CRM News: Wall Street: Philips' Q1 Profit Plummets on Weak TV Sales

Philips reported first-quarter net income of $347 million, down from about $1.4 billion in the year-ago quarter. The company's overall sales, meanwhile, rose to about $9.44 billion. Although Petercam analyst Jurgen Smits van Oyen said Philips' results were unimpressive, there is no cause for excessive concern.

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Royal Philips Electronics reported a sharp drop in first-quarter profits Monday, with falling television sales in North America offsetting growth in its healthcare and lighting industries.

The world's largest maker of lighting said its net income was 219 million euros (US$347 million), down from 875 million euros ($1.4 billion) in the first quarter of 2007, when it had reported a net gain of 733 million euros ($1.2 billion) for selling a stake in a Taiwanese semiconductor manufacturer, TSMC.

Overall sales rose 1 percent to 5.96 billion euros ($9.44 billion), but comparable sales fell 9 percent in North America, mainly in televisions and videos, Philips said.

Clouded Results

The recent quarter included a gain of 83 million euros ($131 million) for the partial sale of LG Display, Philips said.

Chief executive Gerard Kleisterlee said performance was strong across most sectors. "Unfortunately our results are clouded, more than we like, by the adverse situation in our TV business" and lower revenue from license agreements.

Shares fell 3.1 percent to 23.15 euros ($36.65) in early trading.

Analyst Jurgen Smits van Oyen of Petercam said the results were unimpressive, but no cause for excessive concern. Consumer products were disappointing, but that was balanced by "positive surprises" in healthcare. "On balance, we believe the company has released a fairly decent set of results given the economic circumstances," he said.

The company, which makes a broad range of products from simple kitchen juicers to lifesaving medical imaging systems, said it expected a further softening in mature markets, and will focus on investing in emerging areas and on integrating recent acquisitions.

"Essentially, it was a good start to the year," said Chief Financial Officer Pierre-Jean Sivignon, excluding offloading stakeholdings and disappointing TV sales. "We look forward to an encouraging second quarter," he said in a conference call.

Improving Efficiency

China was a target for its expanding healthcare sector, as Philips closed a 25 million euros ($40 million) deal with Ascent Profit to sell digital radiography systems.

Lighting grew 3 percent, and Sivignon said energy-saving devices now comprise half of its lighting sector. "The green portfolio is starting to get traction," he said, with sales growing 12 percent in the quarter.

Last week Philips announced it will license its North American television business to the Japanese company Funai Electric, in a five-year agreement effective Sept. 1, to counter what Kleisterlee called the unacceptable level of profits.

Sivignon said that while the losses in the American TV market were stark, they also were down in Europe, where the company will focus on cost-cutting and improving efficiency. "It was a tough quarter all across," he said.

Kleisterlee said he was confident about Philips' progress in 2008 and that it was on target to meet its 2010 goals to increase earnings per share before interest, taxes and amortization to 10 percent or more.