Philips, the Dutch electrical goods giant, is to shut its loss-making mobile phone business.

The move will involve more than 1,000 job cuts in France and a 300m euro ($259m; �183m) charge for Philips in the second or third quarter of its business year.

But, as far as consumers are concerned, it is not the end of Philips phones.

Like European rivals Ericsson and Alcatel before it, the Dutch company has now decided to outsource handset production to a cheaper manufacturer.

Le Mans losses

Philips said it was discussing the situation with French unions on Tuesday but the decision to end handset manufacture would lead to 1,230 job losses at its Le Mans plant in northern France.

A spokesman said details over how the jobs were to be shed were yet to be resolved but the company would "do its utmost to make this as flexible as possible".

Philips said the Le Mans plant would not be closed. About half of the 2,500-strong workforce would remain employed in fixed-line phone making, the spokesman said.

"We were informed this morning about this, and the reaction is utter dismay," said a spokeswoman for the CGT trade union.

"We did not expect things to reach this stage. We hoped we would find a partner. Philips has totally abandoned us."

Semiconductor disappointment

The long-awaited announcement on the future of the mobiles business came the week after Philips warned that disappointing performance in its semiconductor business might drag the whole group into the red.

The 300m euro charge comes on top of charges of 350m euros and 90m euros already announced for addressing problems in the consumer electronics and semiconductor businesses respectively.

Philips shares jumped initially in Tuesday trading, but were down 85 cents at 29.50 euros by late morning in Amsterdam.

Analysts said investors were weighing the good news of exiting a loss-making business and taking a relatively small charge against disappointment that the unit could not be sold and would help push the group into a loss for the year.

Outsourced to China

Under the plans, production of Philips-branded handsets is being outsourced to China Electronics Corporation (CEC).

Manufacturing as well as some research and development will be carried out in Shenzhen, China where the two companies already operate a joint venture production facility.

CEC is to take a controlling stake in the business and buy equipment from Philips.

In a statement, Gerard Kleisterlee, president and chief executive of Royal Philips Electronics, said: "We are confident that the arrangement with CEC will... give our customers a renewed trust in the continuity of our business.

"By reducing the cost base drastically we will be able to realise market presence with greatly reduced exposure."

Analysts said China - where handset sales are growing fast - would probably become the main market for the products.

Failed to make a dent

Philips's mobiles unit has swallowed 850m euros from its parent since being formed four years ago and has failed to make a dent in a global handset market dominated by Finland's Nokia.

Other major players, including Motorola and Ericsson, the number two and three makers, have also had well-publicised troubles while Nokia - previously viewed as well-protected from the tech slump - has itself recently warned that profits will disappoint.

Philips has 8% of the European handset market and less than 5% of the global market.