Funai to use Philips brand for DVD goods in U.S.

TOKYO, Dec 24 (Reuters) - Japan's Funai Electric Co (6839.OS: Quote, Profile, Research) said it would sell DVD players and recorders under the Philips (PHG.AS: Quote, Profile, Research) brand directly to consumers in North America, in a deal which sent its shares soaring 7 percent.

The preliminary agreement builds upon an earlier pact in which Funai supplied DVD players and recorders to the Dutch consumer electronics firm which then shipped them to consumers.

The deal takes advantage of Funai's lower production costs and allows the mid-sized Japanese electronics maker to expand its sales using the better known Philips brand. It also allows Philips to shift its focus to more profitable products such as medical equipment.

The companies also have a similar agreement for TVs. [ID:nL08832352]

A final agreement is expected to cover Blu-ray players as well as DVD players and recorders under the Philips and Magnavox brands, Funai spokesman Naoyuki Takanaka said.

The Nikkei business daily said the arrangement would likely lift Funai's North American sales by 30 billion yen ($332 million) but Takanaka said the expected boost was unlikely to be that big.

Its North American operations booked revenue of 181.1 billion yen in the past business year, accounting for 65 percent of total sales.

Shares in Funai closed up 7.2 percent at 1,556 yen on Wednesday, outperforming a 2.4 percent slide in the Nikkei average .N225. Tuesday was a public holiday in Japan.

Funai sells a large portion of its products, including Blu-ray players and LCD TVs, in the United States through Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research). (Reporting by Kiyoshi Takenaka; Editing by Edwina Gibbs)