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 Swatch, the world's largest watchmaker, and Tiffany, a New
York-based jeweler, had struck an agreement in 2007 to develop
watches under the Tiffany brand together.
The arrangement, intended to last for 20 years and give Tiffany a
much bigger place in the luxury watch market, never turned into big
business for either company, and the deal ended in acrimony in 2011.
The companies sued one another in arbitration court in the
Netherlands, where their Tiffany Watch Co joint venture was
domiciled. The case want to arbitration in 2012.
Michael Kowalski, the chief executive of the luxury retailer, said
in a statement that he was "shocked and extremely disappointed" with
the court ruling, issued on Friday, and that the company was
reviewing its options.
In their lawsuits, Swatch Group had faulted Tiffany for "systematic
efforts to block and delay development of the business," while
Tiffany had said that Swatch did not honor the terms of the
agreement, including providing adequate distribution.
Kowalski said Tiffany had sufficient financial resources to pay the
full amount of damages. Tiffany said it would fund the award from
immediately available cash on hand and funds from existing debt
facilities, and that it didn't expect the ruling to impact its short
or long-term business plans.
For Tiffany, the dissolution of the deal with Swatch was a huge
setback in its efforts to once again be a big player in the world of
luxury watches.
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The company only gets about 1 percent of sales from watches now,
compared to about 9 percent in the late 1980s. That shrank as the
company decided to focus more on its engagement jewelry business.
Kowalski said in a statement on Sunday that Tiffany is moving
forward with its plans to design, produce, market and distribute its
own Tiffany & Co brand watches.
Tiffany's said it would record a fourth-quarter charge of $295
million to $305 million as a result of the ruling. It lowered its
full-year earnings outlook range to $2.30 a share to $2.35 a share
from a previous estimate of $3.65 a share to $3.75 a share.
Shares of Tiffany's closed at $90.62 on Friday.
($1 = 0.8958 Swiss franc)
(Reporting by Silke Koltrowitz in
Zurich, and Ryan Vlastelica and Phil Wahba; editing by Sonya
Hepinstall and Christopher Wilson)
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