COMMISSION DECISION of 22/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.668 - Philips /Origin) according to Council Regulation (EEC) No 4064/89

(Only the English text is authentic).

The paper version of the decision is available through the sales offices of the Office of Official Publications of the European Communities

PUBLIC VERSION

MERGER PROCEDURE

ARTICLE 6(1)(b) DECISION

To the notifying parties

Dear Sirs,

Subject :Case No IV/M.668 PHILIPS/ORIGIN

<ind> <ind> Notification of 21.11.1995 pursuant to Article 4 of Council Regulation No 4064/89

1.<ind> On 22 November 1995 Philips Electronics N.V. ("Philips") notified the Commission of its intention to acquire sole control of BSO Beheer B.V. ("BSO" holding of BSO/ORIGIN group of companies "ORIGIN").

2.<ind> After examination of the notification the Commission has concluded that the notified operation falls within the scope of application of Council Regulation N 4064/89 and does not raise serious doubts as to its compatibility with the common market and with the functioning of the EEA Agreement.

I. <ind> THE PARTIES AND THE OPERATION

3.<ind> Philips is the ultimate parent company of the Philips' group of companies ("Philips"). Philips is a company involved in the design, manufacture and sale of a broad range of electronic products. Through its Communication & Processing ("C&P") group, Philips is also active on the InformationTechnology Services ("IT" Services) market. The Philips C&P group offers a range of IT services with a focus on the management of IT systems. The major part of Philips C&P's services portfolio relates to processing services.

4.<ind> BSO is the holding company of the "ORIGIN" group of companies, which is engaged in the business of supplying information and communication technology services. "ORIGIN" mainly offers system management, system integration and consulting services. Only a minor part of the activities of "ORIGIN" relates to processing services.

5.<ind> The operation consists of the acquisition by Philips of sole control of "ORIGIN".

II. <ind> COMMUNITY DIMENSION

6.<ind> The combined aggregate worldwide turnover of the undertakings concerned exceeds 5.000 million ECU. The aggregate Community wide turnover of Philips and "ORIGIN" exceeds 250 million ECU. They do not achieve more than twothirds of their turnover in one and the same Member State. The operation has therefore a Community dimension.

III. <ind> THE RELEVANT MARKETS

7.<ind> There are different segments within the information technology software and services domain which can be differentiated by a number of characteristics such as capital investment requirements, role of brand image, development costs, switching costs (installed base effect), etc.

<ind> Four areas of activity within the IT software and services domain have been identified by the parties:

<ind> <ind> Consultancy services: the rending of advice regarding communication and information systems (IT services).

<ind> <ind> Operational support services: included in this category are services performed on behalf of customers, ie installation, operation and optimisation of their information systems network (IT services).

<ind> <ind> Application development and delivery services: the integration of existing systems by means of the development and installation of custom software for clients.This activity may also be designated "customised software" or "systems integration and development" (IT software).

<ind> <ind> Processing services: the "contracting out" of certain data processing needs (IT services).

<ind> It is however not necessary in the present case to decide if these segments constitute distinct product markets within the meaning of the Regulation, as the operation does not create or strengthen a dominant position even on the narrowest market definition.

<ind> A distinction should be made between IT services and IT software. The IT services market is basically a services market requiring a close and constant relationship between the service provider and the client while the IT software market which includes the application software is a product market in which the product can be sold or licensed to the clients.

8.<ind> The geographic markets for services are normally national markets as the ability to communicate in the customer's own language is essential and the close relationship with clients often requires a local presence. On the contrary, software products can easily be imported/exported from one country to another and distributed after linguistic and regulatory adaptations have been made. The precise definition of geographic markets can however be left open in this case since the operation does not raise serious doubts as to its compatibility with the common market even on a national basis.

IV. <ind> ASSESSMENT

9.<ind> On the basis of the above market definitions the combined market shares of the parties, even on the narrowest definitions, does not exceed 15%. The markets in questions are highly fragmented. On each of the possible market definitions the parties face competition of companies like EDS, IBM, CSC, ICL, Digital, AT&T.

V. <ind> ANCILLARY RESTRICTIONS

10.<ind> Philips envisages to treat the new company for a period of not more than three years as preferred supplier. This restriction can be considered as necessary for a startup period which must not exceed three years.

VI. <ind> CONCLUSION

11.<ind> For the above reasons, the Commission has decided not to oppose the notified operation and to declare it compatible with the common market and with the functioning of the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of Council Regulation No 4064/89.

For the Commission,