Philips Loss From Television Swells as Price Pressure Mounts
March 28, 2011, 12:30 PM EDTBy Maaike Noordhuis
(Updates with closing share price in fifth paragraph.)
March 28 (Bloomberg) -- Royal Philips Electronics NV predicted a first-quarter deficit from its television division close to the loss the unit had in all of 2010, raising pressure on the incoming chief executive officer to fix the business.
The loss will be 100 million euros ($155 million) to 120 million euros, Amsterdam-based Philips said in a statement today. Last year, Philips lost 125 million euros from televisions, measured as earnings before interest, taxes and amortization. Philips attributed the loss to pricing pressure and said “resolving this is an absolute priority for the company.”
Philips will likely fail to break even with the business this year, it said today, which would mark the fifth consecutive annual loss. The television subsidiary has suffered as Sony Corp. and Panasonic Corp. cut prices to combat local Chinese suppliers, and Philips has sought to limit losses by farming out some production.
“The loss is of a serious magnitude,” said Victor Bareno, an analyst at SNS Securities. “This shows that it is absolutely necessary for Philips to resolve this issue.” Bareno, who recommends that investors buy Philips shares, had predicted a 70 million-euro deficit for the first quarter from televisions.
Stock Drops
Philips dropped 40 cents, or 1.8 percent, to 22.18 euros in Amsterdam, extending its decline this year to 3.2 percent. Siemens AG, which competes with Philips in lighting and medical equipment, has gained 1.7 percent in Munich trading in the time.
CEO Gerard Kleisterlee, who led Philips for a decade, will hand the reins to Frans van Houten this week. Philips has taken “clear actions” to further reduce television inventories in the first quarter, spokesman Joost Akkermans said by telephone today, without elaborating.
Last year, television sales amounted to 3.16 billion euros, almost a third of the total revenue from the consumer lifestyle division. Philips’ other activities focus on health-care technology and lighting. Jos Versteeg, an Amsterdam-based analyst at Theodoor Gilissen Bankiers NV, had predicted a loss of 36 million euros from TVs in the first quarter.
The Dutch company, which also makes coffee machines and shavers, is among the last few remaining European brands to mass-market televisions. Other companies, including Siemens, pulled out of the business years ago, or moved into the high- priced segments, such as Bang & Olufsen AS with its BeoVision 4- 103 television that costs more than $100,000.
Philips has set a target for earnings per share to grow at twice the rate of sales until 2015 as it focuses on more profitable lighting and medical products and faster-growing markets including India and Brazil. Revenue excluding acquisitions, disposals and currency shifts will increase 2 percentage points faster than global economic growth, Philips said when it set the goals. It excluded TV operations.
--With assistance from Maud van Gaal in Amsterdam. Editor: Benedikt Kammel, David Risser.
To contact the reporters on this story: Colin Keatinge at ckeatinge@bloomberg.net or Maaike Noordhuis in Amsterdam at mnoordhuis@bloomberg.net
To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net
