, the STB and CS businesses together employ approximately 335 people, predominantly based in France, who would transfer to Pace as part of the transaction. The remainder of Home Networks, Home Communications, which includes Internet Telephony and Home Telephony (DECT), will become part of the Peripherals & Accessories unit within Philips’ Consumer Lifestyle sector.

For more information, please contact:
Joon Knapen

Philips Corporate Communications
Tel: +31 20 59 77477
Email: joon.knapen@philips.com

About Royal Philips Electronics

Royal Philips Electronics of the Netherlands (NYSE: PHG, AEX: PHI) is a global leader in healthcare, lighting and consumer lifestyle, delivering people-centric, innovative products, services and solutions through the brand promise of “sense and simplicity”. Headquartered in the Netherlands, Philips employs approximately 128,100 employees in more than 60 countries worldwide. With sales of EUR 27 billion in 2006, the company is a market leader in medical diagnostic imaging and patient monitoring systems, energy efficient lighting solutions, as well as lifestyle solutions for personal wellbeing. News from Philips is located at www.philips.com/newscenter.

About Pace Micro Technology

Pace Micro Technology (FTSE: PIC) is a leading technology developer for the global pay-TV industry. Pace’s main focus is on creating intelligent and innovative products and services that benefit our customers and fuel the development of digital TV. Over the last 25 years, Pace has developed one of the world’s most experienced specialist engineering teams and is now the partner of choice for leading pay-TV operators across the globe. Pace’s international headquarters are in Saltaire, West Yorkshire, U.K., with further offices in the U.S., France, India and Hong Kong. News from Pace is located at: www.pacemicro.com/corporate/newsroom.

Forward-looking statements

This release may contain certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.