Slumping TV Sales Damp Philips 1Q Profit

By: AP
By: AP

AMSTERDAM, Netherlands (AP) -- The television age appears to be fading for Philips, the Dutch company that carries a global reputation for its home electronics: Philips' first-quarter profit fell 75 percent.

Sagging TV sales, especially in the United States, dragged down first-quarter profits, as Royal Philips Electronics NV reported net income of $347 million, nearly 20 percent lower than the $433 million analysts had forecast.

Net profit was $1.386 billion in the same period last year - a quarter boosted by receiving $1.161 billion for part of its stake in Taiwan Semiconductor Manufacturing Co. Ltd.

Chief Financial Officer Pierre-Jean Sivignon said there was stiff competition in the TV market.

"The U.S. remains the black spot, but when we look at the quarter it was tough all across," he said in a conference call.

Philips last week announced that it would license Funai Electric Co. Ltd. of Japan to market the Philips and Magnavox brands in the U.S. and Canada for five years.

Philips is taking a charge of $198 million to cover the cost of the transfer and other steps to make its global supply base more efficient and focus its TV business on the strongest markets, especially in Europe and some developing countries.

But in Europe, where the Philips brand is much stronger than in North America, the company also lost money on TV sales and is unlikely to show a profit for the rest of the year, Sivignon said.

Sivignon said Philips had no immediate plan to license its brands in Europe but was keeping its options open. For the time being, it is focusing on cost efficiencies for TVs - a product it has been developing since 1925.

This quarter included a gain of $131 million for the partial sale of LG Display, Philips said.

Shares fell 3 percent to close at $36.78.

Chief Executive Gerard Kleisterlee said the company's performance was strong in other sectors.

"Unfortunately our results are clouded, more than we like, by the adverse situation in our TV business" and lower revenue from license agreements, Kleisterlee said.

Revenue growth came from the company's ultrasound and other imaging equipment and was helped by the acquisition of Respironics Inc., which makes products to help people with sleep disorders.

Comparable sales for the medical division grew 5 percent over the same quarter in 2007, and equipment orders were up by 9 percent, the company reported.

Lighting grew by 3 percent in comparable sales, it said. Philips is the world's largest maker of light bulbs, and energy-saving devices now make up about half its portfolio of lighting products.

Analyst Jurgen Smits van Oyen of Petercam said the quarterly results were unimpressive, but no cause for excessive concern. Consumer products were disappointing, but that was balanced by "positive surprises" in health care.

"On balance, we believe the company has released a fairly decent set of results given the economic circumstances," he said.

CEO Kleisterlee said he was confident about Philips' progress in 2008 and that it was on target to meet its 2010 goals to increase earnings per share before interest, taxes and amortization to 10 percent or more.

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