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Philips CE Sales Drop 18% In Q2, CE Net Off $422M

Faced with an accelerating economic slowdown, Royal Philips Electronics said sales of consumer electronics dropped 18 percent in the second quarter to $2.14 billion, compared with the same three months last year. Unit volume decreased by 9 percent, while prices dropped on average by 10 percent, said the company.

Sales growth in North America dipped 5 percent, including an upward effect of 10 percent, related to new consolidations, and a 6 percent uplift from the stronger U.S. dollar. The most significant decrease occurred in CE products, said Philips. North America reported a loss of $198.5 million, double the loss of the first quarter.

The most severe reductions in CE sales overall were attributed to VCRs and monitors, said Philips, DVD sales, however, continued to show strong growth of over 50 percent.

Income from operations in CE turned from a profit of $107.9 million in the second quarter of 2000 to a loss of $422.5 million in the current second quarter. The decrease was mainly attributable to special items taken in the consumer communications sector, where the company has decided to refocus its mobile handset business. Sales in consumer communications ended 32 percent lower in the three months, compared with the year-ago second quarter.

In addition Philips said it will eliminate up to 5,500 more jobs to offset a slowdown in the global economy. These layoffs come on top of the 6,000 to 7,000 jobs cut in the first half.

Sales of mainstream CE products were 10 percent lower in the second quarter than the year-ago three months. Price erosion increased from 7 percent in the first quarter to 9 percent in the second quarter. Consequently, mainstream CE reported a loss of $60.2 million, compared with a profit of $24.6 million in the same quarter in 2000.

Philips reported an overall net loss of $655 million in the second quarter, compared with a $3.1 billion profit in the same period in 2000. Revenue fell to $6.53 billion in the second quarter, a 16 percent decrease from the $7.8 billion recorded in the year-ago three months.

For the six months, sales were off 9 percent to $13.5 billion.