Amersterdam, The Netherlands - Royal Philips Electronics reported that a turnaround has begun for its U.S. subsidiary, Philips Consumer Electronics.
During today's meeting with investors and analysts, here, the company confirmed "the turnaround of its business in the key U.S. market is proceeding with success. The strategy is paying off with 142 percent sales growth in up-market retailers, and 55 percent year-on-year growth in the branded TV segment, both cases reflecting the successful development of Philips as a premium brand."
As part of a strategy begun during the spring of 2001 the Philips brand in the United States is the company's higher-end digital product line, while the Magnavox brand is used for more conventional commodity products.
For the quarter ended Sept. 30, Royal Philips reported that Consumer Electronics' operating profit was $23.7 million versus an operating loss of $44.4 million in the same quarter last year. Sales were down for the division during the quarter, from $2.6 billion to $2.1 billion versus last year. In North America Philips reported that third quarter income had improved during the quarter, where the loss of $18.8 million was more than halved from the same three months last year.
The upbeat corporate outlook on its U.S. consumer electronics operation is a far-cry from comments allegedly made by Royal Philips management a year ago in a European magazine. At that time corporate management here supposedly said that if the U.S. consumer electronics operation did not turn around in two years it could be shut down. While the company has since denied that any such plan or comments like that were ever made, the incident was widely reported both here and in the United States.
For the Consumer Electronics division as a whole, Royal Philips said the business is on course for a good fourth quarter, October having been a record month, and November also looking strong, mainly as a result of operational improvements.
The Consumer Electronics said the Digital Networks business will be integrated into other parts of the company, with the main set-top box business moving to Consumer Electronics. The change will deliver R&D synergies and enhanced cooperation, better utilization of the retail sales channel and lower overheads. No restructuring charge will be required, but savings will be realized. Digital networks will no longer appear as a separate line in Philips' financial statements after the fourth quarter.