Philips to sack over 6,000 people, forecasts loss

Citing a “rapid downturn in the telecommunications and PC industries,” Koninklijke Philips Electronics NV said Tuesday it will lay off between 6,000 and 7,000 people, or about 3 percent of its workforce. The Dutch electronics giant also expects to turn a net loss in the second quarter.

Philips reported a first quarter net income of 106 million euros (US$94 million), down 91 percent from 1.14 billion euros in the year-ago period. Sales were down 1 percent at 8.21 billion euros from 8.33 billion euros last year. Excluding one-time gains, net income for the first quarter was at 53 million euros. Last year’s first-quarter net profit included a one-time gain of 526 million euros from the sale of part of Philips’ stake in JDS Uniphase Corp., bringing net income, excluding the gain, to $614 million.

Philips sees no signs that the economic slowdown, particularly in the U.S., is near its end, the company said in a statement. Philips expects the continuing malaise to cause low growth and high price erosion for some of the markets it is active in. As a result, net income in the second quarter before special charges is likely to be negative, Philips said.

Because of the negative sentiment, Philips said it has cut back capital expenditures to 2.5 billion euros, from a planned figure of 3.5 billion euros for 2001. Further reduction is possible, if needed. Also, as a cost cutting measure, Philips said it will layoff between 6,000 and 7,000 people. The company plans to take a one-off restructuring charge of 350 million euros in the second quarter.

Shares in Philips (PHI.AMS) were sharply down 13.93 percent at 27.8 euros in afternoon trading on the Amsterdam exchange.

“With a loss of about 400 million euros in the second quarter it will be tough for Philips to turn a profit for the full year. I expect the fourth quarter results to be in the black, which should bring earnings per share for the fiscal year to between nil and 0.25 euro,” said Lucas Daalder, an analyst at brokerage firm Amstgeld NV in Amsterdam.

Earlier, Daalder said, the consensus forecast for the year was at between 1.40 and 1.50 euros in earnings per share. He described Philips’ results as “disappointing” and “not very hopeful.”

Details on the restructuring will be presented during the course of the second quarter, particularly considering the activities in Sunnyvale, California-based Components and Amsterdam-based Consumer Electronics, Philips said.

Most cuts can be expected in the U.S. and Asia, where the divisions Components and Consumer Electronics have their main operations, Daalder said, adding that he deems it likely that more job cuts will follow.

Sales at Consumer Electronics in Q1 were down 5 percent at 2.69 billion euros. Income from operations at the unit turned from a profit of 83 million in 2000 to a loss of 99 million euros last quarter. Especially bad performers were mobile telephones in Europe and digital set-top boxes in the U.S.

At Components sales dropped 22 percent at 934 million euros. The unit rang up a loss of 77 million euros, compared to a profit of 100 million euros last year. All businesses within Components showed deterioration, Philips said. Especially affected were sales of mobile display systems, optical storage modules, and mobile displays.

Around the world on a comparable basis overall sales for Philips were down 11 percent in the U.S., down 3 percent in the Asia Pacific region, flat in Europe, and up 5 percent in Latin America. Income from operations in the first quarter weakened in all regions, except Asia Pacific.

This quarter was the last under Chief Executive Officer Cor Boonstra, who stood at the helm of Philips for over 4 1/2 years. Philips veteran Gerard Kleisterlee will succeed Boonstra at the end of this month.

Philips Electronics, in Amsterdam, is at +31-20-597-7777 or at

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