European CE Makers See Mixed Q3 Results

By Jeff Malester On Oct 27 2003 - 8:00am

Two top consumer electronics manufacturers based in Europe, Thomson and Philips, both reported mixed results during the third quarter.

Although Thomson's third quarter revenue for its consumer products segment dropped 12.6 percent, coming in at $859.6 million, down from $1.1 billion in the year-ago period, the company said this result was "a sharp improvement on the first half trend." Including currency movements, the decline was 20.9 percent.

Thomson, which said "activity [in the third quarter] showed an improving trend in the Americas — notably in the second part of the quarter — benefited from a strategy focused on essentials products, together with a broader range of high-end television sets."

Within its consumer products segment, Thomson's strategy is to transition its business toward higher value-added services, by growing its "essentials" business, and changing its "mainstream" business. Essentials products include accessories, after-sales, portable audio/video and communications. Mainstream products include televisions and home A/V devices.

Thomson noted improved third quarter activity in the United States in high-end products, including a full range of flat-screen televisions and an expanded offering of HDTV products. It claimed both market share and revenue were positively impacted for these categories in the three months.

Consolidated Thomson sales for the third quarter hit $2.4 billion, down 4.8 percent from the same quarter a year ago, when sales reached $2.7 billion. Including currency movements, sales dropped 13.6 percent.

Philips substantially reduced its third quarter consumer electronics loss in North America, compared with second quarter results, but the company backed away from an earlier prediction of moving its struggling U.S. operation into the black by the end of 2003.

Price erosion and ongoing competition form existing brands and new market entrants continue to shape the CE market, said Philips, but the company believes its recently announced business renewal program will help strengthen its competitive position.

Philips reported a third quarter loss of $26.9 million in North America, down from a loss of $41 million in the second quarter of 2003, and qualified its initial stance with the statement, "North America is expected to be close to break-even in the fourth quarter."

Overall, third quarter CE sales dropped to $2.58 billion, down 1 percent — but up 6 percent on a comparable basis — from the $2.61 billion recorded in the year-ago period. Philips said lower sales in audio/video entertainment were more than compensated by increased sales of television, set-top boxes and monitors.

The CE segment reported an overall loss from operations in the third quarter, coming in at a negative $37.5 million, compared with a $9.4 million operating profit for the same three months in 2002.

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