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Philips Upbeat On Its U.S. CE Operations

Royal Philips Electronics reported that a turnaround has begun for its U.S. subsidiary, Philips Consumer Electronics.

During a meeting with investors and analysts, here, the company confirmed “the turnaround of 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.

At the same time Philips’ CE business was getting a good report card the company announced the resignation of Guy DeMuynck. He was CEO of the consumer electronics division and member of the Group Management Committee, will leave the company January 1, 2003 to join the Board of Management of Dutch telecom operator, KPN.

Gottfried Dutine, member of the Philips’ Board of Management since February 2002 will take over Demuynck’s role in addition to his current responsibilities.

In addition, Philips has appointed Andrea Ragnetti as chief marketing officer at group level, a new position. Ragnetti will join Philips effective January 1, 2003. His background includes international marketing roles with Procter & Gamble, Reckitt Benckiser) and Telecom Italia Mobile.

He will be responsible for global marketing activities and brand management. He will report directly to Gerard Kleisterlee, Philips’ President and CEO. Philips’ management board is expected to propose to the Supervisory Board that Ragnetti be appointed to Philips’ Group Management Committee.