LONDON — Philips' announcement Wednesday (June 21) was, on the surface, a reiteration of its intent to seek a partner for its semiconductor division or to float the operation by way of an initial public offering.

However, the devil is in the detail and it could be the forerunner of transitional job cuts as Philips seeks to separate its semiconductor interests into a subsidiary company prior to an IPO or merger.

The significant event Wednesday was that Gerard Kleisterlee, president and chief executive officer of Philips (Amsterdam, The Netherlands), wrote an email to employees in which he discussed a process that was "on track" and the need to accelerate plans.

These plans include the formation of a separate subsidiary company to encapsulate Philips' semiconductor interests prior to its merger or IPO, which must have implications for Philips staff.

And, although a Philips spokesman told EE Times that many courses of action were still possible, the fact that Philips is preparing to select a name for a subsidiary semiconductor company would seem to favor an IPO and may imply that merger discussions going on in the background have started to run out of steam.

At first sight there was little new in the latest announcement. There was nothing new in the timing — the second-half of 2006 — although one can argue that an announcement was necessary to allay fears that Philips might miss its previously announced intentions. The only thing that could vaguely be seen as new was Philips insistence that it expects to dispose of a majority of its stake in semiconductors in this way " so a pure 50:50 partnership with a chip company to form a Philscale or Freelips joint venture has, apparently, been ruled out.

Since Philips announced that it was seeking strategic options for its semiconductor division there has been much speculation about which entities would make a good partner for Philips Semiconductor (see Making book on Philips match). Intel has named alongside Infineon, Freescale and STMicroelectronics as potential partners.

Philips may also have been encouraged by the launch of Qimonda AG and the way it has been received. Qimonda is the subsidiary formed to hold the memory chip business, including most of the manufacturing, of Infineon Technologies AG (Munich, German). That company is now at the half-way stage — Infineon has separated its contracts, patents and intellectual property into two piles and is now preparing to float Qimonda when the time is right, also some time in the second half of 2006.

And so now Philips is probably beginning a roadshow to talk to potential institutional investors. The naming of the subsidiary company "will be announced in due course" and "preparations for a separate stock exchange listing have started," according to Philips.

But there is also no doubt that the formation of Qimonda has been disruptive to the previously stable Munich engineering environment. There has been the formation of many startups and separate operations as Infineon put its house in order and different economies of scale were revealed and different groups of engineers and support staff were let go or transferred.

The same thing will be happening around Eindhoven as Philips attempts to draw a line through its business including such aspects as research, EDA support, its innovation incubator program, and patents and contract management.

In his email to Philips staff Kleisterlee proclaimed success in examining the strategic alternatives. "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," he wrote. The company went further saying "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."

Under European employment law it is necessary for companies to support the formation of "workers councils" and to consult with workers councils where there is a threat to employment or substantial changes in work organization or in contractual relations.