It has been known for some time that Continental wanted to do something with its display business. In a recent announcement, the company confirmed that it is carving out the User Experience business as part of a strategy to increase long-term profitability and competitiveness of its Automotive group sector. The User Experience business makes displays, head-up displays and digital instrument clusters for car interiors.
Continental makes about 40 billion euro in sales and this year, User Experience is expected to contribute about 3.5 billion euro of that with order volume of more than 7 billion euro. Continental is looking to grow its sales to 51-56 billion euro in the next 3-5 years. Carving out the User Experience business is part of a strategy to focus on the company on core competencies and the most profitable aspects of its business like its Tire group.
The cost of maintaining its display business has risen for Continental and with this move, it can look at a sale, an IPO, or join venture as options in its path to containing overall costs at the company. By all accounts, the company is healthy and positioned well in the automotive industry, but the display business is a drag on its overall performance. As a standalone entity, it is still a viable opportunity with a strong product portfolio and customer base. It just needs a different business model, perhaps one more focused on optimizing the performance of display sales only.
