Philips’ Q2 CE Sales Up, Profits Down

By Steve Smith -- TWICE, 7/17/2006

Amsterdam, The Netherlands — Driven by growth in connected displays and the transition from CRT to flat-screen TV, and strong peripheral and accessories sales, Philips Electronics reported consumer electronics sales up 17 percent during its second quarter, ended June 30.

Philips reported worldwide CE sales of $3.14 billion for the quarter vs. $2.90 billion for the same time last year.

However, the company reported consumer electronics earnings before interest and tax for the quarter was $56.9 million. Last year’s second quarter had earnings of $78.5 million. Philips explained that the impact of additional price pressure driven by market oversupply in flat displays was limited, due to the division’s effective business model.

Gerard Kleisterlee, president/CEO, commented on CE in the company’s overall report, stating, “Our CE business model is showing its robustness in difficult conditions for the industry.”

Looking ahead, Philips believes that sales growth will ease in the third quarter “as the speed of transition to flat TV decelerates.” And the company believes that margins will remain under pressure as competitors and retailers clear pipeline stock.

Philips’ overall sales during the quarter were $9.62 billion, 10 percent higher than the second quarter of 2005. Net income for the quarter was $380.9 million vs. $1.24 billion in last year’s second quarter. Net income for the second quarter of last year was boosted by a book gain on its share in NAVTEQ.

The company also reported that it would launch a $1.9 billion share repurchase program, similar to others recently offered by the company, starting in the third quarter.