Philips' CE Sales Down, To Layoff Up To 7,000

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EINDHOVEN, THE NETHERLANDS — Overall first-quarter sales of consumer electronics at Philips fell 5 percent in the first three months of 2001, compared to the year-ago first three months, dropping to $2.4 billion.

Weakness in the telecommunications and personal computer industries, that has affected Philips' businesses since last December, continued during the first quarter. Consumer electronics was one of these especially impacted by this decline.

Faced with an overall precipitous fall in company-wide net income during the first quarter — a drop of more than 10 times, from $1 billion to $95 million — the company said it will ax between 6,000 and 7,000 jobs this year.

Hampered by a slowdown in the U.S. market, sales of mainstream consumer electronics products increased marginally at Royal Philips Electronics during the first quarter.

Sales edged up in branded monitors and DVD video and audio systems. However, sales in mobile handsets were impacted by the weakness in the telecommunications industry, while digital networks recorded sharply lower sales of set-top boxes, in particular to U.S. cable operators.

In the first quarter, mainstream CE extended its loss to $35 million, compared with a loss of $7.2 million in the same quarter in 2000. Philips said CE performance was negatively impacted by the slowdown of the U.S. economy, which left both manufacturers and retailers with high inventory levels in the first few months of the year.

The weaker economic conditions in then United States affected the performance in North America, including mainstream CE. This resulted in a loss of $103 million for the region, compared with a loss of $9 million in the first quarter of 2000.

Detailed plans to bring costs in line with revenues, including layoffs, will be available during the second quarter, in particular with respect to structurally under-performing businesses like CE, said Philips. The company said it will take a one-time, pre-tax charge of about $314 million in the second quarter.

Overall company sales in the first quarter dropped 1 percent to $7.4 billion, compared with the year-ago period. Income from operations in CE products dropped from a profit of $74 million in the first quarter of 2000 to a loss of nearly $89 million in the same period this year. The decrease was mainly attributable to Consumer Communications, which reported a loss of $106 million, compared with a profit of $22 million in the same three months last year.

Sales volume in the CE sector increased by 4 percent during the first three months, while prices decreased on average by 10 percent. Price erosion rose particularly in mobile phones.

Philips said it has cut back capital expenditures by $2.2 billion, and that this will be cut back even further if needed.

(The conversion rate of euro to dollar was not supplied by Philips, therefore the rate in place on April 12 was applied.)

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