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Thomson CE Division Income Off, Sales Slide 13%

Paris – Reflecting, in large part, a decline in profitability of its broadband business, the consumer products division of Thomson Multimedia reported a $37.9 million drop in operating income during the first half of 2002.

The division reported an operating loss of $5 million for the first six months, compared with operating income of $32.9 million in the first half of 2001.

Revenue in Thomson’s Consumer Products division, which includes mainstream RCA consumer electronics products, decreased 13 percent during the first half, reaching $2.8 billion, down from $3.1 billion in the first six months of last year.

However, Thomson said division results show the company’s ability to react to changing market circumstances in order to limit the impact on its performance resulting from falling sales.

Thomson blamed much of the division’s woes on a sharp decline in sales of broadcast access products during the first half, with the company selling 2.3 million set-top boxes and cable modems, down from 3.1 million units in the year-ago period. DSL modems are excluded from the totals.

With prices also declining during the first half, Thomson said its set-top box and cable modem revenue dropped by some 46 percent in the six months. However, it said the Broadband unit remained profitable during the half, despite a very difficult six months, reflecting strong cost-cutting efforts. The DSL modems business was break-even during the period, despite substantial price drops during the half, Thomson said.

Following a particularly difficult 2001, Thomson reported signs of stability in terms of pricing and volume within its consumer retail markets. In particular, losses in the U.S. high-end segment were reduced substantially.

Volume in high-end televisions improved, more than offsetting price declines. Audio volume declined significantly less than the market, while communications products gained in volume and value market-share, said Thomson. The company had decided to exit the camcorder business in 2001, registering $88.6 million in sales in the first half of 2001 and only $10 million of sales in the first half of 2002.

Overall sales at Thomson climbed by less than 1 percent in the second quarter, reaching $2.49 billion, compared with $2.48 billion in the same period last year.

For the six months, overall sales increased 7 percent, hitting $4.5 billion, compared with $4.2 billion in the year-ago period. Net income increased 10 percent in the first six months, reaching $111 million, up from $98 million year over year.

Thomson is targeting double-digit sales growth overall for the full year, and expects about an increase of 20 percent in operating results over the 12 months.