Sagging TV business drags down Philips Electronics' profit

Company will stop making TVs for the North America market; inks brand-licensing deal with Japan's Funai.

By Matthew Miller, Editor-in-Chief, EDN.com -- Electronic News, 4/14/2008

Stating that its results had been "clouded" by adversity in the television market, Royal Philips Electronics this morning announced that its core profit for the first quarter fell 28% on sales that increased just over half a percentage point.

Overall EBITA (earnings before interest, taxes, and amortization) for the company, which includes healthcare and lighting divisions in addition to consumer products from electric toothbrushes to televisions, fell to €265 million ($420 million) from €370 million ($586 million) a year ago. Overall sales ticked up slightly to €5.965 billion ($9.46 billion), compared with €5.930 billion ($9.40 billion) a year ago. The company noted that first-quarter revenue last year had enjoyed a €733 million ($1.2 billion) bump from the partial sale of Philips' stake in TSMC (Taiwan Semiconductor Manufacturing Corp).

The Consumer Lifestyle division, which includes domestic and cosmetic appliances as well as music players and "connected displays" (including televisions), turned in grim results, with EBITA down 45% to €77 million ($122 million) from €141 million ($223 million) in Q1 2007; sales fell 5% from €2.82 billion ($4.5 billion) to €2.66 billion ($4.2 billion). The company noted that EBITA for connected displays dropped by €44 million ($70 million).

Philips intends to sign a five-year deal with Japan's Funai, which will take over sourcing, distribution, marketing, and sales of Philips-branded televisions in North America effective in September. Last month, Philips also announced a further reduction of its stake in LG Display.