January 26, 2009

Philips To Shed 6,000 Jobs

In results that missed even the most pessimistic of expectations, Philips Electronics announced on Monday that it would shed 6,000 jobs after posting a $1.9 billion fourth quarter loss, its first quarterly loss since 2003.

The loss included 1.3 billion euros ($1.7 billion) in write-downs, primarily for the company's position in NXP Semiconductors and LG Display and its acquisition of Lumileds acquisition. 

The results bring Philips' full-year net loss to 186 million euros ($245 million).

The Dutch company said its sales were down 9 percent form the same quarter the previous year, and that the layoffs would help it cope with declining consumer demand amid a global economic slowdown.

"The development of our quarterly results reflects the unprecedented speed and ferocity with which the economy softened in 2008," said CEO Kleisterlee.

Philips' report comes on the heels of a series of negative news from the company's top competitors.  Sony recently warned recently it would record a $2.9 billion annual operating loss, while Samsung Electronics posted its first quarterly loss ever.

The world's largest lighting maker said it would accelerate its restructuring programs, including roughly 6,000 layoffs this year, which are expected to result in annual cost savings of 400 million euros ($526 million) beginning in the second half of 2009.

Analysts embraced the company's cost cutting measures, and the fact it kept its dividend at last year's level. 

"We were expecting some bad news and I don't think this is worse than the market has been anticipating," Petercam analyst Eric de Graaf told Reuters.
Maintaining the dividend was a big plus, he said.

"They have been taking proactive initiatives in the past year and in this sense, management has been doing much better than some of its peers, such as Sony."

Philips, Europe's biggest consumer electronics maker, has already acknowledged that it will not meet its 2010 profit targets, citing the impact of a "steep downturn" that has dampened the value of its financial holdings and sharply reduced consumer demand. The slowdown has his the company's consumer lifestyle unit, which makes devices such as MP3 players, TVs and electronic toothbrushes, particularly hard, it said.

Philips also said it has halted its share buyback program until further notice.

"On the short-term we want to retain maximum flexibility ... We have liquidity to the tune of 6 billion (euros) and we want to use that liquidity primarily to catch the opportunities that certainly will present itself to further strengthen our market positions," Kleisterlee said during a briefing with reporters.

Shares of Philips' stock were up more than 5 percent in midday trading Monday, after rising as much as 10 percent earlier in the day.


Image Caption: Headquarters of Philips in Amsterdam, The Netherlands. Courtesy Wikipedia


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