Amsterdam, The Netherlands — Although fourth-quarter margins continued to remain under pressure at Philips, mainly in flat-panel televisions and DVD recorders, overall consumer electronics margins recovered from third-quarter levels and CE sales enjoyed a three-month increases.
Philips CE segment sales climbed 9 percent in the fourth quarter, ended Dec. 31, hitting $4.4 billion, up from $4 billion in the year-ago period. Income from operations for the CE business rose to $345.2 million from a year-earlier $325.6 million.
Philips reported that accelerated digitalization of the CE product mix, new entrants and new business models put severe pressure on gross margins, which could not be fully offset by higher sales volumes and reduced costs. In order to further improve its CE business, Philips plans to transfer its monitor display business and part of its flat-panel display business to Taiwan-based TPV Technology.
The companies announced in December that TPV would take over responsibility of Philips’ existing OEM Monitor business, while Philips will focus on the marketing and sales of its own branded monitor and Flat TV products.
The businesses transferred from Philips to TPV amount to approximately $2 billion, Philips said. Upon completion of the transaction, TPV will become the world’s largest PC monitor manufacturer with annual volume exceeding 35 million units.
The decline of the U.S. dollar against the euro had a large impact on Philips’ sales revenues, said the company. The result to the bottom line was partly negated by hedging strategies and by adjusting the currencies of cost structures to better balance the currencies of revenues, said Philips.
Sales to the United States for the 12 months dropped to $9.2 billion, down from $9.8 billion for all of 2003.
For the 12 months, CE segment sales jumped to $13 billion from $12 billion year-on-year, while income from operations reached $472 million, up from $324.3 million in 2003.
Consolidated Philips fourth-quarter sales came in at $12 billion, up 2 percent, compared with $11.8 billion in the same three months a year earlier. Although comp sales rose by 6 percent, the weaker dollar translated to a downward effect of 4 percent.
Consolidated net income for the fourth quarter reached $651.2 million, down 17percent from a year-ago $781.9 million.
For the 12 months, Philips consolidated sales hit $39.6 billion, up from $38 billion in 2003. Net income rose to $3.7 billion from a year-earlier $908.8 million.